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Media and Insights Filter by Tags About Aurellan Equities Kiwisaver Markets Media Podcast Portfolio Construction Private Assets Tax Wilshire 14 Oct 2026 Anthony Edmonds appears on "Beat the bank" podcast Anthony Edmonds appears as a guest on the “Beat the bank” podcast series and talks about his career, the businesses he has built, Aurellan, and the importance of smart portfolio construction. Read More About Aurellan, Portfolio Construction, Podcast 6 Oct 2026 KiwiSaver investors are taking on more risk, what it could mean for the next crisis 55% of investors now in Growth and Aggressive Funds. Would the downside scenarios come as a surprise? Read More Kiwisaver, Portfolio Construction, Equities 1 Oct 2026 Media round up - October 2026 A quick round-up of some recent news stories featuring Aurellan. Read More Media, Kiwisaver, Portfolio Construction, Equities, Private Assets 18 Sept 2026 The SPIVA NZ Scorecard's own methodology, applied to passive NZ equity funds, produces the same flawed result SPIVA's new mid-year Scorecard says 80% of active New Zealand equity funds “underperformed” the S&P/NZX 50 Index. Applying the same method to passive funds built to track the market produces a number that is just as striking, and just as unreliable. Read More Portfolio Construction, Equities 6 Sept 2026 Index-washing: how dirty data pollutes the NZ active (and passive) environment NZ global equity managers have been put through the SPIVA wringer and judged sub-par. But Aurellan Asset Management co-founder, Anthony Edmonds, finds the indexer is not playing clean… Read More Portfolio Construction, Equities 3 Sept 2026 Passive investing with a large dash of active hypocrisy Why lots of investment managers and market participants drive revenue by dismissing active management while actively encouraging you to do it anyway, for a fee! Read More Portfolio Construction, Equities 21 Jul 2026 Aurellan Intergenerational Thinking Podcast: Talking private markets with Wilshire's Mark Perry Mark Perry covers the key trends among private market investors in the US Read More Podcast, Private Assets, Wilshire 29 Jun 2026 Aurellan Intergenerational Thinking Podcast: Backing the next generation of NZ companies What does it take to back the companies shaping New Zealand's future? Read More Podcast, Private Assets 5 Jun 2026 Don't let tax be the one that got away Anthony reflects on how he tackles tax within his own family investments. Read More Tax, Portfolio Construction 29 May 2026 The investment tax hack Sir Michael Cullen probably never meant to give us Budget 2026 doubles a threshold that has sat untouched for years, and in doing so creates a once-in-a-generation opportunity for long-term investors in New Zealand. Read More Tax, Portfolio Construction, Equities 19 May 2026 Currency: friend, not foe Foreign currency hedging often fits into the camp of too complex, too hard, or even too boring, Aurellan's CEO and CIO Chris Di Leva puts forward the case on why it is a super important piece of the portfolio construction puzzle. Read More Portfolio Construction 16 Apr 2026 Aurellan Intergenerational Thinking Podcast: Chris Di Leva and Anthony Edmonds talk global equity style diversification What investment styles have been in and out of favour? Read More Podcast, Portfolio Construction, Equities 25 Mar 2026 Our take on the medium term outlook Thoughts from Aurellan’s CEO and CIO Chris Di Leva on the current state of play in investment markets and what this means in the medium term for investors. Read More Markets 12 Mar 2026 Aurellan Intergenerational Thinking Podcast featuring Causeway Capital CEO Sarah Ketterer The ups and downs of 25 years of value investing Read More Podcast, Portfolio Construction, Equities 11 Feb 2026 Aurellan Intergenerational Thinking Podcast: Cotality's Nick Goodall and Rachel Weld Are property prices on the mend? or is it a case of one bitten, twice shy? Read More Podcast 23 Dec 2025 Outlook 2026: Five questions that could shape 2026 and beyond Aurellan have compiled a team of experts to discuss the key long term themes that could drive markets in the coming years Read More Markets, Portfolio Construction 25 Nov 2025 Aurellan Intergenerational Thinking Podcast featuring Chris Di Leva Aurellan co-founder and CEO Chris Di Leva is interviewed by Anthony Edmonds. Chris and Anthony talk about Chris' path to Aurellan including learnings from his role as Portfolio Manager at Mercer and Head of Global and Multi Asset Investments at Harbour Asset Management. Read More Podcast, About Aurellan 17 Nov 2025 Aurellan Intergenerational Thinking Podcast featuring Wilshire's Head of Manager Research Aurellan CEO and CIO, Chris Di Leva, interviews Wilshire's Head of Manager Research, Rob Noe. Rob talked about how Wilshire goes about selecting managers for its US$1.5 trillion client base. Read More Podcast, Portfolio Construction, Wilshire, About Aurellan 3 Nov 2025 The shark already has teeth: Looking at the facts around capital gains tax in NZ A dead shark can still bite — and so can New Zealand’s tax system. Our latest article unpacks why the real question isn’t “should we have a capital-gains tax?” but “how far will Inland Revenue go with the one we already have?” Read More Portfolio Construction, Tax, Equities 21 Oct 2025 Aurellan Intergenerational Thinking Podcast featuring co-Founder Campbell Gower In this second episode of the Aurellan Podcast, Campbell shares how he helped build enduring New Zealand brands like Charlie’s Juice, Mountain Buggy and phil&teds — and why the Gower Family Office chose to back Aurellan Asset Management. Read More Podcast, About Aurellan 17 Oct 2025 Why the case for NZ shares isn't dead yet New Zealand shares have struggled to keep up with global shares. But are there still benefits to the NZ share market? Read More Portfolio Construction, Equities 10 Oct 2025 Aurellan Intergenerational Thinking Podcast featuring co-Founder Anthony Edmonds Aurellan CEO and CIO, Chris Di Leva interviews fellow co-Founder Anthony Edmonds. This conversation covers Anthony's lucky break which got him into investments to founding and exiting three successful investment businesses. Read More Podcast, About Aurellan 14 Sept 2025 Edmonds, Di Leva venture brings $1.5 trillion US firm to NZ investors The new investment firm founded by Anthony Edmonds and Chris Di Leva has confirmed the US-headquartered Wilshire Advisors as its global partner. Read More Media, Wilshire, About Aurellan 20 Aug 2025 Di Leva, Edmonds partner in new investment management business - Investment News After months of speculation, former Apex NZ chief, Anthony Edmonds, has emerged with a new investment management firm to be headed by ex Harbour multi-asset specialist, Chris Di Leva. Read More Media, About Aurellan

< Back Currency: friend, not foe Chris Di Leva, CFA 19 May 2026 Foreign currency hedging often fits into the camp of too complex, too hard, or even too boring, Aurellan's CEO and CIO Chris Di Leva puts forward the case on why it is a super important piece of the portfolio construction puzzle. Ask most people about currency and you will hear the same word: risky. And in many ways, it is. Exchange rates are volatile, notoriously hard to forecast, and potentially unkind to anyone who tries to pick them with conviction. But inside a diversified investment portfolio, currency plays a very different role. For a small open economy like New Zealand, having exposure to foreign currencies is not just a sensible diversifier, it can be a genuine superpower. That is not the convention you will hear from every adviser, and it sits uncomfortably with the instinctive desire to "remove the currency risk" especially as this is often the right approach within companies that have offshore earnings. This piece sets out why we think the right question is not whether it is appropriate to have foreign currency exposure within investment portfolios, but rather how much. Also, we touch on why the answer for a New Zealand investor looks very different to the one that a textbook might give or apply for an Australian investor. The Kiwi dollar is not the US dollar There is an old saying that when the United States sneezes, the rest of the world catches a cold. For a small open economy like ours, the impact on the currency tends to be rather more violent than a mild midwinter sniffle, and more like being knocked flat by influenza in the middle of haymaking. When the appetite for taking risk collapses globally, capital tends to flow out of higher-beta currencies like the New Zealand dollar and into perceived safe havens currencies like the US dollar, the Japanese yen, and the Swiss franc. The NZ dollar often doesn’t just drift lower in these episodes, rather it can drop sharply and quickly. For a Kiwi investor who holds global shares, that fall in the Kiwi dollar is the silver lining: foreign assets denominated in USD, EUR or GBP are suddenly worth more in New Zealand dollar terms, cushioning the equity drawdown. That cushion is real, it is sizeable, and as we will show, it has shown up reliably in the two biggest market shocks of the past two decades. The carry that was, and the carry that is not For many years, New Zealand investors hedging their offshore exposure were paid handsomely to do so. The mechanism is the "carry" or “forward points”. When you hedge a foreign asset back to NZ dollar, you are effectively borrowing the foreign currency and depositing it in NZ dollars. Because historically New Zealand interest rates were higher than those in the US, Europe, Japan and most other places that Kiwis invest, investors who hedged pocketed the differential in short-term interest rates as a tailwind. Put simply, within currency prices investors were getting paid interest to hedge, albeit invisibly, which is the “carry”. This tailwind “carry” was generous. From the early 2000’s through to around 2016, the implied yield pick-up from hedging global equities back to NZ dollars comfortably averaged more than 2% per annum, and at the height of the GFC briefly touched 6%. It was a meaningful enough sweetener that some New Zealand fund managers argued the carry alone justified 100% hedging any offshore equities back into NZ dollars. However, as the graph shows, the picture today is very different. The line above (which is the “carry”) has been below 2% since 2016 and has spent much of the recent past hovering at, or below, zero. This reflects that in recent times our Reserve Bank was cutting cash rates in NZ, while the Federal Reserve was hiking. Meaning the long-standing premium that compensated New Zealanders for parking their money offshore has been worn away. Hedging back to NZ dollars is no longer a "free lunch" and in some periods like now, has been at a small cost. That single chart undermines the strongest historical argument for high hedging ratios. If the carry is gone, the case for hedging must stand on its diversification merits alone, and in that case, as it turns out, is weaker than many investors assume. The downside-protection benefit, in numbers One theory is that hedging currency risk back to NZ dollars provides downside protection to investors. However, while theory is one thing, the track record of this is another. We looked at the MSCI ACWI in unhedged NZ dollar terms versus the fully hedged version of the same index, using monthly returns over the past twenty years. Period / metric MSCI ACWI Unhedged NZD MSCI ACWI Hedged Difference GFC bear market (Nov 2007 – Feb 2009) –31.3% –47.7% +16.4% Worst single month (Oct 2008) –8.1% –16.6% +8.5% COVID quarter (Q1 2020) –10.5% –20.1% +9.6% March 2026 –2.4% –6.6% +4.2% Annualised volatility, trailing 5 years 10.5% 13.2% -2.7% Annualised volatility, trailing 10 years 11.1% 13.3% –2.2% Annualised volatility, trailing 20 years 12.0% 14.0% –2.0% Source: MSCI, Aurellan Asset Management calculations. Returns are total returns in NZD and fully-hedged NZD respectively. Volatility figures are annualised standard deviations of monthly returns over the trailing 5, 10 and 20 years to 31 March 2026. Three episodes do most of the heavy lifting in this argument. During the GFC bear market, holding global equities unhedged saved a New Zealand investor more than sixteen percentage points compared with a fully hedged position (that is 16%!). In October 2008 alone, the worst single month of the crisis, the hedged index fell 16.6%, while the unhedged NZ dollar version fell just 8.1%. The Kiwi dollar did roughly half the work of the equity