ANZ Default KiwiSaver Scheme High Growth Fund

• The last quarter has been a challenging one for global share markets, with most developed markets ending lower as rising bond yields posed headwinds for growth assets. At a sector level, real estate and technology companies underperformed, while energy was the only strong performer, helped in part by rising oil prices. 
• Meanwhile, in New Zealand, the NZX 50 fell 5.2%, making it one of the worst-performing regions. Although recent company earnings updates were broadly in line with expectations, companies’ forward guidance was somewhat disappointing. Weak business and consumer confidence also didn’t help.
• Global bond markets had a challenging quarter too. Despite signs central banks were winning in their battle against inflation, resilient economic growth in some of the major economies meant sentiment shifted towards the prospect of interest rates staying ‘higher for longer’. What’s more, expectations remain for further potential rate hikes before a peak in rates is reached. This was certainly the case in the US, where market pricing suggests one more quarter-percent move higher later this year.
• New Zealand bonds were lower over the quarter after the Reserve Bank raised its terminal rate, which suggests there may be another interest rate hike later this year. Meanwhile, stronger-than-expected growth data reaffirmed that the central bank would need to hold interest rates at a restrictive level for a prolonged period.
• Equity stock selection was the main detractor on fund performance, largely driven by an underweight position to the strong-performing energy sector. Meanwhile, an underweight position to the poor-performing consumer discretionary sector would have ordinarily been beneficial, but it was offset by some weak individual company performance. 
• In bonds, it was no surprise that our international fixed interest managers faced challenges, especially as US bonds were some of the worst-performing over the quarter. 
• At a tactical level, we remain underweight to international shares and overweight to global and New Zealand bonds. This reflects our belief that the global economy will start to slow in the coming months as central banks hold rates in restrictive territory for an extended period of time. This will soften labour markets and slow consumption, which will eventually weigh on economic growth. In New Zealand, consumer spending is slowing, and households are starting to roll off ultra-low mortgage rates, which will decrease disposable income.

The High Growth Fund has no quarterly performance history as yet, having only launched on 3 August 2023. Performance will be reported on from next quarter.

The fund aims to achieve (after the fund charge and before tax) over the long term higher returns, allowing for larger ups and downs in value.

The fund invests in growth assets (equities, listed property and listed infrastructure), with a very small exposure to income assets (cash and cash equivalents and fixed interest). The fund may also invest in alternative assets.