Informed Investor - Winter 2024 - The Diversification Issue

A FINE BALANCE HOT ON THE HEELS THE COVID EFFECT How to create the Do altcoins follow in Long-term implications optimal portfolio mix Bitcoin's trail? of the pandemic

The Diversification Issue

COLD COMFORTS Luxury interiors for the winter months

KIWISAVER SPECIAL INSIDE

ETHICAL OPTIONS Can diversification be sustainable?

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I N F O R M E D I NVESTO R

Contents IN THIS ISSUE

10. Contributors Meet some of our expert contributors.

12. What We Like Beautiful jewellery and a classic Auckland eatery.

14. Essentials Stylish ways to keep the cold at bay.

18. Count Those Eggs, Watch Those Baskets Finding the right mix of cash and growth assets is tricky, but looking at a wider investment portfolio is worth considering, writes Amy Hamilton Chadwick.

24. Going Up, Going Down Economist Cameron Bagrie has the latest on the New Zealand economy.

26. Do Altcoins Really Play Follow the Leader?

In the wake of Bitcoin halving investors are now tracking altcoins, but the devil is in the detail.

28. The Benefits of a Diversified Ethical Approach

Misconceptions about returns and risk of ethical investment might be inhibiting some investors, writes co-CEO of Mindful Money Kate Vennell.

30. The Time and Temperament Recipe Psychological profile, financials and time are the main ingredients in defining your appetite for diversification, writes Martin Hawes.

34. Is This the Other Long Covid?

Governments have accumulated massive debt since the pandemic which could lead to financial headaches and is likely to mean a lockdown on public expenditure, writes Andrew Kenningham.

50. The Journey to a Successful, Diversified Portfolio

Understanding your appetite for risk is an investment fundamental, but aligning it with your investor profile and stage in life is key to getting the most from a diversified KiwiSaver strategy, writes Sam Bryden.

52. Snapshot What’s impacting the global economy right now?

54. Are KiwiSaver Funds Really Diversified?

Diversification has the twin charm of being a golden rule and a free gift, but are KiwiSaver and fund managers really making the most of this option? Sam Stubbs takes a look.

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KIWISAVER GUIDE 2024 40. Taking an Inside Peek at KiwiSaver We reveal the results of our inaugural KiwiSaver survey, powered by InvestNow.

44. Getting the Best out of KiwiSaver InvestNow takes a look at several ways KiwiSaver can be tailored to deliver the right results.

46. Who Should Sign up for KiwiSaver?

Is it worth enrolling your kids in KiwiSaver? And what should you do if you’re self-employed? Jennie O’Donovan from Simplicity has the answers.

48. The Gap Between Saving and Investing What’s the difference between investing in my KiwiSaver of $30,000 vs $100,000 and what advice should I seek?

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Contents 56. It’s an Upturn, but an Under-whelming One

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Stretched affordability, high mortgage rates and the recent rise in market listings have all had an impact, writes Kelvin Davidson.

58. Taking the Risk Out of Investment Diversification is one of the key benefits of investing in property, but what does this mean? Sally Lindsay finds out.

62. When Diversification Meets Commercial Property Funds

Often referred to as 'the only free lunch in investing', diversification is a fundamental risk management concept embraced by astute investors across the board.

65. Taking the Commercial Plunge

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Diving into commercial property can be attractive for investors, but it pays to do some homework first, writes Andrew Logie.

66. Diversify and Thrive To spread risk and enjoy higher returns you need to buy in different areas, which is a form of diversification, writes Andrew Nicol.

68. Up for Sale And Still Earning Rent The Stay Hub offers a short-term way to keep your or your client's house on the market while earning rent until you find the right buyer and price.

70. Commercial Property Poised for Growth

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Commercial property investment remains a defensive asset class. Mat Harvie, explains how unlisted property funds are moving through what is likely to be the bottom of this economic cycle.

74. Fashion Update The colours and styles of winter 2024.

76. Here Comes the ‘Wolf’ Without Sheep’s Clothing

The Amarok offers a blend of rugged capability, refined design and advanced technology, writes Liz Dobson.

78. National Treasure Joanna Mathers enters a world of fine jewellery and high-end watches to discover the glittering history behind a very special anniversary.

80. Luxury Cold Weather Warm-ups

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Interior Designer Mary-anne Tobin, of Design Addiction, provides helpful ways to keep the fire alive in your home for a mid-winter glow up.

EDITOR’S LET TER

The Wisdom a Father can Bestow The father of diversification died last year, but the modern portfolio theory was his invaluable gift to the world.

Harry Markowitz, American economist and Nobel Prize winner, died on June 22 last year.

He was 95.

In 1952, he published a dissertation entitled Portfolio Selection. Investment theory at the time was underpinned by the assumption that you should buy shares in companies that seem likely to be successful … and hope for the best.

Markowitz’s theory threw this out the window.

Portfolio Selection postulated that risk lies not in the stocks within a portfolio, but in their relationship to each other. The optimal mix of high-risk, high-return, and low-risk, low-return stocks offered the perfect balance for cautious investors.

Markowitz was the father of diversification.

Using complicated mathematical equations, his theory offers those charged with managing our funds a vital analytical tool for compiling optimal portfolios.

Modern portfolio theory (or MPT) is his gift to the world. And as the New York Times stated in an article following his death, “[his] breakthrough insight and its corollaries have now permeated all aspects of money management”.

The lead story this issue looks at the art and science of diversification. As a nation, New Zealand is extremely under-diversified. Amy Hamilton Chadwick reveals how we are skewed towards property and the implications of this.

you have so much of your wealth tied up in a single asset that’s tucked away in the corner of the world. It doesn’t make much sense from a diversification perspective.”