rally that eventually followed. The pattern repeated in the March 2020 quarter, when COVID hit markets. The hedged MSCI ACWI lost 20.1% over those three months, while the unhedged NZ dollar version of the same index only lost 10.5%. That is nearly ten percentage points of downside protection delivered by the currency in a single quarter. This protection arrived precisely when investors needed it most. And it is not just a "crisis-era" phenomenon. In the most recent down month of our dataset, March 2026, the hedged MSCI ACWI fell 6.6%. Unhedged investors lost 2.4%. The cushion was smaller in absolute terms, consistent with the lower volatility of the Kiwi today, but it was the same direction and the same mechanism. And the cushion is not just an episodic phenomenon, as it shows up in the long-run volatility figures too. Over the past 10 years, the unhedged NZ dollar version of the MSCI ACWI ran at an annualised volatility of 11.1%, against 13.3% for the fully hedged version. Over 20 years the gap is similar: 12.0% versus 14.0% per annum. On the face of it this is counterintuitive, as adding a second source of risk (the currency) on top of equity risk should make things more volatile, not less. The reason it does not is exactly the mechanism above: because the NZ dollar tends to fall when global equities fall, the unhedged investor gets a partial offset that reduces, rather than amplifies, total portfolio volatility. Currency is doing real work in terms of the diversification benefits it provides, rather than just adding noise. That said, the cushion is not symmetric across every shock. There are episodes, like the dot-com bust being the obvious example, where the source of the equity weakness is the US itself. In this situation the US dollar weakens rather than strengthens, and the NZ dollar rises against it. In these windows, historically unhedged investors have experienced more pain, not less. The lower long-run volatility tells you the diversification works on average and across most environments; it does not tell you it works in every environment. Which is exactly why neither extreme is the right answer. Our liabilities are not all in New Zealand dollars Step back from the charts and theory for a moment and think about what New Zealanders actually consume and produce. Our biggest export, dairy, is auctioned in US dollars on the Global Dairy Trade platform. The oil and petroleum that moves our country is priced in US dollars. Coal, gas, fertiliser and most globally traded soft commodities are priced and typically settled in US dollars. Imported manufactured goods, electronics and increasingly cloud computing and software-as-a-service are all priced in US dollars, as are even the blue cod that my father caught commercially in the Cook Strait, which is something I have been lamenting since he retired. Put another way, a meaningful portion of a New Zealand household's real cost of living is fundamentally a US dollar liability dressed up in NZ dollar clothing. When the Kiwi dollar falls, the cost of filling the car, eating blue cod, and buying anything with a microchip in it, goes up. Holding some unhedged foreign currency is not exotic risk-taking; it is a natural offset to a US dollar-denominated cost base most of us already carry without realising it. Prudent risk management for a small open economy is having your assets in more than one currency. If everything you own, everything you spend and everything you owe sits in the same currency, you have concentration risk, even if the line on the chart looks comforting. At the risk of sounding like an actuary, not that there is anything wrong with that, in its purest form, successful investing is all about liability matching, such as making sure investors can fund their retirement spending, while charities and foundations can continue to make grants. Therefore, it makes sense that prudent risk management for a small open economy is having your assets in more than one currency. If everything you own, everything you spend and everything you owe sits in the same currency, and your liabilities are driven by another currency, you have a potential problem. What does the industry actually do? Ask a New Zealand fund manager what hedge ratio they run for global equities and the modal answer is around 50%. The BNZ FX Hedging Survey, which we think is the most comprehensive look at industry practice, found exactly that. It shows on average there is a 50% hedging ratio for international shares across KiwiSaver providers, superannuation schemes and fund managers. That is not a coincidence, nor is it laziness. Fifty per cent is the "point of least regret": the position you can live with regardless of which direction the currency moves, and the one that has historically delivered the highest risk-adjusted return for a New Zealand investor in global equities. Across the Tasman and the answer is very different. APRA data shows that Australian superannuation funds, on average, hedge only around 22% of their international equity exposure, meaning that roughly three-quarters of it sits unhedged. And it is not because Australians have less offshore exposure within their portfolios to worry about. If anything, the opposite is true. Australian super funds now hold more than 50% of their total assets offshore for the first time in the sector's history, with international shares typically a larger allocation than domestic shares. So, the gap with New Zealand is entirely a question of hedging policy, not equity allocation. Why such different answers to the same question? At first glance this divergence is puzzling. The Australian and New Zealand dollars are about the most closely correlated pair of currencies in the G10. Daily moves in our currencies typically correlate above 0.85, reflecting both are commodity-linked, both are smaller/higher-beta currencies, and both fall against the US dollar in genuine risk-off episodes. If the structural story were just "small open economy with a risk-on currency", you would expect Kiwi and Aussie investors to land in roughly the same place. They do not. So, what is driving the gap? At Aurellan we think there are several things, which are all real, but none individually decisive. Firstly, the Australian dollar has historically been the cleaner version of this trade. It is a much more liquid currency, sits closer to the centre of global foreign exchange markets, and has had a longer and stronger inverse relationship with global equity drawdowns. Australian funds have been able to get most of their downside protection from leaving US dollar assets unhedged, with less need for an active overlay. The Kiwi has been a noisier proxy for the same trade, which arguably justifies a more deliberate hedge structure - rather than relying on the currency to do all the work. Secondly, the carry economics have run in opposite directions. For most of the past decade, hedging Australian dollars has not offered Australian investors with a meaningful interest rate pickup (“carry”). This reflects that in lots of periods the Reserve Bank of Australia has run their cash rates below the US Federal Reserve, meaning that hedging has resulted in a small negative drag or “carry”. The structural argument for hedging Australian-side was therefore weaker than it was in New Zealand during the long high-NZ-interest rates period. Now that New Zealand's “carry” has also disappeared, that gap has narrowed, but a couple of decades of muscle memory does not simply unwind in two years. Thirdly, scale matters. With a A$3.7 trillion sector in Australia, the operational cost, collateral management and counterparty drag of running large FX hedge books is non-trivial. This is reflected by the fact that the Australian regulator has been increasingly attentive to liquidity stress under sharp Australian dollar moves, but a lot of the institutional preference for low hedging is simply that it is cheaper and simpler not to. The New Zealand industry, smaller and with more vanilla balance sheets, has historically accepted that cost. Fourth, the underlying liability structure is different. Australia is a much larger and more vertically integrated commodity exporter, with these including iron ore, LNG, coal with most of those revenues invoiced in US dollars. A meaningful share of corporate Australia is effectively long the US dollar already. Households are less directly US dollar-exposed than the corporate sector, and the franking credit regime plus a deep, broadly diversified domestic equity market reduce the need to look offshore in the first place. New Zealand sits in a different spot: a smaller, more import-dependent economy where the household US dollar liability (fuel, dairy, imported goods, software-as-a-service) is the dominant exposure, and where the domestic equity market is too concentrated and too small to anchor a diversified portfolio. And fifth, honestly, there is a degree of institutional convention within the industry. The "point of least regret" at 50% has become the default starting point for the New Zealand industry, while in Australia, the equivalent industry accepted reference point sits well below that. Once these types of defaults are set, they take years to move, even when the case for change is good. Recent CommBank and Deutsche Bank surveys suggest Australian hedge ratios are now creeping higher as funds reassess the historical Australian dollar equity correlations post-COVID. This means the direction of travel is closing the gap, slowly. None of this is to say our Australian counterparts are wrong, or that New Zealand should converge to Australian practice. It is to say that the right hedge ratio depends on the structural specifics of where you sit, the depth and concentration of your home market, the FX liability profile of your real economy, the behaviour of your currency in tail events and that for a New Zealand investor those specifics still point to a meaningful, but not dominant, level of foreign currency exposure. So how much, then? For a New Zealand investor, neither extreme is obviously right. Zero hedging exposes you to the full force of NZ dollar appreciation in calm periods. Hedging your portfolio 100% to New Zealand dollars strips out the downside cushion just when you most need it, locks in volatility in the wrong direction, and now that the interest rate “carry” has gone, no longer compensates you for the privilege. For portfolios with a particularly low tolerance for negative returns, like charities and endowments needing to fund regular spending needs, retirees in pension phase, or anyone for whom a 20% capital loss is a behavioural or operational problem rather than a market-cycle annoyance, there is a strong case can be made for running with a very low hedge ratio, or even none at all. The unhedged NZ dollar investor has historically suffered shallower drawdowns in the worst quarters, and for an investor who genuinely cannot ride out the bottom, that protection is worth more than the smoother returns a hedged portfolio delivers in calmer years. It is not the default, but it is a coherent answer for the right kind of portfolio. There are also investors with large swathes of assets exposed to the NZ economy who might benefit from more foreign currency exposure. All of this is to say that the industry convention of hedging to a level of global shares exposure, is perhaps less important than targeting a specific amount of foreign currency exposure at a portfolio level. Our view Currency is volatile, currency is hard to forecast, and currency is genuinely risky if it is the only thing you own. But foreign currency exposure inside a diversified portfolio is something different. It is the closest thing a New Zealand investor has to a free downside hedge, even allowing for the erosion of the carry that historically rewarded New Zealanders for hedging back to a higher-rate currency. The data through the three biggest episodes of equity weakness of the past two decades — the GFC, COVID, and the March 2026 sell-off — supports the conclusion that unhedged offshore exposure has reliably softened the blow when global markets have fallen hardest, while also delivering lower long-run volatility. The irony is that, despite foreign currency being a superpower for a New Zealand investor, it is one often used sparingly. Why? Perhaps memories of the carry from years gone by anchor us to higher hedging than the current environment justifies. Or perhaps it is the convention of setting hedge ratios at a global-shares-sector level rather than a portfolio level. Take the average KiwiSaver Conservative Fund, with around 12% in global shares, versus the average Growth Fund at 52%. Does it really make sense for both to hedge 50% of those global equities? The Conservative investor still has USD liabilities but a very limited appetite for drawdowns, and we believe little or even zero hedging may be better aligned to their objectives than the industry-standard 50%. Putting tactical considerations aside, a healthy degree of foreign currency exposure in a New Zealand denominated portfolio rests on structural diversification of currency risk. Unhedged exposures provide offsets to a fundamentally USD-denominated cost of living. The empirical evidence indicates it also provided downside protection through three of the worst equity drawdowns of the past quarter-century, while delivering lower volatility. The principle is the same one we started with, being that currency exposure when used carefully provides a key diversification benefit within New Zealander’s portfolios, not a bug. Previous Next

