Many KiwiSaver members will have seen hundreds of dollars erased from their balances. Photo / iStock
Many KiwiSaver members will have seen hundreds of dollars erased from their balances. Photo / iStock
KiwiSaver balances have been beaten down by Brexit-driven market upheaval, but an investment expert is urging members of the savings scheme to keep calm and carry on.
A record US$3 trillion (NZ$4.3 trillion) was wiped from global sharemarkets in two days following Britain's surprise vote to leave the European Union, according to data from S&P Dow Jones Indices.
Many KiwiSaver members will have seen hundreds of dollars erased from their balances.
However, JBWere New Zealand equity manager Rickey Ward said scheme members had enjoyed a great run in recent years on the back of rallying markets.
Total KiwiSaver assets increased by a third in the year to March 31 last year, to almost $28.5 billion, largely driven by strong investment returns.
"You've had a period of wonderful returns in equity markets leading up to this particular [Brexit] event," Ward said. "KiwiSaver is a long-term investment - you should never be overly concerned about short-term movements."
Most KiwiSaver funds hold Australasian and international shares and riskier, more growth-focused options generally invest more heavily in stocks.
Ward said it was worth remembering that KiwiSaver funds held a diversified range of assets - not just shares.
New Zealand's S&P/NZX 50 share index has already gained back much of the losses it sustained in the Brexit sell-off, which saw it fall 2.3 per cent on Friday.
When you have uncertainty, you tend to get magnitudes of emotion and emotion drives volatility. I don't see that going away.
The index, which was had risen by 0.8 per cent in early trading this morning, has gained 1.5 per cent this week and is still up 7 per cent in the year to date, although it remains 3.8 per cent below the record close of 7039.4 it reached on May 31.
The Australian sharemarket gained back some ground yesterday but is falling again today, having shed 3.4 per cent since Friday morning.
Ward said uncertainty around the Brexit process would be a source of volatility in markets for some time.
"You've got uncertainty around the globe due to Brexit," he said. "When you have uncertainty, you tend to get magnitudes of emotion and emotion drives volatility. I don't see that going away."
Ward said KiwiSaver members should consider their personal circumstances when deciding how much risk they wanted to take with their investment.
"Age is a consideration for that - the younger you are, the longer you've got until retirement and therefore you should be able to weather increased levels of volatility," he said.
"If you're 64, coming to retirement at 65, and you're in a high-risk fund you probably should re-think that."
Last week, two days before the Brexit vote, the $30.3 billion New Zealand Superannuation Fund announced it was cutting back its active investment risk, saying most of the major asset classes and investments it tracked were trading at or above fair value.
In a note to clients, Craigs Investment Partners head of private wealth research, Mark Lister, said European equity markets seemed most at risk from further under-performance in the short-term.
"The New Zealand market will ... be somewhat shielded, although we should still expect to follow global trends," Lister said.
"The Australian market will be more volatile than our own, with the resources sector likely to come under pressure should the 'risk-off' tone hurt commodity prices. The [Australasian] banking sector could also suffer by association, given the moves we have seen in the UK and European banks since the Brexit outcome."