As Amy explains, there is a simple tool for portfolio diversification, KiwiSaver. A wellmanaged mix of assets within a KiwiSaver scheme offers exposure to national and international investments. By spreading your money over a wide range of industries and assets, you’re sheltered from the dangers of under-diversification.

On the topic of KiwiSaver, Informed Investor has partnered with InvestNow for our inaugural KiwiSaver survey.

There are 3,351,507 active members of KiwiSaver in New Zealand and we are highly engaged with it – most of these members have chosen their own fund managers.

The results of the survey are fascinating and indicate we understand the scheme and are invested in the results.

We also feature a KiwiSaver Q&A section with a lot of useful information around the scheme, written by experts. There are some misconceptions around KiwiSaver, and we hope to offer you clarity.

I hope you enjoy your quarterly delve into the wonderful world of investing.

“You almost can’t avoid it, because everyone wants the peace of mind that comes with owning property,” says Jason Choy, senior portfolio manager at InvestNow. “But then

Joanna Mathers Editor

Editor Joanna Mathers

Resident economist Ed McKnight

Art Director Mark Glover

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Subscriptions Jill Lewis – subscriptions@informedinvestor.co.nz This magazine is subject to NZ Media Council procedures. A complaint must first be directed in writing, within one month of publication, to the email address, stephanie@informedinvestor.co.nz. If not satisfied with the response, the complaint may be referred to the Media Council PO Box 10-879, The Terrace, Wellington 6143; info@mediacouncil. org.nz. Or use the online complaint form at www.mediacouncil.org.nz. Please include copies of the article and all correspondence with the publication.

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UP FRONT

Meet Some of Our Contributors CAMERON BAGRIE

SAM BRYDEN

Cameron is the managing director of Bagrie Economics, a boutique research firm. He was previously chief economist at ANZ, a position he held for over 11 years.

Sam Bryden is Head of Distribution at Nikko AM NZ. With over 18 years’ experience in investment management and financial markets, the last six of these at Nikko AM, he is responsible for leading the firm’s sales, marketing and client servicing.

AMY HAMILTON CHADWICK

MARTIN HAWES

Amy specialises in property and finance journalism.

She has been a writer and editor for almost 20 years.

Amy is a registered financial adviser.

Martin is the chairman of the Summer KiwiSaver Investment Committee.

He’s an authorised financial adviser and offers his services throughout New Zealand.

BEN BRINKERHOFF

SAM STUBBS

Ben is Head of Advice at Consilium and has over 20 years’ experience in financial services. He works with over 140 independent financial advice firms to help develop their ideal advice practice.

Sam is the founder and MD of Simplicity, New Zealand’s only low-cost, nonprofit funds manager.

Previously from the banking world having worked for Goldman Sachs and NatWest Markets in London and Hong Kong, Sam believes the finance industry should be as much a force for good as a source of profit.

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C ONTRIBUTORS

KELVIN DAVIDSON

JENNIE O'DONOVAN

Kelvin joined CoreLogic in March 2018 as senior research analyst, before moving into his current role of chief economist. He brings with him a wealth of experience, having spent 15 years working largely in private sector economic consultancies in both New Zealand and the UK.

Jennie O'Donovan has been a part of the Simplicity team since 2020, bringing with her 15-plus years in communications and education experience from the nonprofit sectors in New Zealand and the United Kingdom.

MIKE HEATH

ANDREW KENNINGHAM

Mike has been leading the InvestNow service since launch, March 2017. Over the past 20+ years he has held senior management roles for some very well-known NZ and international businesses and brands – TAB, Contact Energy, Reuters and Rabobank.

Andrew is the chief Europe economist for Capital Economics. He was previously an economic adviser for the United Kingdom Foreign Exchange.

MARY-ANNE TOBIN

ANDREW NICOL

Former senior underwriter turned qualified interior designer, Mary-Anne Tobin is constantly viewing the latest international trends and incorporating these into her designs. She also blends modern day aesthetics with practical solutions.

Andrew is an authorised financial adviser and the managing partner of Opes Partners. He has more than 15 years’ experience in banking, finance, and property.

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UP FRONT

What We Like

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A Touch of Luxe 3.

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The Daisy Sapphire Drop Earrings are the perfect accompaniment for an evening at the opera.

Priced at $2,850, they are crafted from white gold and feature a sapphire encircled by diamonds. An exquisitely playful pendant, Letters of Love Diamond Yellow Gold Pendant ($2,015) can be personalised to the first letter of your loved one’s name.

A true statement piece, the Rubellite Cushion Cut Ring is the ultimate expression of love made from 18ct gold; it retails for $18,000.

But the crowning glory of the collection is this Rose Gold and Diamond Heart Chain Necklace; something to cherish for generations, it sells for $60,250.

For more information on these pieces, visit www.partridgejewellers.com WI NTE R 2 0 2 4 | I N F O R M E D I NVESTO R 1 2

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W H AT W E L I K E

Time to Return to a Rave Restaurant Andiamo, 194 Jervois Road, Herne Bay, Auckland.

I’ve been frequenting Andiamo for decades. It’s always been one of those places – a local restaurant with flare, friendly service and excellent food – you will revisit time and time again.

So, on the coldest night of 2024 I headed to the Herne Bay eatery with my partner, knowing I wouldn’t be let down.

Good table service makes a restaurant, and from the outset that’s exactly what we experienced. Our waitress from Colombia was a delight – attentive, quick to bring fresh glasses of excellent wine: Te Kairanga rose for me, Mt Difficulty pinot noir for him (both exceptional).