< Back Media round up - October 2026 Anthony Edmonds 1 Oct 2026 A quick round-up of some recent news stories featuring Aurellan. Here is a quick round-up of some recent news stories featuring Aurellan: Chris Di Leva, Business Desk, KiwiSaver growth asset exposure https://businessdesk.co.nz/article/kiwisaver/aurellan-ponders-kiwisavers-growth-assets-exposure Anthony Edmonds, Investment News and Goodreturns, SPIVA NZ Scorecard https://www.goodreturns.co.nz/article/call-for-fma-to-investigate-spiva-scorecard https://investmentnews.co.nz/investment-news/down-the-index-launderette-new-study-questions-spiva-spin/ https://investmentnews.co.nz/investment-news/spiva-nz-debate-heats-up-as-half-year-report-lands/ Chris Di Leva, Investment News, Aurellan launches Private Markets Yield Fund https://investmentnews.co.nz/investment-news/aurellan-targets-private-payback-with-offbeat-wholesale-fund/ Previous Next

< Back Aurellan Intergenerational Thinking Podcast: Chris Di Leva and Anthony Edmonds talk global equity style diversification Chris Di Leva, CFA 16 Apr 2026 What investment styles have been in and out of favour? One thing we spend a lot of time on at Aurellan is working alongside Wilshire to understand what is really driving risk and returns beneath the surface. Right now, global equities are a great example. While headlines are dominated by the “Magnificent Seven” and AI, recent performance has actually been driven by value managers, leaving many growth-style managers (still the dominant exposure in NZ portfolios) lagging behind. What does this mean for portfolios from here? We unpack this, along with several other key market dynamics, in our latest episode of Intergenerational Thinking with Aurellan. Watch or listen on your preferred platform: ▶️ YouTube: https://youtu.be/S7NsxsqaH8s 🍎 Apple Podcasts: https://podcasts.apple.com/us/podcast/intergenerational-thinking-with-aurellan/id1845060554 🎧 Spotify: https://open.spotify.com/show/6E4lg41DEoCcbytV3IiMwZ 📻 iHeartRadio: https://iheart.com/podcast/299614352 Previous Next

< Back Why the case for NZ shares isn't dead yet Chris Di Leva, CFA 17 Oct 2025 New Zealand shares have struggled to keep up with global shares. But are there still benefits to the NZ share market? It is no secret that the New Zealand market has struggled on many fronts. Performance being the primary one, though I can recall as a young analyst looking at the ten-year numbers of the US market, in a period which captured both the tech bubble and the global financial crisis, and wondering why one would invest there. How times have changed. While the performance issues of the New Zealand market are worth exploring and understanding, the more commonly cited reason which has brought the allocation to Australasian equities for the average KiwiSaver Balanced Fund in the MJW Investment Survey from 17.4% to 14.5% over the past five years, is the status of the New Zealand economy which has gone from being viewed as an outperformer to an economy facing major headwinds. There is also the issue of market depth. Despite what is a burgeoning venture capital ecosystem in New Zealand which is spinning out exciting companies such as Crimson Education, Halter, Hnry, Mint Innovation, Auror and others, few seem destined to list on the New Zealand share market, preferring to list closer to their target markets where they are more likely to attract capital at more attractive multiples. Given these challenges it is easy to see how one could be down on the local market, but could it be the case that we overlooking some of the structural advantages? The performance of the New Zealand share market versus the global market Firstly, addressing the elephant in the room, the S&P/NZX 50 Index has underperformed the MSCI ACWI (unhedged to NZD) by around 13% per annum over the past five years to the end of September and around 10% per annum in hedged terms. Clearly global shares have overdelivered over this time, with a large component down to multiple expansion and strong earnings growth. Though as shown below, in the decade preceding that, New Zealand shares more than held its own, significantly outperforming the global share market. Source: MSCI, S&P. Ten year returns to 30/09/2020. While we live in an increasingly globalised world, the New Zealand market is still different enough to march to the beat of its own drum. This has served investors well in the tech bubble in the early 2000’s where the New Zealand market rose modestly from late in the year 2000 to early 2003, while at the same time, the S&P 500 Total return index fell some 45%. Somewhat more famously, the Nasdaq Composite which hit a high in March 2000 took fifteen years to reclaim its previous high. Generally, the NZ market has held up well in times of crisis. Source: MSCI, S&P. As at 30 September 2025. But the New Zealand market provides diversification…but concentration Much of the difference in return profile comes down to the different sectoral mix of the NZ market. We have a large amount of lower volatility, dividend rich companies in our market, which is dominated by industrials (mainly the large electricity generators), utilities and real estate. The New Zealand market also has a large weighting to healthcare sector, though this is primarily in two large capitalisation names, Fisher and Paykel Healthcare and Ebos. The healthcare sector globally has been a notable laggard in recent years, due to a mix of an unfavourable policy agenda in the US as well as GLP-1 drugs shaking up existing revenue lines for companies who have products which treat conditions related to obesity. The New Zealand market is underweight financials (which helped it in the GFC) and underweight technology and consumer discretionary, which on a global scale, is a technology heavy sector. These have been some of the stronger performing sectors in recent times.This makes New Zealand more heavily weighted towards value factors (lower price to book ratios overall and higher dividend yield) than growth factors (for example, return on invested capital and earnings growth rates). Global growth stock indices have outperformed value by circa 5% per annum over the past five years. Source: MSCI, S&P as at 30 September 2025. While there is plenty of concern at present around the concentration in the US market, with the weight the top ten stocks coming in at 39% (25% for the MSCI ACWI), NZ remains a very concentrated market with 66% of the index in the top 10 stocks. The largest of which, Fisher and Paykel Healthcare, comprising 16% of the index. Tax While fees tend to dominate the discourse in funds management, tax is often something viewed as too hard or met with the comment “I am not a tax advisor”. We are not either, though we have a fiduciary duty to deliver the best returns to clients, which they receive after they have paid the tax man. The thing which many don’t appreciate is the tax efficiency of New Zealand shares. Dividends for many companies are fully imputed, and the tax rate paid, on a weighted average basis by the underlying companies in the index is c. 20%. This means that the additional tax paid by investors is minimal. If we compare this to the global market, and for simplicity, let’s just focus on the USA since it makes up by far the biggest weight, there is no imputation regime. On top to that, there is a withholding tax of 30% applies to dividends. Now, assuming the correct forms are filled out, this falls to 15% under our double tax agreement from the US. And this 15% tax can be utilised by the underlying investor. Key message here is to ensure your fund is structured correctly, otherwise this is a leakage. The other thing which often gets overlooked is that there is, though it isn’t called one, a quasi-capital gains tax on global shares. The FDR regime assumes income at 5% per annum, which for most funds, particularly ones which follow the global share indices which have a dividend yield of less than 2%, means the rest, essentially capital gains or losses is taxed. 5% is well above the NZX 50 dividend yield which is currently running around 3%. Now some will point out that individuals have the benefit under the foreign investment fund (FIF) regime of being able to select the comparative value method for their offshore shares when their returns are negative. This provides the benefit of having no tax liability in these negative return years. However, the FIF tax regime comes with issues like not being able to get a tax deduction for any offshore management fees, plus not being able to use all foreign tax credits in full, or sometimes at all. Also, a limitation of the FIF rules is that in any given year a person must use the same tax treatment for all their global shares. This is problematic when some global assets perform positively, while the investor’s overall global share return is negative. This reflects that the CV tax liability on the positively performing assets is very aggressive and quickly adds up. As a result, the industry has largely moved towards PIE funds, particularly since the top tax rate and the trust tax rate moved to 39% which is well above the PIE’s top tax rate of 28%. If we construct a scenario where two investors are in PIE funds, get charged the same fee and get an 8% gross return, we calculate the difference in return after tax as being 1.2% per annum in favour of New Zealand shares. That assumes the global shares are invested in a tax effective structure, when they are not the divergence increases. This is a large potential benefit to tax paying investors. We also highlight that this analysis assumes that an investor holds their New Zealand shares in a PIE fund where capital gains are specifically exempt from tax. While the IRD in New Zealand doesn’t appear to place any focus on chasing individuals for tax on capital gains, this remains a risk none-the-less. Where we land… What we haven’t covered in this paper, which is also of extreme importance, is diversification. Most New Zealanders have a large exposure to NZ through property or operating businesses. Similarly, foundations, councils, iwi and charities often have assets already in New Zealand or may be reliant on NZ donors, all factors which may temper allocations to New Zealand assets. Further, for non-taxpaying investors, not getting the benefit of imputation credits makes the case for New Zealand shares relatively weak, which should typically lead to a materially lower, or even no exposure, to NZ shares. A combination of NZ's imputation credit regime and the fact that NZ shares PIE funds are specifically exempt from further tax on capital gains, means that the long term net-of-tax returns are extremely attractive when compared to global shares (taxed under the FIF and FDR) and other asset classes like fixed interest and cash (where the total return is taxed). While these structural nuances may seem minor in years when returns between asset classes diverge significantly, in the long term they can compound into significant after-tax outcomes for tax paying investors. And while death and taxes may be life’s only certainties, in investment management factors like tax can help make a material difference to the legacy people leave when they face the former! Previous Next

