ANZ KiwiSaver Scheme Conservative Fund

Performance is after the annual fund charge and before tax. Rates, fees and agreements.

• The fund has a significant weighting to bonds, which make up more than half of the fund’s holdings.
• It was another tough quarter for global bond markets. Despite signs that 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 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 also lower over the quarter after the Reserve Bank of New Zealand 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.
• Rising bond yields were a headwind for shares over the quarter, which saw most major share markets finish lower. At a sector level, rising bond yields weighed on real estate and technology companies, while energy was the only strong performer, helped in part by rising oil prices.  
• 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, which would have ordinarily been beneficial, 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 fund aims to achieve (after the fund charge and before tax) over the long term low relatively stable returns, allowing for small ups and downs in value.

The graph below shows the value of a $1,000 investment made at the time the fund launched.

Performance is after the annual fund charge and before tax. Rates, fees and agreements.

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

This chart shows the mix of assets that the fund generally intends to invest in.