We were excited to try the change in menu, developed by new female head chef Canada Loucks, and started with focaccia and warm Sicilian olives. Served with red pepper and parmesan butter, and a drizzle of cabernet vinegar, the focaccia was possibly the highlight of my night. The crust crunched into doughy bliss ... a dreamy vessel for the delectable butter.

The olives were also excellent, offering some of the tiniest I’ve ever eaten (a delicately salty treat) and the addition of roasted garlic and chillies kept things interesting.

Hello to new dish Onto the mains, and I chose the butternut girella with sage and burnt onion brodo – mainly because I’d never heard of girella or brodo.

Girella (“spinning top” in Italian) is the ideal descriptor for this spectacular dish. The thick strip of pasta is spiralled in the centre of the plate and liberally sprinkled with small gems of diced butternut. The pasta sits within a pool of brodo (broth); a salty counterpoint to the sweet butternut.

It’s a multi-layered textural and flavourful dish.

My partner chose the tomato risotto, with soffritto, stracciatella and basil; it was light and subtle and partnered well with the girella (we shared the mains).

Tiramisu is irresistible, so was ordered straight after the main. But I was keen to partake of the ricotta and fig Genoise sponge with chestnut crema and pear sorbet.

Star performer The tiramisu was extremely decadent, rich and creamy, but the Genoise sponge was the star. We have figs in our garden, which are underutilised, so it was great to see them as stars of the show. The pear sorbet elevated the earthiness of the fig, adding a refreshing tangy undertone.

Dessert was enjoyed with a glass of port (a family tradition) and the night ended on a high note.

Good Italian eateries are few and far, but Andiamo never disappoints.

Reviewed by Joanna Mathers WI NTE R 2 0 2 4 | I N F O R M E D I NVESTO R 1 3

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QUOTE & DEFINITION

Diversification /də-ˌvər-sə-fə-ˈkā-shən/

‘The act or practice of spreading investments among a variety of securities or classes of securities’ Merriam-Webster Dictionary

‘What’s comfortable is not the right way to invest. You must own things that you’re uncomfortable with, otherwise you’re not really diversified.’

– Peter Bernstein, US economist

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D I V E R S I F I C AT I O N

Count Those Eggs, Watch Those Baskets Finding the right mix of cash and growth assets is tricky, but looking at a wider investment portfolio is worth considering, writes Amy Hamilton Chadwick.

Don’t put all your eggs in one basket ... that’s essentially what diversification is all about. It’s a simple idea, but the details can get almost infinitely complicated. How many eggs do you have, which baskets should you put them in, and how many eggs should you allocate to each basket?

Many Kiwis wouldn’t think the phrase “investment portfolio” relates to them. But if you have a KiwiSaver account and savings in the bank, you already have an investment portfolio.

Beyond that, you might own a home, have shares in a trading platform or cash in a term deposit. You possibly own a business, or a rental property, or have a chunk of money in a managed fund. You might even collect sneakers, own gold or be in cryptocurrency.

All your assets and debts make up your total portfolio, and where they are invested tells you how diversified your financial life is. Ideally, you want your money to be spread across a range of investment types, countries and industries.

But New Zealanders typically aren’t well diversified – in large part thanks to our high-cost housing market. Our houses are so expensive that if you own a home, it’s likely to be your biggest asset – one that produces no income and is located on a remote island nation.

This can leave you more vulnerable than you’d like to a local downturn.

“New Zealand is a unique situation where a lot of our financial wealth and economy is tied up with property, and it’s how a lot of people have gained their wealth,” says Jason Choy, senior portfolio manager at InvestNow. “You almost can’t avoid it, because everyone wants the peace of mind that comes with

owning property, but then you have so much of your wealth tied up in a single asset that’s tucked away in a corner of the world. It doesn’t make a lot of sense from a diversification perspective.”

Overweight in property?

Not only are homeowners typically underdiversified, many have doubled down on property, buying rentals and commercial buildings.

“Previous generations have done very well out of property, so we’ve chased the same dream – which can be quite a stressful consideration for younger people,” says John Moffett, group general manager at short-term property management company The Stay Hub. “I would hope from a diversification perspective that property owners have other investments, but Kiwis are creatures of habit and we do what we know.”

Owning several properties in the same location intensifies the risk that something could go wrong in that local market, like flooding or council rule changes. Buying different types of properties across several locations is one way to diversify, but it’s rare in practice and still only provides limited risk mitigation.

“People do what is comfortable and invest in places they know,” says Moffett. “They tend to have clusters of properties within an area.

Or they’ll have a type of property they feel comfortable with. It might be townhouses, so they’ll have multiple townhouses in different locations, or portfolios of just CBD apartments.

It’s rare to see someone who owns a villa in Parnell and an apartment in Onehunga – people do stick to their knitting.”

‘New Zealanders typically aren’t well diversified – in large part thanks to our high-cost housing market.’

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F E AT U R E S

‘One of the simplest ways to diversify your investments is to pick the right KiwiSaver fund.’

Business owners For business owners, the bias towards local investment is intensified further. All your success is tied up in the performance of the New Zealand economy, which represents only the tiniest fraction of the world’s wealth and productivity.

Moffett says clients with several properties are often highly successful business owners, but it’s quite common for those businesses to be in construction or property development. This means a property downturn like the one we’ve experienced over the past two years hits them on several fronts simultaneously – exactly the type of risk that diversification aims to reduce.

“For people who have a home and a business in New Zealand, plus maybe a bach and some money in a friend’s business, they are highly concentrated in New Zealand,” says Choy.

“They can’t do much to change that, but they should be considering how to diversify where they can.”

The KiwiSaver option One of the simplest ways to diversify your investments is to pick the right KiwiSaver fund.

If you are not a homeowner, the typical diversified KiwiSaver fund might be an ideal combination of local and global shares, as well as local and global cash and bonds. This kind of well-managed mix could be just the right amount of diversification, especially if your other investments are mainly savings in the bank and perhaps a few shares.