< Back Aurellan Intergenerational Thinking Podcast: Talking private markets with Wilshire's Mark Perry 21 Jul 2026 Mark Perry covers the key trends among private market investors in the US On the latest Intergenerational Thinking, Aurellan's CEO Chris Di Leva sat down with Mark Perry, Head of Alternatives Manager Research at Wilshire. A few contrasts that stood out: 📊 The average US institution holds around 25% in alternatives, a far cry from NZ investor allocations. 🎼 "Alternative yield" - music royalties, transportation leasing, specialist lending can potentially offer private credit-like returns with genuinely uncorrelated risk. 🤔 And the question almost nobody is asking: are most retirement portfolios actually too liquid? We've got to know Mark and his team well over the past nine months, working together to unearth true diversification from listed markets, culminating in the launch of the Aurellan Private Markets Yield Fund. The Information Memorandum is available to wholesale investors by contacting us or Adminis. 🎧 Listen to the full episode: 🍎 Apple Podcasts: https://lnkd.in/e3Nbn55g 🟢Spotify: https://lnkd.in/eecjqM_V ❤️ iHeart: https://lnkd.in/eH2U_FBN Important information: Aurellan is an investment management client of Wilshire; no compensation was paid for this episode. Views expressed are personal opinions as of the recording date, subject to change, and are not an offer or solicitation to buy or sell any security. Statistics and performance comparisons discussed are estimates only and are not indicative of future results. Previous Next

< Back Index-washing: how dirty data pollutes the NZ active (and passive) environment Anthony Edmonds 6 Sept 2026 NZ global equity managers have been put through the SPIVA wringer and judged sub-par. But Aurellan Asset Management co-founder, Anthony Edmonds, finds the indexer is not playing clean… S&P Global Dow Jones Indices (S&P DJI) hung out the NZ-domiciled global equity sector to dry this March in another of its famous SPIVA studies that found, as usual, active managers suck. Many local news organisations laundered the S&P DJI report into stories such this one from Radio NZ headlined ‘All active funds 'underperform' over past year, data shows’. Citing the SPIVA research, in the past week a chief executive of a passive index fund manager told NZ media that “74% percent of actively managed global equity funds in New Zealand underperformed the S&P World Index in 2025”. Another, called it “the survey most KiwiSaver managers don’t want you to read”. Case closed. But let’s crack it open again. In a new analysis, using the same process S&P applies to its SPIVA sets, I can ‘prove’ that 86 per cent of NZ-domiciled passive funds have underperformed the index. The table below compares the returns of a collection of index or passive NZ-domiciled global share funds against the S&P World Index over the three years to 31 July 2026: I look forward to headlines screaming that ‘Almost 90 per cent of NZ passive funds ‘underperform’ the index’. To be clear: the above header is deceptive as none of the products included in the table, or indeed any NZ-based global share funds, have been designed to track the S&P World Index. The reality is that if each passive fund was being measured against the index they track, by design 100% of them should underperform the index after fees. Furthermore, two of the Kernel products in my comparison list, the Global Infrastructure and Global Clean Energy funds, are narrow, sector-focused strategies that shouldn’t be judged against any broad-based equities benchmark, let alone an index that no NZ managers reference, ever. Yet S&P DJI makes exactly the same error in its SPIVA NZ report; soiling the sample pool with listed infrastructure strategies in the active global shares fund universe, for example. After combining whites with colours, the research house compares the sodden, grey pile against a purity scale of its own design to produce marketing claims, like in a detergent ad, that only one brand of investment management can ever measure up. Ironically, the flawed SPIVA NZ ‘index-washing’ approach works just as well at staining the relative performance reputations of both active and passive funds. The SPIVA global spin-cycle S&P DJI produced its second NZ-specific SPIVA Scorecard in 2026 but the index-provider applies a similar process in numerous other countries, dating back to its inaugural US study in 2002. While S&P DJI promotes SPIVA as the impartial ‘scorekeeper’ in the endless game of passive-vs-active management, a recent study concludes that the underlying research assumptions tilt the playing field in favour of indexing. The 2026 paper by well-respected finance academics, Martijn Cremers (Notre Dame), Jon Fulkerson (Dayton) and Timothy Riley (Arkansas), found the SPIVA methodology is rigged against active managers in three ways. Firstly, the ‘How the SPIVA US Scorecard Understates the Performance of Actively Managed Mutual Funds’ study argues the S&P DJI assumption that counts every closed or merged active fund as an underperformer, regardless of actual historical results, muddies the pitch at the outset. The academic analysis also shows SPIVA skews the outcomes by ranking performance of, say, a $5 million fund in the same way as a $50 billion counterpart rather than on a money-weighted basis. And finally, Cremers et al critique the S&P DJI decision to measure active fund performance against a hypothetical, cost-free index that no investor could actually buy. After stripping out the impact of those three distortionary factors, the study concludes just 55 per cent of active US equity funds underperformed passive alternatives over the 20 years to the end of 2024 compared to SPIVA claim of 92 per cent. “Put another way, rather than overwhelming underperformance, our results suggest that the probability of outperformance for a given dollar invested in the U.S. equity class over the last 20 years approximated a coin flip,” the paper says. Since the NZ Scorecard is built on the same S&P DJI methodology, every one of these built-in biases applies here, too. However, the NZ version of SPIVA has some other specific flaws that further undermine its credibility as a neutral arbiter of passive-active relative performance. Spot the difference: why no one lives in the ‘S&P World’ I have made some assumptions about the underlying NZ-based global share funds in the SPIVA sample that S&P DJI can’t, or won’t, confirm but most of the arguments below stand without precise knowledge of the dataset. The first, obvious, red flag hinges on the use of the ‘S&P World Index (NZD)’, a benchmark created only in 2024, as the ultimate yardstick to measure all NZ global equity funds over the last 15 years: according to a note in the SPIVA report, all results prior to 2024 rely on back-tested data. How many NZ-domiciled international share funds use the above index? According to S&P DJI, representative benchmarks are selected for each fund category, but not all funds adopt the benchmarks stipulated. They noted that many funds do set their performance hurdle on benchmarks similar to the S&P World Index. Are all global share indices really ‘representative’? Cows are very similar to bulls, too, but a farmer might want to know the difference come milking-time. In fact, a more honest answer to my question would be that not a single NZ global shares fund uses the S&P World Index as its benchmark. None. Nada. Zip. Zero. Whether NZ managers referenced the S&P index or not would not matter if the benchmark was more-or-less in line with those that are in fashion here but, on closer inspection, the differences are too large to ignore. Importantly, the S&P World Index is an unscreened benchmark, potentially containing nasty elements such as companies involved in the manufacture of cluster munitions that are both illegal for New Zealand funds to invest in and part of a wider exclusion list, often modelled on the NZ Superannuation Fund, that many managers adhere to. By that gauge, the S&P benchmark might fail to comply with regulations issued in 2014 under the Financial Markets Conduct Act (FMC) for all funds to reference an “appropriate” market index in the context of the NZ industry. In another discrepancy with standard global shares benchmarking practices among NZ fund managers, the S&P World Index follows an old-school view of the ‘world’ that includes just 24 developed markets rather than the almost 50 housed in more common alternatives in use today such as the MSCI All Countries World Index (screened, of course, to local ESG specifications). Certainly, over five and ten years, an emerging markets allocation would be a headwind to returns versus this index. The SPIVA NZ global equities analysis also appears to lump many funds that are partially NZ dollar-hedged (some up to 75 per cent) in an unhedged category, which by itself would undermine the validity of the Scorecard. At the same time, S&P DJI has piled a mismatched collection of funds into the same dirty-washing basket. This includes funds with certain styles (such as growth, value, sustainability or dividend focused) as well as sector or theme focused funds (e.g. infrastructure, disruptive innovation). Herding a wildly different assortment of funds into a single group may synthesise statistical significance for rating against a broad benchmark but it’s no meaningful way to measure the skill, or not, of active managers… and it may be actively misleading. Unfair dealing: how to clean up the benchmark mess The Financial Markets Authority (FMA) has, quite rightly, been very active over the last few years in clamping down on fund manager advertising excesses as covered under broad ‘fair dealing’ rules. In a 2021 guidance on advertising in the sector, the regulator notes "a person must not, in trade, engage in conduct that is liable to mislead the public in relation to any dealing in financial products, or as to the nature, characteristics, suitability for a purpose, or quantity of financial products". The guidance note also spells out that advertising can be any medium, including posts made on social media and professional networking sites, as well as information promoted in the media and on news websites. For instance, my notional claim that ’86 per cent of NZ passive global share funds underperform the index’ might spark a call from a friendly FMA operative, or perhaps a public shaming or worse. It’s difficult to say whether S&P DJI, which is not registered financial services provider in NZ, would fall under the regime, but, theoretically, the same logic should apply to wide-sweeping statements about financial performance based on cherry-picked data. To date, the FMA has focused on alleged misleading advertising around unsubstantiated ethical investment claims, however, the influence of indexing, often supported by ‘research’ such as the SPIVA report, is far more pervasive in NZ than any concerns about ESG labels. This is not an argument for, or against, active or passive management: at Aurellan, we offer strategies in both styles to our clients, and, during my career I have built index funds like the highly successful Foundation Series US 500 Fund. Instead, I want to highlight the dangers, and possible breaches of NZ law, of allowing flawed analyses of relative fund manager performance to stand unquestioned in what amounts to the benchmark version of ‘greenwashing’ – or, to coin a new phrase, index-washing. Perhaps the FMA can adapt its ‘greenwashing’ language for index guidance purposes, as below: Index-washing refers to false or misleading claims about the benefits of passive management, including misleading information or claims about how products might perform in relation to an index or benchmark. While S&P Global Dow Jones claims to be the de facto scorekeeper in NZ’s active passive debate, only the FMA has the power to arbitrate on what it considers an ‘unsubstantiated claim’ is. So it’s time for the FMA to get their calculators out and do the analysis. Would claiming that 86 per cent of NZ-domiciled passive global share funds underperformed the index be an unsubstantiated claim? Ultimately, only the FMA can decide. The future of accurate fund assessment is on the line. Previous Next

< Back Don't let tax be the one that got away Anthony Edmonds 5 Jun 2026 Anthony reflects on how he tackles tax within his own family investments. Every year I go fishing with mates who are successful investment advisers. After a few cold refreshments we seem to fall into the same old fight about tax. They argue tax isn’t something they really think about in structuring their clients’ portfolios and that they focus simply on selecting the best possible investments assets. This is the proverbial red rag to the bull! I find myself going red in the gills as I explain that structural considerations like tax is often where the biggest, most repeatable gains sit! In addition to investing in great assets, steps like making sure fees are tax deductible, that every available tax credit is used, getting the right assets in the right names, and choosing funds that could save up to 40% in tax absolute dollar terms, is a sure-fire way to maximise wealth through time. Aurellan was built by our founders to manage our own families’ intergenerational portfolios, and the thinking in this series reflects how we invest practical, honest, and grounded in what we do with our own money. This article talks about how, in my own household, we utilise PIE Funds for family members who have low levels of taxable income, which is something we implement because the numbers and dollars are compelling, the PIE tax rules are straightforward, and the benefit recurs every single year. The spouse who isn’t in paid work, while absolutely killing it financially Let’s address the elephant in the room straight away. When I say a spouse “who isn’t in paid work,” I’m not casting aspersions. I am not suggesting they are somehow faulty, or that they spend their days horizontal on the couch watching reality television. I simply mean they have no taxable employment income, which as it turns out, makes them one of the most tax-efficient investors in the country. So, while you’re grinding through another Monday, your non-working spouse may be quietly building wealth at a tax rate your accountant can only dream about. A quick primer on PIE tax Portfolio Investment Entities (PIEs) are New Zealand managed funds that pay tax on behalf of their investors using each person’s Prescribed Investor Rate (PIR). The lowest available PIR is 10.5%, and qualifying for it requires meeting two tests. Firstly, a person’s taxable income from employment, rental, and other ordinary sources must be under $15,600 per annum, and secondly their combined taxable income plus PIE income must remain under $53,500 per annum. Both tests are assessed based on either of the two prior income years, so a temporary spike in income does not necessarily disqualify an investor from the 10.5% rate. A spouse or partner with no other taxable income will sail through both tests with ease. Most importantly, it means their entire $53,500 annual allowance can be filled with PIE investment income, all taxed at just 10.5%. Better still, unlike interest or rental income, PIE returns cannot be reassessed upward at year end. PIE tax is a final tax, meaning there is nothing more to pay. Zip, zero, nada. Pleasingly, this PIE tax opportunity isn’t restricted to just those on a 10.5% tax rate, as people on 17.5% tax rated can earn up to $78,100 including their PIE income, provided the “normal” income component of this remains under $53,500. Also, be sure to read our article “The investment hack Sir Michael Cullen probably never meant to give us”, as that strategy creates no taxable income, so is perfectly complimentary to the opportunity set out below. Global shares and the FDR advantage PIE funds that invest in global equities are taxed under the Fair Dividend Rate (FDR) method. FDR is beautifully simple, reflecting that regardless of what the fund actually earns, the taxable income is deemed to be exactly 5% of the value of the investment over the course of the year. For PIE funds, this is typically calculated daily, which means that if an investor withdraws partway through the year, the fund knows precisely how much tax has accrued to that point. If global markets return 15% that year, the investor is still only taxed on 5%. The other 10% is entirely tax-free. For a 10.5% PIR investor, the effective tax on the underlying investment is just 0.525% per annum (5% x 10.5%). That is an extraordinarily low tax cost for a growth-oriented investment, and it would be lower again if we considered the tax deductibility of fund fees and the ability to offset credits for offshore withholding taxes, but we will keep things simple for now. So, let’s work backwards from the $53,500 PIE income threshold. If a spouse has no other income, their entire allowance can be used for PIE income. Under FDR, $53,500 of deemed taxable income corresponds to an investment of $1,070,000 in a global share PIE fund (5% x $1,070,000 = $53,500). In practice, however, it pays to leave a small buffer below the threshold, meaning a sensible target investment amount might be around $1,050,000 , generating deemed FDR income of $52,500 per annum and keeping the investor comfortably inside the 10.5% PIR limits. The good news is that staying within the threshold is straightforward to manage. Because FDR income is based on 5% of the value of the portfolio, it is very predictable. There are no surprise dividends or variable distributions to catch an investor off guard. A quick check to make sure the portfolio value mainly stays below $1,070,000 during the year is all that is needed to confirm the investor remains within their $53,500 allowance. If the portfolio has grown above $1,070,000 through strong market performance, a modest withdrawal or rebalance will bring it back into range. New Zealand equities and the imputation credit sweetener PIE funds investing in New Zealand equities work differently. There is no FDR deemed return, and instead the fund is taxed on actual dividends received from its NZ company holdings. Crucially, capital gains on the sale of NZ equities are specifically exempt from tax in a PIE fund, So, if a NZ equity PIE fund generates strong capital growth, that growth flows through to investors completely free of tax. Note that investors hold NZ equities directly don’t enjoy the same surety about not getting clobbered for capital gains tax which you can read about in this article The shark already has teeth . The real magic with a PIE fund, though, comes from the imputation credits . New Zealand companies pay corporate tax at 28% before distributing profits as dividends. When they pay those dividends, they attach imputation credits representing the tax already paid, meaning the income has in effect already been taxed at 28% before the investor sees it. The NZ share market is notable for its high level of fully imputed dividends. Most of our major listed companies distribute credits at or close to the full 28% rate. Inside a PIE fund, imputation credits are applied against each investor’s individual tax liability, which is calculated daily and attributed at the investor level. For a 10.5% PIR investor, the arithmetic is striking. Since the credits represent tax already paid at 28%, they substantially exceed the investor’s 10.5% tax liability on the same income. The surplus is not lost, reflecting that each year, following 31 March, IRD refunds the excess to the PIE fund as cash, which is reinvested on the investor’s behalf as additional units. This means that on fully imputed dividend income, a 10.5% PIR investor will typically receive what amounts to a net tax refund (as explained above) rather than pay any tax at all. From a threshold perspective, the taxable income attributed by a NZ equity PIE is based on actual dividends received, which in recent years has typically been around 4% per annum for a diversified NZ share portfolio, rather than the 5% FDR deemed rate that applies to global equities. This means that the amount a 10.5% PIR investor can hold in a NZ equity PIE before approaching the $53,500 threshold is actually higher than for a global equity PIE, making it an even more capital-efficient structure for low-PIR investors. The benefits described above only materialise, however, if the investment is held in the right name. As the next section shows, many New Zealand families are inadvertently giving these advantages away. The family trust trap, plus the wrong spouse problem Here is where things get sobering for many New Zealand families, and the problems come in a few different forms. To understand this change let’s just focus on an investment in global equities. The first form is where a family holds the same global equity PIE fund investments in a higher-income earning spouse’s name, or in a family trust with the income being treated as trustee income. In both cases the PIE FDR tax is capped at 28% , resulting in an effective rate of tax of 1.40% per annum (5% x 28%). This is more than 250% of the tax in absolute terms compared to when the same PIE fund asset is held in the lower-income spouse’s name. Often this PIE-based approach is far more advantageous than the second, more complex scenario where families hold global share investments directly, for example in US-listed ETFs or directly held global shares. When these investments are subject to FDR tax and the deemed income is taxed as either trustee income or at the highest marginal tax rate, both of which are 39%, the effective tax rate becomes 1.95% per annum (5% x 39%). The complexity in this case comes from a quirk in the tax rules where individuals and trusts owning directly held global equities can switch between the FDR method and what is called the Comparative Value method (often shortened to CV method), provided they use the same methodology for all their directly held global equities in any given year. The benefit of this is that in a year where an individual or trust experiences a negative return on their directly held global shares, they can choose to opt out of paying any FDR tax entirely. While this appears advantageous at first glance, several other factors come into play in favour of a well-structured PIE global equity fund. For global equities these include the higher level of FDR tax that applies for trustee income and individuals on top tax rates, tax leakage from the non-deductibility of offshore fees, potential tax slippage relating to some non-resident withholding taxes in offshore funds and ETFs, plus the compliance costs of having to file a tax return with IRD. We will cover this in a separate article, which will show that these factors more than offset the benefit of paying no FDR tax in the occasional negative return year. It is more than worth noting that where an individual invests less than $100,000 in directly held global shares and global ETFs, a de minimis threshold applies, meaning these investors only pay tax on dividends received rather than under FDR. This threshold does not apply to investments held inside a PIE fund. The de minimis threshold throws up another super lucrative opportunity to create some real wealth, which I have covered in a separate article. The table below shows the difference in tax cost between the different scenarios when the FDR method is being used in a situation where the investor has $1,050,000 invested in global equities. Investment in global equities Spouse PIE at PIR of 10.5%. Effective rate 0.525% Trustee tax and high-income spouse in PIE at PIR of 28%. Effective rate 1.40% Trust and high-income spouse in offshore ETFs or direct shares at 39% tax rate. Effective rate 1.95% Annual tax saving — best vs worst outcome (scenario 1 vs scenario 3) $1,050,000 $5,512 $14,700 $20,475 $14,962 On a $1,050,000 global share investment, the difference between the best and worst outcome is $14,962 every single year the FDR method is used, simply by choosing whose name the investment is held in, or whether a PIE fund is used. Even a family trust or high-income earning spouse holding the same investment through a PIE fund, which is often assumed to be the most tax-efficient structure, is paying roughly two and a half times as much tax as a non-earning spouse on 10.5% when the FDR method is used. A direct holding outside a PIE is worse still in this scenario. Why this matters for investors The takeaway for investors (and their financial advisers) is clear. When reviewing a household investment structure, two questions should always be asked. Firstly, is the investment held inside a PIE? Secondly, is it held by the lowest-PIR investor in the household? A “no” to either question often means money being paid away unnecessarily in extra tax. Some simple tax optimisation steps at the household level represent one of the most reliable and accessible wealth creation tools available in New Zealand. These steps typically cost nothing to implement beyond a structural review and, where appropriate, ensuring that assets are held by the most appropriate individual or entity within the family circle. The numbers above show that the tax saving is not marginal. It is substantial, recurring, and entirely legal. The spouse who “doesn’t work” may, in fact, be doing more for the household’s long-term financial position than anyone else at the table. Important Notice Please note this article is provided for informational purposes only and is not intended to be tax advice. Previous Next