Top investment funds use a combination of local and international expertise, giving you exposure to plenty of other markets and a wide range of industries, as well as high-growth and steady-income assets.

“Contributing into your KiwiSaver will give WI NTE R 2 0 2 4 | I N F O R M E D I NVESTO R 2 0

you some diversification – most providers have a portion of global assets mixed into your fund,” says Mei Zi Ho, research analyst at Nikko Asset Management New Zealand Limited. “The majority of providers will have investment teams in New Zealand that look at Australasian stocks where we know enough to make a difference. Here at Nikko, we outsource a portion to overseas-based third-party managers who are experts in global markets and industries.”

Should you go global?

If you are already locally focused, you might be able to use KiwiSaver to get more of your money invested offshore.

“For those people who are super loaded up in New Zealand, there’s an argument that the vast chunk of your KiwiSaver or managed fund investments should be global,” Choy says. “Let’s say you own a home, a bach, a business, and then you are in a balanced diversified KiwiSaver fund. The average default KiwiSaver fund is invested in approximately 40 per cent global shares, 20 per cent New Zealand

shares, 20 per cent global fixed interest and 20 per cent New Zealand fixed interest.

“Relative to the entire investable universe, a 40 per cent exposure to New Zealand assets is still very Kiwi – this is what’s known in investing circles as a ‘home bias’.

"So, you might want to think carefully about how diversified you really are.”

When you’re already neck-deep in local assets, a managed fund with an international focus will likely help you reduce the impact of an New Zealand downturn.

“Global investments also give the added diversification benefit of foreign currency exposure, which we tend to forget about here in New Zealand,” adds Choy.

“Investing is really about creating a portfolio of assets to meet your future liabilities. While we tend to earn, spend, and think in New Zealand dollars, a lot of our expenses are driven by international markets and foreign currencies.

D I V E R S I F I C AT I O N

‘You need a balance of defensive and growth assets that match your lifestyle.’

“So, there’s a really strong case for some unhedged exposure to global investments.

That way, you have some foreign-currency denominated assets to match your foreigncurrency driven liabilities, and so you’re not as exposed to the nuances of what happens in New Zealand.”

One of the great advantages of KiwiSaver is the huge range of funds and the enormous amount of information available about each one. You can select a fund that matches the amount of diversification you want to achieve, depending on how heavily overweight you are in New Zealand assets.

“I love property, but I also try to invest in a diversified way, and I think people don’t rate KiwiSaver as much as they should,” Moffett says. “You can turn your nose up at what KiwiSaver does and you don’t even realise it’s happening. My wife and I bought our first house with KiwiSaver in 2020, and at one point we had 8 per cent of our incomes going into it. The balance is now back up to where it was prior to the deposit coming out – and the value of the house has more than doubled.”

Diversified mix of assets All your assets can be broadly categorised into two types: defensive and growth.

Broadly speaking, your defensive assets are cash and bonds; in a diversified fund these are the income assets. Growth assets are shares and property.

Thinking about your total financial situation, you need a balance of defensive and growth assets that match your lifestyle.

Defensive assets give you cash when you need it, form your emergency fund, and help you keep paying the bills in a downturn. Growth assets should be the big performers over the long run, building your wealth over the decades – going up and down in the background but tending to grow in value over time.

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F E AT U R E S

The oversized housing egg How overweight are we in property?

A 2022 report by the Reserve Bank of New Zealand (RBNZ), Housing as an Investment Asset in New Zealand, found that: •

Finding the right mix of cash and growth assets is tricky because it means balancing your returns with your lifestyle. Can you afford to lock away a large proportion of your income in KiwiSaver or a property for a higher balance at retirement? Or do you need to keep more in cash in case you’re laid off or there’s an emergency?

If you’re retired and your home is paid off, you’ll need to think about a mix of assets that will give you the best possible combination of a high income for a long time.

“Think about all your investments, from funds, property and business to a future inheritance expectation,” says Ho. “Think about how all these investments flow into how you want to live. Do you want lump sums now or a steady income trickling in? If you have your money in property, although it has proven to be a safe bet historically, you might want to invest in equities that can help diversify the risk of a downturn in the housing market like we’re seeing now.

Or if you might want a steady income or quick access to a lump sum, investing in a cash fund or a bond fund might be for you.”

Risky endeavours Diversification necessarily involves putting money into assets you don’t know much about. That can push you out of your comfort zone, which is why so many Kiwis stick to what they know and keep buying local shares, forestry and property.

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Being exposed to other types of investments is a fundamental tenet of diversification, but it can be risky to put money into any enterprise you don’t know much about.

Picking your own individual shares can give you a false sense of diversification. Owning 20 different US shares may feel like it’s giving you a good range of companies but compared to the hundreds of stocks in most ETFs or the thousands of stocks contained in the average managed fund, you’re still not achieving much diversification.

When it comes to risky investments like start-ups and cryptocurrency, the general rule is not to put in any money you can’t afford to lose, or more than five per cent of your total portfolio value, whichever is lower. That’s probably a wise bet for individual shares, too.

Different types of assets go up and down over time. Diversification aims to build a portfolio which smooths out these fluctuations by having a little bit invested in all these different asset types. As always, work with your financial advisor to think about whether your portfolio needs more diversification, and how it fits with your investment timeframe.

“Obviously you are the person who is investing, so you need to find your own comfort zone,” says Ho. “But don’t put all your eggs in one basket, it’s as simple as that.”

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57 per cent of all NZ household assets are tied up in land and housing. A further 30 per cent is in investment funds, equity and bonds; eight per cent in currency and deposits; and five per cent in life insurance and superannuation funds.