< Back Outlook 2026: Five questions that could shape 2026 and beyond Chris Di Leva, CFA 23 Dec 2025 Aurellan have compiled a team of experts to discuss the key long term themes that could drive markets in the coming years At this time of year it is always tempting to make predictions about the next twelve months like how markets might perform, or which asset class will outperform. As impossible that these types of predictions are to get right, they make for neat media headlines. However, we think that they are rarely the questions that matter most for long-term investors. For investors with time horizons measured in decades, rather than quarters, outcomes are shaped less by where markets happen to be in twelve months’ time, and more by the structural forces that unfold gradually and compound quietly. With that in mind, this outlook is structured around five questions that we believe are particularly relevant for New Zealand investors with long-term horizons. These questions cut across asset classes, regions, and investment styles, and which are unlikely to be resolved quickly, but capture factors we need to be acutely aware of when building portfolios today. Our specialist panel Mark Perry - Head of Alternatives Manager Research at Wilshire. Mark has over 15 years of private markets investment experience, currently chairing Wilshire's Private Markets Manager Research and Private Markets Investment Committee. David Johnson - Senior Vice President, Portfolio Manager at Wilshire. David sits on Aurellan’s Investment Committee. At Wilshire, he is responsible for developing and implementing multi-asset investment solutions for institutional discretionary clients. He is also a voting member of Wilshire’s Investment Committee and the Alternatives Oversight Committee. Chris Di Leva – CEO, CIO at Aurellan, in this role he is responsible for the investment outcomes of our clients. Prior to co-founding Aurellan, Chris was Head of Global and Multi Asset Investments at Harbour. Prior to that he was a Portfolio Manager, responsible for growth assets, at Mercer. Rachel Weld – Investment Principal at Aurellan. Rachel co-founded Resolution Capital which is a well-known Global Real Estate investment firm and worked for pre-eminent NZ investment firms Southpac and Doyle Patterson Brown. She is also the Chair of Aurellan’s Investment Committee. Paul Carmen – Founder and Managing Partner of Private Capital Group. Paul’s expertise has been gained from extensive international positions. These included running the global sponsor and acquisition finance platform for Mizuho Bank with teams in London, New York, Hong Kong & Sydney. Q1: What worries and what excites you about private markets right now? Why we are interested from an investing perspective: Private markets have moved rapidly into the mainstream, with them being included as part of Kiwi’s portfolio, including KiwiSaver funds. Much of the 2025 debate focused on their potential to lift returns and improve diversification at a time when public markets are more concentrated and fully valued. But those higher expected returns come with trade-offs. Private assets introduce risks around liquidity, valuation, leverage, transparency, and governance, and some of these were tested in 2025. Australia’s regulator ASIC scrutinised how private assets are valued and managed within superannuation funds, as well as highlighting a range of concerns in a report on the private credit sector. Further abroad stresses in parts of the US private credit market, including the restructuring of First Brands, highlighted how quickly risks can surface when conditions tighten. What Wilshire’s Mark Perry has to say on the matter: Private markets in 2026 sit at the intersection of structural transformation and persistent uncertainty. Across regions and strategies, the landscape is being reshaped by four global megatrends—AI, geopolitics, macroeconomic volatility, and the energy transition—which together create both meaningful risks and compelling opportunities. The environment demands heightened selectivity, disciplined underwriting, and a forward-looking approach to portfolio construction. What worries us is the breadth and persistence of macro and geopolitical uncertainty. Elevated valuations in technology and AI, uneven inflation trajectories, and divergent regional interest rate paths all contribute to a more fragile backdrop. Geopolitical fragmentation—from U.S.–China tensions to European political instability and shifting tariff regimes—continues to disrupt supply chains and cross border investment flows. Liquidity remains constrained across several private markets, with exit activity still below historical norms, particularly in Europe and parts of the global venture ecosystem. In private credit, intense competition has compressed spreads and weakened underwriting standards in large cap direct lending, while distressed opportunities remain limited despite growing signs of credit stress. Real estate markets, especially office and logistics in Europe and residential sectors in China, continue to experience slow and uneven recoveries. Overall, the risk environment is defined by policy unpredictability, valuation dispersion, and the potential for macro shocks to expose accumulated vulnerabilities. What excites us is the abundance of structural, long duration opportunities emerging across global markets. AI is driving unprecedented investment in data centers, digital infrastructure, industrial automation, and productivity enhancing technologies—supporting strong pipelines for buyout, growth equity, and infrastructure strategies. The energy transition is unlocking multidecade capital needs in renewables, grid modernization, storage, mobility, and decarbonization technologies, with Europe and Asia Pacific particularly active. Private credit continues to expand as banks retrench, with smaller transactions and solution premium lending offering attractive risk adjusted returns. Real assets—industrial, logistics, data centers, and multifamily—benefit from improving fundamentals and durable thematic tailwinds. Venture capital, while reset, is seeing concentrated strength in AI, robotics, and deep tech, supported by improving exit markets globally. Across regions, the combination of structural demand, policy support, and persistent market inefficiencies is creating compelling opportunity sets for specialized, disciplined managers. Q2: What data are you seeing that suggests AI may not be a bubble? Why we are interested from an investing perspective: This might be the single most important question shaping equity returns over the next few years, because so much of global index performance is now riding on a handful of “AI winners”. The top 10 stocks in the MSCI ACWI are ~25% of the index today. By comparison, ten years ago the top 10 were approximately 8%. Interestingly just two companies in today’s top 10, Apple and Microsoft, were in the top 10 a decade ago. That concentration matters because valuations are also stretched relative to history. The Shiller cyclically adjusted price-to-earnings ratio is around 40, which is close to the most elevated levels in history. The only clearly higher episode was the dot-com era peak (the maximum through history was 44 in Dec 1999), and the subsequent unwind led to a lost decade for equity investors in the US. We have deliberately framed this question around what can go right , rather than what can go wrong. After all, share markets are ultimately a triumph of the optimists. The challenge for investors is distinguishing between optimism that is being validated by data, and optimism that is simply being priced in. What does Wilshire’s David Johnson and the wider Wilshire research team have to say on the matter? Equities continue to be supported by resilient earnings despite low expectations for Q3 and Q4 of 2025. History suggests that consensus expectations are typically conservative, as actual results have consistently outpaced consensus expectations, as shown in the graph below. Earnings for Q3 significantly outpaced expectations, delivering 13% earnings growth, well above the 6% consensus expectation. Forward earnings expectations into 2026 appear far more optimistic. While higher expectations set a high bar for earnings, the gains in productivity from AI and automation may fuel higher margins and profitability growth, both of which are supportive of multiple expansion. Source: Goldman Sachs Investment Research, Wilshire. For illustrative purposes only. While valuations appear expensive based on the 12-month forward earnings multiple, equities are less expensive when adjusting for current profit margins. Ultimately, it’s reasonable for investors to pay a higher valuation for companies that deliver high profit margins and earnings growth, which is the case for U.S. equities today relative to history. We are not dismissing the apparent pockets of exuberance that exist in certain sectors within the equity market, and we acknowledge the growing concentration of thematic (i.e. AI) and idiosyncratic risk in U.S. equities today. However, we also believe that it’s important for investors to appreciate the structural shifts that could drive stronger fundamentals and multiple expansion in the near- to intermediate-term. The rise in capex among hyperscalers has led to higher levels of earnings growth downstream for many companies tied to the expansion in AI. The chart below shows that consensus expectations indicate a substantial decline in capex growth among hyperscalers into 2026. This has implications for economic growth, as capex related to AI has been a notable driver of private domestic investment, while also supporting earnings growth among AI-related companies. Hyperscalers are facing increasing scrutiny regarding the growing level of capex, and if consensus estimates are accurate, a slowdown in capex could have negative consequences for economic and revenue growth. This is a risk to equities in 2026 that we continue to monitor. (editor’s note: this is a rapidly changing situation where consensus numbers are being upgraded due to increased capex guidance during earnings season. This has contributed to recent market volatility) Source: Goldman Sachs Investment Research, Wilshire. For illustrative purposes only. Q4 2025 onwards are forecasts. Q3: What would it take for the NZ share market to outperform? Why we are interested from an investing perspective: 2025 marked the third consecutive year of underperformance for the New Zealand share market relative to global equities. Over that period, persistent valuation discounts have not been enough to offset weaker earnings growth, limited sector breadth and ongoing capital outflows. This prolonged underperformance has begun to change investor behaviour, with domestic and offshore capital increasingly reallocating away from New Zealand equities, which can at times create a self-fulfilling loop. That raises a more fundamental question than short-term relative returns: what would need to change, structurally or cyclically, for the New Zealand share market to regain relevance and outperform? What Chris Di Leva has to say on the topic. We recently covered this topic in a research piece on “Why the case for New Zealand shares isn’t dead yet?” in that article we go in to the structural reasons why New Zealand has some benefits for tax paying investors. We also look into periods when the NZ market has outperformed and found the following: While we live in an increasingly globalised world, the New Zealand market is still different enough to march to the beat of its own drum. This has served investors well in the tech bubble in the early 2000’s where the New Zealand market rose modestly from late in the year 2000 to early 2003, while at the same time, the S&P 500 Total return index fell some 45%. Somewhat more famously, the Nasdaq Composite which hit a high in March 2000 took fifteen years to reclaim its previous high. Generally, the NZ market has held up well in times of crisis, as can be seen below. Source: MSCI, S&P. As at 30 September 2025. So while it is a rather pessimistic comment to make as we head into a new year, a scenario where the NZ market could outperform is one where global markets wobble. Another scenario is where the sectoral composition of the global market turns from a tailwind into a headwind. Global shares (MSCI ACWI) have become increasingly heavily weighted to technology-related sectors, such as Information Technology, Consumer Discretionary and Communication Services sectors, which make up around 47% of the index, NZ has around 9% in these sectors. NZ has substantially higher weights in healthcare which is a sector which has been under pressure globally due to changes in the US healthcare policy agenda. Over the shorter term there is the improving cyclical outlook which should be of benefit. New Zealand has underperformed economically coming out of the COVID lockdowns, and depressed house prices have weighed on domestic balance sheets, confidence, and credit growth. But there are reasons to be optimistic. The Official Cash Rate (OCR) has been cut by 3.25% over the last sixteen months, with 1.00% over the past four months, which should continue to help household balance sheets and encourage activity. Q4: Where to for global listed property? Why we are interested from an investing perspective: With valuations elevated across many asset classes, particularly global equities, this feels like an appropriate time to revisit sources of diversification that are underrepresented in many portfolios. Global Listed Property offers exposure to real assets with contractual income streams and differentiated drivers of return and has undergone a significant repricing following the sharp rise in interest rates. Is the sector primed for better returns? To answer this question we talk to Rachel Weld: The performance of Global Real Estate Investment Trusts (GREIT) has disappointed with returns in recent years falling below the historical average. The narrative on GREITs price weakness has centred on the rapid rise of interest rates, the demise of the office sector and the impact of e-commerce on retail property. While there has been merit to these concerns, today, the underlying fundamentals of the sector overall appear to be in solid shape with low property vacancy rates and limited new building supply. Many GREITs have strong balance sheets, well-laddered debt maturities, and access to diverse sources of capital. Furthermore, due to significantly higher construction costs many are trading at or below replacement costs making new development uneconomic at current rent levels. Interestingly, in April 2025 Blackstone raised €9.8bn, for a real estate drawdown fund and given many GREITs are trading below their replacement costs and private market values, the sector may be poised for increased corporate activity. GREITs offer investors a liquid exposure to some of the world’s best real estate assets, a diversified exposure to all sectors of real estate. The listed GREIT universe has evolved significantly since Covid as the office sector now makes up less than 10% of the GREIT benchmark, down from over 20% in 2007. Sectors like data centres, healthcare (seniors housing), and industrial properties are much larger segments, benefiting from long-term growth trends. With their ability to diversify portfolios and provide a steady income stream, GREITs could become a valuable addition to an investor’s portfolio, especially as the sector begins to recover from its recent undervaluation. Perhaps 2026 and beyond is going to be times for the sector to finally shine again. Q5: How big can private credit get in NZ? Why we are interested from an investing perspective: The Active Investor Plus (AIP) Visa is New Zealand’s main residence-by-investment pathway. Changes introduced in April 2025 simplified the regime and broadened eligible investment options. Uptake has been materially stronger than under the previous settings. By mid-December 2025, Immigration New Zealand had received 491 applications, representing 1,571 applicants and a minimum potential investment of approximately NZD $2.9 billion. So far 129 applications have been approved with committed investment $770m. Much of the activity has been in the “growth” category which much of the flows within the growth category being allocated to private credit. Private credit is long-established asset class in the US and Europe. There, regulatory changes following the Global Financial Crisis materially increased bank capital requirements, prompting banks to retrench from large parts of middle-market and sponsor-backed lending. Non-bank lenders stepped in to fill that gap, and private credit has since become a core component of institutional portfolios. Large US pension funds and insurers typically allocate mid- to high-single digits (around 7–10%) of portfolios to private credit, with similar levels evident across European institutions. Historically, the asset class has delivered attractive risk-adjusted returns, benefiting from an illiquidity premium, floating-rate structures, and tailored lender protections through covenants and bespoke deal terms. Over long periods, private credit has outperformed public leveraged loans and core fixed income. These characteristics have underpinned its institutional appeal offshore and help explain the growing interest now emerging in New Zealand. The asset class does not come without challenges, one of which is manager selection, which our global partner Wilshire often points out to us is very wide within private asset classes, meaning that investor experiences in the asset class have not been uniformly positive. Further, the term “private credit” encompasses a broad church of strategies with materially different risk and return profiles. These range from higher-risk segments such as distressed debt and opportunistic special situations, through to more conservative forms of lending such as senior secured direct lending and bilateral SME finance. However, private credit remains a relatively nascent asset class in New Zealand though flows are increasing largely due to AIP. Like in the US and Europe, structural tailwinds exist for the sector here, but how big the market could get is still unknown and there is some worry, which is shared by this author, around how potential future changes in AIP could impact the asset class. To answer How big can private credit get in New Zealand? And to address some of the challenges and opportunities of a growing asset class, we ask PCG’s Paul Carmen. Being part of the development of a new asset class in any jurisdiction certainly brings its fair share of challenges and opportunities. New Zealand is no different and yet much of this development in our domestic market represent somewhat of a well-trodden path offshore. When establishing a prior private credit platform in Europe in 2003, we witnessed first-hand the stark contrast between a lack of investor familiarity and the flourishing asset opportunity driven by banks' withdrawing capital from business lending. At that time, a lack of market data and manager track record, created hesitancy in the eyes of institutional investors. This is very much in evidence in NZ 20 years on and yet, given a tangible lack of private credit competition from offshore in our domestic market given the difficulties of a fly in and fly out approach, and the impact of RBNZ's bank capital adequacy requirements on NZ bank appetite, there is a tangible opportunity to establish the asset class as a core element of the NZ market and as part of investors' asset allocation strategies. For context, business lending in the US, where private credit is mature and a common feature of investors' asset portfolios, is broadly comprised of 80% private credit and 20% bank lending. This evolution from an historically bank dominated market to a private credit centric model has played out over the past 30 years and is summarised in the graph below: The New Zealand economy is dominated by privately owned small and medium size companies. Historically these businesses have relied on banks for funding and to their support growth. RBNZ data indicates that the volume of bank lending to NZ businesses (excluding Property and Agriculture debt) totals circa NZD 80b. In a mature market such as the US, between 65-80% of this might be provided private credit; implying a right sized mature domestic private credit market of somewhere between NZD 50-60b. Such a level of penetration by private credit has in reality taken many years to achieve in the US. However, the sum total of assets under management amongst New Zealand's private credit funds today is estimated to be less than NZD 1b, suggesting substantial room for expansion as the asset class starts to embed in the portfolios of institutional investors locally. Against this asset opportunity, the reality of investor unfamiliarity creates a genuine barrier to entry. Fund Management requires capital for investment and in an environment where performance data is limited and opaque, institutional investors are only now starting to evaluate the domestic investment opportunity within private credit. To date, the majority of New Zealand managers do not routinely report data through Morningstar or similar sources, and independent manager ratings and reports have yet to become a common feature. Whilst these steps take time, building an understanding of manager track records around AUM growth, deployment and performance is a critical step for investor as part of their due diligence. Moreover, forming teams with experienced risk managers and with relevant investment committees, who have benefited from exposure to and deep involvement in the global private credit markets, is limited domestically; certainly, the historically bank dominated New Zealand credit markets have not been conducive to widespread fund management expertise in private credit. This is now starting to change. Offshore, much of the initial investor base has been from high networth investors, which over time has been augmented by institutional investors committing to funds as manager performance develops. This pattern is very much alive in New Zealand today. Managers and investors look for diversification in asset portfolios; global norms point to prudent risk management and a granular asset base, often with 50+ portfolio assets within a given private credit fund. Similarly, investors are keen to understand investor diversification and to ensure no undue concentration or influence is exerted by any single investor. These all combine to create somewhat of a chicken and egg environment in nascent markets. AIP has provided a step change to those local private credit managers who have been building track records and relative domestic scale over the post covid period. Many AIP investors are highly experienced investors and a number have had careers and/or are long term investors in alternative assets. The arrival of AIP capital has been instrumental in enabling local private credit managers to build and show both asset under management growth and, perhaps more importantly, deployment. This has helped to demonstrate the opportunity in the asset class and to enable funds to build their necessary diversification and attract experienced teams. As fund scale and track records are further evidenced, the New Zealand market, as witnessed offshore, will start to attract additional institutional investors and thereby enable further scaling and further investor diversification. The local market is starting to evidence this next step, and with this, local managers are able to broaden the nature and scope of their private credit funds to suit specific investor profiles and align these with asset opportunities. This is most visible for instance with domestic private credit managers starting to launch infrastructure debt funds to complement their existing direct lending strategies. All of this plays out in the context of an environment of modest competition and prudent asset structures and terms. In fact, New Zealand has a very favourable legal environment which enables managers to structure deals with registered and enforceable security to support the contractual cashflows represented by the loans these funds originate and extend. These deals are typically private in nature and this allows access to proprietary due diligence in relation to the financial performance, projections and prospects of the companies funds lend to. It also helps to foster a deep and direct relationship with the borrower's owners and management teams. This creates an environment where loans are tailored to the cashflows and needs of businesses and avoids the one fits all approach historically seen in the market. Since fund returns are derived from a borrower's