Of the amount invested in housing, around two-thirds are owneroccupied housing and one-third investor-owned.

NZ is not an outlier here; Canada and France have higher allocations to housing, with the UK and Australia only slightly lower.

The ability to leverage (borrow) to buy houses, plus their favourable tax treatment, gives housing investments an advantage.

Our heavy investment in property has intensified the impact of housing market downturns and led to wider social costs.

“Past performance is no guarantee of future results,” the authors write. “There is no surety that future housing returns will keep up with past rates. If anything, there are plenty of emerging factors pointing to the opposite direction.”

F E AT U R E S

Going Up, Going Down Economist Cameron Bagrie takes a good, hard look at New Zealand and how we’re going as a nation.

The wall The New Zealand economy has contracted four out of the last five quarters. Are we feeling the squeeze yet? Not really. Bank non-performing loans as a share of total loans are around half what they were in 2010. Last year, growth eased and firms were less busy. The new year has brought about a change. Less busy has switched to not enough work and spare capacity.

These are the conditions coming into play and needed to contain and dampen inflation. Inflation goes away with tough times and we are now entering that era.

Push back Expectation and hope for lower interest rates in 2024 are fading. The culprit is inflation; it’s proving to be persistent. Directional leads around the globe are taken from the United States, and stubborn inflation pressure in the world’s biggest economy has seen the market pull back from expectations the US Federal Reserve could cut six times (25 basis points each time) to one-to-two times. Rate cut expectations in New Zealand have also been pared back.

Ouch The headline inflation rate in New Zealand might have fallen to 4 per cent, but domestic inflation (non-tradable inflation), that part the Reserve Bank has more influence over, came in at 5.8 per cent for the 12 months to March 2024, down a tad on three months prior. That represents slow progress and, by itself, would say to the Reserve Bank, lift rates. Large rises in local authority rates, insurance and energy costs are not going to help either.

The key issues Inflation/cost of living, housing, healthcare and law and order remain the key issues facing New Zealanders, according to the IPSOS Issues Monitor. Getting rid of inflation involves tough times, which we are now facing. This will test society’s mettle as we have not seen tough times for quite a while.

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Broadening weakness The evidence is becoming more compelling that tough times are here. The unemployment rate has risen to 4.3 per cent, up from 3.2 per cent and on track to more than 5 per cent. The Pasifika unemployment rate has risen to 9.4 per cent. Building consents are down 25 per cent on a year ago. Retailers are finding it difficult. A post new government bounce in confidence has been replaced by the reality that 2024 will be a tough year.

Absent this weakness, the Reserve Bank would likely need to increase interest rates.

They will be hoping economic weakness manifests in pricing and lower inflation.

MARKET INSIGHTS

The door is open

Local authority pressures

Net migration remains strong with an annual gain of 130,900 in the past year. The rise comprised a net gain of 178,600 non-New Zealand citizens, which more than offset a net migration loss of 47,700 New Zealand citizens. That would normally have the property market on fire, but the composition of migration, with strong inflows from India, China and the Philippines, appears to be supporting the rental market as opposed to purchasing houses. House buying continues to face affordability and high interest rate challenges.

In the last 12 months local authorities have run an operating deficit of $1.2 billion, which is 15 per cent of rates income. This is one reason local authority rates look set to rise 15 per cent this year. Interest expenses are rising and dealing with Three Waters is going to cost lots, which means ratepayers are going to end up paying more.

Treading water There are signs the recovery in the property market is stalling. House prices are up 2.6 per cent on a year ago, but flat in the past three months. The finger can be pointed at interest rates, which continue to bite as borrowers roll off lower fixed rates into higher mortgage rates. Rising unemployment will not help either. Listings have increased substantially, up 23.9 per cent compared with March 2023. The Reserve Bank’s latest Financial Stability Report described the housing market as “weak, as high interest rates have reduced borrowing capacity and investor demand”.

About time Out of this economic mess, steps to improve education, such as adopting the structured literacy approach to teaching, and getting rid of cell phones in classrooms, are welcome. I have frequently referred to New Zealand’s economic future in 30 years as dictated by education today. There is a lot more work to do. Many problems in education are a function of wider ills across society such as housing, law and order, poverty and inequality, which are carried into the classroom.

A rising challenge Climate change is an emerging issue we all need to be aware of.

The Financial Stability Report (see QR code) explores the impact of insurance becoming more expensive or unavailable in some locations. Risk-based pricing is becoming more prevalent. This may make the insurability of some properties unaffordable or insurance unavailable over time. Buyer beware.

The 2024 Budget is shaping up as a tough one, with complex decisions for the new Minister of Finance.

Stopping the accumulation of debt and turning deficits into a surplus requires tough decisions. At the same time there is promised tax relief, pressure to deliver front-line services in health education and law and order, and a look at infrastructure deficits.

It’s a tall order. The danger is that infrastructure plays second-fiddle to tax relief.

While Bagrie Economics uses all reasonable endeavours in producing reports to ensure the information is as accurate as practicable, Bagrie Economics shall not be liable for any loss or damage sustained by any person relying on such work whatever the cause of such loss or damage. Data and information have been gathered from sources Bagrie Economics believes to be reliable. The content does not constitute advice.

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Correct as at 14 February 2024.

The Budget

PERSONAL FINANCE

Do Altcoins Really Play Follow the Leader?

In the wake of Bitcoin halving, investors are now tracking altcoins, but the devil is in the detail. Provided by Easy Crypto.

The consequence of Bitcoin’s recent halving is clear. If demand for Bitcoin is exactly the same, then Bitcoin miners won’t be able to sell enough Bitcoin to satisfy demand, resulting in the cryptocurrency becoming perceived as being more scarce and hence more valuable ... the basic economics of supply and demand.

Still, many crypto investors are interested in investing in “altcoins”. Altcoins are cryptocurrencies other than Bitcoin.

A few examples are Ethereum (ETH), BNB Chain (BNB) and Ripple (XRP).

So why are investors looking at altcoins post-Bitcoin halving? Well, in part it’s due to them being able to potentially outperform a Bitcoin-only crypto portfolio.

Conventional wisdom says that altcoins typically follow the footsteps of Bitcoin in terms of price performance.

The oversimplified way of putting it is, if WI NTE R 2 0 2 4 | I N F O R M E D I NVESTO R 2 6

Bitcoin goes up, altcoins go up, and vice versa.

Rule of thumb This rule of thumb naturally arises by observing two major crypto boom cycles in the span of less than a decade. Easy Crypto’s data analyst studied the daily price movements of Bitcoin (ie how much Bitcoin price increased) and compared that with the daily price movements of coins that are older than 2018, whose market cap is currently in the top 10 ranks. This gives us a good enough length of history for higher quality data.

Notice how prices of altcoins tend to cluster around a range (above right). When Bitcoin’s price dropped 10 per cent, most altcoins dropped 20 per cent. There’s an almost linear price correlation as Bitcoin’s price increases approach 10 per cent.

But when Bitcoin’s price increases beyond

15 per cent, there’s a whole range of possible prices for altcoins, from shooting up more than 100 per cent to getting as low as 50 per cent. On the opposite end of the spectrum, when Bitcoin loses more than 15 per cent of its previous day’s value, there is also a wider range of possibilities altcoins can be priced at.

On average, price movements for altcoins tend to be lacklustre when Bitcoin’s price increases by more than 30 per cent, a surprising counter-trend for sure. Bitcoin rarely moves beyond 30 per cent in a single day. When it did, it was due to a special condition, such as Bitcoin ETF issuers buying up Bitcoin and inducing a “supply shock”. When Bitcoin received so much attention, investors seemed to care more about Bitcoin than altcoins.

So, yes, while conventional wisdom is correct to say that altcoins often follow the path of Bitcoin in terms of price trends, there are important nuances you should know about, so you don’t follow the pattern blindly.

The bottom line is: altcoins are priced by the Bitcoin market’s confidence.

The strongest pointer to why altcoins are priced by Bitcoin’s market confidence is that when Bitcoin fell beyond 10 per cent of its previous day’s value, altcoin investors looked frantic, as selling occurred so much that altcoins could fall around 25 to 50 per cent of its previous day’s value.

C RYP TO

Price performance A day trader may only care about daily price movements. However, an investor should think with a longer timeframe. This means thinking less about how a crypto asset is priced and more often about how a crypto asset can solve real-world problems.

Take a look at another chart below. This chart doesn’t show the true prices of each cryptocurrency apart from Bitcoin (BTC). The altcoin prices here have been normalised, meaning that for every coin we look at, we assume that their price started out exactly the same as Bitcoin’s in November 2017. This gives us a fairer picture of how each coin performs relative to one another.

Yet, Doge appears second to BNB in leading the pack. It offers what Bitcoin offers, but much cheaper. At the moment it really doesn’t have any other use apart from it being a collectible (memecoin) and a payment method for buying a Tesla.

It’s true that valuable things tend to be more expensive as more people want them.

But in the short term, the reasons people want a crypto asset can at first be unclear or simply speculative. The value being offered by an asset will eventually be the

primary reason for its price in the long term.

So, should you invest in altcoins? The answer depends a lot on your own financial conditions and how knowledgeable you are about the crypto market.

Easy Crypto is not a financial adviser, so we can’t give you the answer. But once you’re confident with your research, boost your confidence even more by using a registered local crypto exchange.

Investing in crypto carries risk. Always do your own research.

This chart should make you regret not buying Dogecoin. Although the price comparisons are accurate, this chart is misleading. It doesn’t show you the value being offered by each coin, and no-one would know how a product could be or fail to be relevant and useful until we’ve observed it long enough.

Ethereum paved the way for people to build applications that use blockchain technology without them having to build an entirely new network. BNB Chain does the same, but cheaper. Ripple is being used within the banking industry while Cardano is slowly being adapted by governments and private businesses.

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MINDFUL MONEY

The Benefits of a Diversified Ethical Approach Misconceptions about returns and risk of ethical investment might be inhibiting some investors, writes co-CEO of Mindful Money Kate Vennell.

Are you one of the 74 per cent of Kiwis who want to invest ethically? Do you want to align your investments with your values and avoid investing in industries that cause harm to people, the planet and animals?

Annual surveys of the public show that two-thirds of those who want to invest ethically haven’t done so yet, but most intend to within the next five years. So, what’s holding people back?

Ethical returns A possible reason is the misconception that ethically investing delivers lower returns due to exclusion of some sectors or companies.

There is a body of evidence that show returns from well-managed ethical investments are, on average, at least as high as from conventional investing. For example, Morgan Stanley reported an 8 per cent outperformance in the five years from 2019 to 2023 for global “sustainable” funds verses “traditional” funds. It’s a myth that investing in line with values requires a trade-off with long-term returns.

In the short term, however, traditional funds may outperform ethical funds due to acute events. In 2022, following the Russian invasion of the Ukraine, oil and gas prices spiked leading to higher returns from traditional funds. Despite this spike, the long-term trend continues for global transition to new forms of energy. In fact, acute events may speed this up. For example, since 2022 the EU has acted to reduce demand for gas and to distribute more finance for renewable development.

Higher or lower risk?