ability to service its debt, fund performance is not impacted by public market technicals. This removes any correlation with public markets. Moreover, since the majority of private credit loans are subject to first ranking security, the embedded equity value in these businesses, provides a strong defensive moat against the impact of credit related underperformance. In data driven markets, compiling and demonstrating performance takes time. However, cadence has been developing over the past 18 months and fund portfolios are now showing positive signs of requisite asset diversification, origination pipelines and AUM development, which combine to enable the local market to move towards the kinds of investor asset allocation patterns and strategies witnessed in the more mature and established markets offshore. Wilshire Important Information This material is distributed or presented by Wilshire Advisors LLC (“Wilshire”) for informational or educational purposes only and should not be considered a recommendation of any particular security, strategy or investment product, or as investing advice of any kind. Wilshire is not providing this material in a fiduciary capacity, and the information may not be relied upon for or in connection with the making of investment decisions. Nothing in the materials constitute a solicitation of an offer to buy or sell securities, nor is it intended to be and should not be construed as legal or tax advice. The information does not consider any investor’s particular investment objectives, strategies, tax status or investment horizon. Always consult a financial, tax and/or legal professional regarding your specific situation. This material contains opinions of the presenters or authors, but not necessarily those of Wilshire or its affiliates. The opinions contained herein are subject to change without notice. Forward-looking statements, estimates, and certain other information contained in this material are based upon proprietary and non-proprietary research and other sources believed to be reliable but are not assured as to accuracy. Past performance is not indicative of future results. This material represents the current opinion of Wilshire and is subject to change without notice. Wilshire assumes no duty to update any such opinions. The information and materials presented may not be disclosed, reproduced or redistributed, in whole or in part, to any other person or entity without prior written permission from Wilshire. Wilshire gives no representations or warranties as to the accuracy of the information provided and accepts no responsibility or liability (including for indirect, consequential, or incidental damages) for any error, omission or inaccuracy in such information and for results obtained from its use. Wilshire is a global financial services firm providing diverse services to various types of investors and intermediaries. Wilshire’s products, services, investment approach and advice may differ between clients and all of Wilshire’s products and services may not be available to all clients. For more information regarding Wilshire’s services, please see Wilshire’s ADV Part 2 available at www.wilshire.com/ADV . Wilshire Advisors LLC (Wilshire) is an investment advisor registered with the SEC. Wilshire® is a registered service mark. All other trade names, trademarks, and/or service marks are the property of their respective holders. Copyright © 2025 Wilshire Advisors LLC. All rights reserved. Previous Next

< Back Our take on the medium term outlook Chris Di Leva, CFA 25 Mar 2026 Thoughts from Aurellan’s CEO and CIO Chris Di Leva on the current state of play in investment markets and what this means in the medium term for investors. In September 2007, customers of Northern Rock bank were given a very simple message: “don’t panic.” What followed was, at the time, one of the largest bank runs in history. Sometimes the very words meant to prevent panic are the ones that cause it. Like many lessons, this is one I learned the hard way. I can remember, (though I am too scared to re-listen to the recording) giving a similar “don’t panic” message in 2022 on a radio show as inflation was accelerating globally and in New Zealand. A caller dialed in and expressed his opposing view in fairly direct terms. As it turned out, we were both right, just over different time horizons. That experience has stayed with me. Not simply because the call was uncomfortable, but because it reinforced something simple: context is more useful than reassurance. So rather than focusing on the developments between the US and Iran, where we don't have any advantage in terms of predicting what happens next, we think that putting context around what is happening right now is a far more useful focus point. Here are a few things which we believe are relevant in contextualising markets right now. 1. Inflation shocks are harder to insure for than growth shocks In the decade or so following the Global Financial Crisis, the 60/40 portfolio (a mix of bonds and equities) worked a treat. Market shocks were typically due to growth shocks, which led to falling bond yields and therefore bonds did a decent job of offsetting equity losses. This alongside the NZ dollar, which tends to sell-off during periods of global stress, has provided meaningful offsets to falling markets. The issue with inflation shocks is that bonds don’t typically provide any offset over the shorter term as the market's response to inflation is typically higher interest rates rates (also called yields). I say "short term", as higher bond yields ultimately results in higher long term expected returns in absolute terms. There are very few places to hide in inflationary environments. One asset class in the past which has delivered strongly is commodities, which was one of the few asset classes to deliver positive returns in 2022, a year when global equities (hedged) fell some 18%. This latest bout of volatility has seen strong performance from broad commodity indices which invest in a range of collateralised commodity futures, though not all the futures, such as gold, have delivered. 2. Equities have double digit draw-downs (falls) in most years Against this backdrop, it’s also worth grounding expectations around what ‘normal’ volatility looks like. When I talk to most people about returns last year, they are happy. After all indices like the S&P 500 were up 17.9%, while the MSCI All Country World Index which aims to capture global stocks, was up significantly more than that. It is amazing how we forget about the chaos that followed “Liberation Day” which saw shares in the US fall, peak to trough, some 18.9%! Interestingly, a fall of that magnitude isn’t uncommon during any given 1 year period. In fact, since 1950, the average intra-year peak to trough fall is 13.6%, yet this hasn’t stopped the S&P 500 delivering a handsome 11.7% annualised return over this full period. In other words, the current drawdown (fall) in equity values is not atypical of what we commonly see in markets. 3. Average returns are not typical returns Since 1928, when our data source begins, the return for US Equities has been around 10% per annum. Further, the common return forecast for equities from asset allocators, ourselves included, typically congregates between 6 – 8% on a forward-looking basis. Interestingly, since 1928, the annual return of the S&P 500 has returned between 0 – 10% only fourteen times. In other words, history tells us that 86% of the time the annual return for the S&P 500 is outside the range of 0 – 10%. Source: S&P, Robert J Shiller 4. Entry points do matter Valuations always matter - just not always immediately. One of the more reliable anchors we have is the Shiller CAPE ratio, which smooths earnings over a decade and has been shown to have real explanatory power for long-term returns. Put simply, the higher the starting valuation of the sharemarket as a whole, the lower the subsequent 10-year return has tended to be. That’s easy to ignore in strong markets, but history is pretty clear on what happens when you don’t. At the peak of Japan’s late-80s bubble, there were stories, probably apocryphal, but directionally right, that the land under the Imperial Palace in Tokyo was worth more than all the real estate in California. It captured the mood: prices had detached from reality. The Nikkei then spent more than three decades getting back to its 1989 high. The same dynamic played out in the tech bubble— the Nasdaq-100 peaked in 2000 and didn’t sustainably reclaim that level until the mid-2010s, implying a “lost decade” and then some once you adjust for inflation. These episodes are not anomalies—they’re the natural consequence of paying too much for assets upfront. Where we can see this clearly in the gap between fund returns and investor returns. Time-weighted returns, what gets reported, measure the underlying performance of the assets. But dollar-weighted returns, what investors experience, tell a very different story, because they reflect when capital is put to work. Morningstar’s long-running “Mind the Gap” research shows that, on average, investors earn around 1–2% per annum less than the funds they invest in, largely due to poor timing of entry and exit. Put more bluntly, investors tend to buy after strong performance and sell after weak performance, exactly the opposite of what you would want. There are few better real-time case studies of this than the ARK Innovation ETF. The fund itself delivered extraordinary returns in its early years, but the bulk of investor capital arrived in 2020–2021, right at the peak. As performance reversed, the average investor experience was dramatically worse than the headline numbers. In fact, dollar-weighted returns lagged reported returns by more than 25 percentage points over certain periods, and a large portion of investors remain underwater despite the fund’s earlier success. We see this happening not only in markets, but also in the selection of managers currently, with investors rotating out of growth style equity funds and into value style funds. This of course is the investment style that has worked better in more recent times. This is the opposite of what we saw just five years earlier, as many value strategies were struggling, particularly in COVID times, so investors chased growth funds based on their past performance. The below chart plots the Shiller CAPE, a valuation metric, and the forward ten year returns of the US market. Source: S&P, Robert J Shiller. Chart shows relationship between high starting valuations and lower future returns. Where we stand on the current market conditions None of this is to say that the current environment is without risk, there clearly is. But history suggests that volatility, drawdowns, and dispersion in returns are features of markets, not bugs. The more important question for investors is not what happens next week or next month, but how portfolios are positioned to navigate a range of outcomes from here. In our view, maintaining diversification, being conscious of starting valuations, and avoiding reactive decision-making remain the most reliable anchors in an increasingly uncertain world. In our own portfolios, this means we are weary of relying too much on global equities as a source of returns and looking towards assets with different returns exposures such as select exposures within private markets and real assets. Previous Next

< Back Aurellan Intergenerational Thinking Podcast: Cotality's Nick Goodall and Rachel Weld 11 Feb 2026 Are property prices on the mend? or is it a case of one bitten, twice shy? NZ property prices are still around 17% below their peak — despite lower rates and early economic green shoots. Why? In Episode 5 of Intergenerational Thinking with Aurellan, we sit down with Nick Goodall (NZ Head of Research, Cotality) and Rachel Weld (Investment Principal, Aurellan) to unpack what’s really happening in markets — both here and globally. We discuss: Is the downturn cyclical, or is there a structural shift in how people invest? Are weak housing markets a New Zealand-specific issue or part of a broader global trend? Are we approaching a genuine turning point — or another false start? Previous Next

< Back Edmonds, Di Leva venture brings $1.5 trillion US firm to NZ investors David Chaplin - Investment News NZ 14 Sept 2025 The new investment firm founded by Anthony Edmonds and Chris Di Leva has confirmed the US-headquartered Wilshire Advisors as its global partner. Full article is available here Previous Next