Some investors may believe ethical investment has higher risk due to lower diversification. However, diversification does not need to be comprehensive to be effective and even when maximum exclusions are applied, they reduce the WI NTE R 2 0 2 4 | I N F O R M E D I NVESTO R 2 8

investing universe by only around 10-15 per cent.

Exclusion primarily reflects the concerns of investors about the harmful effects to society. Some excluded sectors are also in long-term decline and affected by social taxes and high regulation (eg tobacco, gambling and alcohol). A fund excluding these harmful products still has a wide choice of consumer products, which reflect contemporary preferences.

Exclusion of fossil fuels can be offset by an active strategy to select companies developing a range of climate solutions.

These include renewable energy, innovations to reduce energy use, or electrify polluting industries eg, cement, construction, packaging and consumer products.

Approach by managers Offsetting the potential impact on risk of any reduced diversification are approaches taken by fund managers of ethical funds to lower the portfolio’s risk by reducing the likelihood of the fund being affected by company losses due to bad practices. An index-hugging fund remains exposed to these and relies on diversification benefits from other holdings to offset the risk.

The responsible investment manager analyses holdings using global data about environmental, social and governance (ESG) quality and risks. A manager reduces the allocation of the portfolio to companies with poor ESG performance and increases it to companies with higher performance.

Alongside harmful outcomes for the planet and society, poor management of ESG increases the risk of material monetary loss through lawsuits, regulatory fines, costs to clean-up pollution or consumer backlash.

These events can reduce the share price.

In contrast, companies with strong ESG performance may benefit from lower costs

(eg less energy and waste), fast growing revenues (eg selling EV cars), and more productive and motivated workers. Good corporate governance supports better performance; a well-qualified and diverse board of directors oversees good culture and sustainable long-term results.

Effective fund managers use engagement and stewardship to influence action by the companies in their portfolios on ESG issues. They use the power of the funds they manage to vote at AGMs on motions about the Chair, executive pay and to demand action on issues.

Fund managers also consider climate risk and carbon emissions. Over the next two decades global economies are transitioning from fossil fuel reliance to low carbon models. Oil companies that hold large reserves with current value on the balance sheet will eventually need to write off these “stranded assets” as demand falls.

This year sees the introduction of mandatory reporting in New Zealand on climate factors for all listed companies and fund managers who manage more than $1 billion. New

reporting will make it easier for investors to analyse exposure to climate risks and future losses and to find companies with effective adaptation strategies.

provide long-term government-backed rental returns and help solve our housing crisis and investment in green technology accelerates the development of low carbon solutions.

Changes in the economy Over time traditional funds will also rebalance to reflect changes in the economy. But there is risk of the investment portfolios changing more slowly compared to the pace of development of new economic models and rising climate risks.

There has been huge growth in the number of funds claiming to be ethical or responsible in NZ and globally. It’s important to find a fund that aligns with your values and your investment preferences. Mindful Money’s tool helps to navigate the range of ethical investment options by showing what each fund invests in and provides easy access to information about each fund’s approach.

It’s worth noting that in 2008 the energy sector represented 16 per cent of the US S&P 500, but by 2023 this was only four per cent. Technology companies now dominate the S&P 500. A responsible strategy may help investors to access high returning opportunities sooner.

An emerging investment approach is to seek opportunities for investment that create positive social and environmental impact along with further diversification. Mindful Money’s annual conference on June 12 will focus on this exciting development in NZ. As examples, community housing projects can

Global momentum is with diversified ethical investment. It provides lower risk in the long term and opportunities to invest in higher returning opportunities aligned to new economic paradigms. Investors who embrace the trend are well-placed to achieve good returns and contribute to a better future.

The information contained in this article is general in nature and is not intended to be financial advice. Before making any financial decisions, you should consult a professional financial adviser. Nothing in this article is, or should be taken as, an offer, invitation or recommendation to buy, sell or retain a regulated financial product.

How to Become an Ethical Investor As an investor, you have the power to effect change. By making informed decisions and advocating for responsible investing, we can collectively create a significant impact and build a more just and equitable world.

Here’s how you can ensure your retirement savings align with your values: Visit the Mindful Money website (www.mindfulmoney.nz) to check, for free, whether your KiwiSaver or investment fund supports companies involved in weapons production, human rights abuses, environmental damage, animal cruelty, or social harm.

If you’re unsatisfied with your fund’s investments, reach out to your fund manager and express your preferences for how you want your money invested.

Use Mindful Money’s Mindful Fund Finder to discover ethical funds that align with your values and principles.

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D I V E R S I F I C AT I O N

The Time and Temperament Recipe Psychological profile, financials and time are the main ingredients in defining your appetite for diversification, writes Martin Hawes.

Diversification is not for everyone. While most people need at least some degree of diversification of their assets, there are some who have profitably shunned it.

For a start, I doubt Jeff Bezos was much diversified when he started his career, nor Sir Robert Jones. In fact, from all accounts these two probably had everything in their businesses early on, property investment in the case of Sir Robert; IT for Bezos.

This high concentration of wealth is common for entrepreneurs. Diversification is not for them as they are determined to succeed – they live, eat and breath their enterprises and are prepared to let everything hang on just one thing.

Many successful entrepreneurs don’t think “diversify” and, for a period at least, run their businesses as hard as they can. It may be nice to have a bit of diversification with cash or other assets to fall back on, but if you want to become really wealthy you probably won’t get there by diversifying – you will need to go all in, boots and all, and be the very opposite of diversified.

Most successful entrepreneurs are like this in their early years – they own their businesses and not a lot else. Society needs people who mortgage their houses and/or scrape together every last dollar to throw at a new enterprise.

They create wealth and jobs for all, and when they are successful, they ought to be applauded. They forgo the safety of diversification and work hard with everything at risk.

Higher-risk settings Those who do not have a burning business idea, or do not have the inclination to own a business, may form a second group who also choose concentration of their assets. These people take their KiwiSaver or other funds to a higher risk setting, meaning they go for an aggressive portfolio, one with 90 per cent in shares or perhaps even more.

Many people will want some diversification, but there are plenty of younger people who could most profitably be aggressively invested with a portfolio that consists almost solely of shares in businesses.

As an example, take a 35-year-old trying to decide the amount of risk she should take with her KiwiSaver and other investments. Imagine that this person is a lawyer and good at her job – she’s unlikely to be without an income.

She is well insured, owns her own house and would not expect to be able to withdraw her KiwiSaver for 30 years.

Someone like this could easily have her KiwiSaver in an aggressive fund with 90 per cent in international shares (the most volatile asset class but probably the best returns).

‘Generally, a high concentration to shares in a fund or portfolio ought to be good for younger people’ WI NTE R 2 0 2 4 | I N F O R M E D I NVESTO R 3 1

F E AT U R E S

‘Bezos listed Amazon about 27 years ago and since then has given shareholders returns of 33.5 per cent per annum.’

If she asked for advice on this, most people would say it was a good strategy – very few would say she should be in a balanced fund or similar. A high concentration of international shares will be volatile, of course, but the ownership of good shares (especially in technology) listed on the share market is bound to give good returns over a long period of time.

Value of hindsight These returns may not be as good as owning your own business (assuming it’s successful), but they can still be excellent.

In fact, you could have bought shares in the business that Jeff Bezos started – Amazon.

Bezos listed Amazon about 27 years ago and since then has given shareholders returns of 33.5 per cent per annum. Other companies have also given high returns: Apple, Microsoft, Alphabet, Infratil and Mainfreight, for example.

Anyone who would be happy to run the risk of owning their own business ought to be happy trying to seek out a few of these high performers and concentrate their investment accordingly.

Of course, it will be a lot easier to do this with hindsight than it ever could be to pick them from scratch. Nevertheless, if you owned (say) 30 stocks, this would probably see you doing very well over 30 years provided you are never rattled out of the market by volatility.

The amount of diversification you should have depends on three main things: 1. The length of time you are investing for.

A 30-year-old saving for the deposit for a house in two years would invest much more safely than a 35-year-old saving for retirement in 30 years. This second person with a time frame of 30 years could afford a lot more risk (ie more shares).

2. Your financial capacity. This is the ability you have to withstand financial WI NTE R 2 0 2 4 | I N F O R M E D I NVESTO R 3 2

shocks like the loss of your job or a health issue. Having insurance for key risks also increases your financial capacity. Usually, the better your financial capacity the more risk you can take.

3. Your psychological profile. There are some people who worry about their money and who react badly when markets slump. These people who might tend to panic and sell ought not to have portfolios with large percentages of shares – they have a high chance of being rattled out of the market in the next big crash.

Younger people should be able to tolerate less diversification than older people.

Generally, a high concentration to shares

in a fund or portfolio ought to be good for younger people and they should take advantage of their most important asset – time.

These higher concentrations to growth assets (shares and property) will give better returns than a portfolio that has large amounts in cash and fixed interest.

A portfolio with most (or even all) allocated to shares will give excellent returns if you have the time and fortitude to let it run.

The information contained in this article is general in nature and is not intended to be personalised financial advice.

Before making any financial decisions, you should consult a professional financial adviser. Nothing in this publication is, or should be taken as, an offer, invitation or recommendation to buy, sell or retain a regulated financial product.

F E AT U R E S

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GLOBAL INSIGHTS

Is This the Other Long Covid?

Governments have accumulated massive debt since the pandemic which could lead to financial headaches and is likely to mean a lockdown on public expenditure, writes Andrew Kenningham.

Larry Fink, who is the head of the world’s largest asset manager (Blackrock) said recently he gets frightened when he looks at United States public debt.

One statistic he will be worried by is that the US fiscal watchdog, the Congressional Budget Office, warned that the US debt will soon exceed its World War II-era record of 115 per cent of gross domestic product.

There are similar concerns all around the world. All major economies have come out of the pandemic with much bigger debts than they had going in. This partly results from governments ramping up spending to help people and businesses during the health emergency and partly from the slump in tax revenues as businesses were shut down.

In Europe, governments also helped households and firms with the energy crisis following Russia’s invasion of Ukraine.

So how worried should we be about these debt burdens? Will they ever be repaid?

In truth, governments do not ever repay their debts in full. Instead, they take on fresh loans to service existing debt. The key issue is whether governments maintain the confidence of investors. This is only possible if people believe the public debt burden is under control.

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F E AT U R E S

‘Italy and, to a lesser extent, France are also running into fiscal difficulties.’

This brings us to the so-called fiscal arithmetic. The path of public debt as a share of GDP is governed by an equation involving three variables: the budget balance, the interest rate and economic growth. The higher the growth rate and the lower interest rates and the deficit, the easier it is to contain the debt burden.

The problem today is that economic growth has slowed compared to the pre-pandemic years, and interest rates and budget deficits have both risen. That is what Larry Fink will find frightening.

AI revolution It’s very difficult to predict what will happen to all these economic variables.

The medium-term outlook for growth may not be as bad as many now assume if the AI revolution delivers a meaningful improvement in productivity growth – something that seems quite likely in the US, but less so elsewhere.

On the other hand, long-term pressure on public finances from other sources, including ageing populations and the cost of the net zero transition, look set to intensify.

What can be done?

Governments cannot do much about interest rates because, under current laws, central banks decide on monetary policy independently. And despite politicians’ promises, they have no magic wand to boost the rate of economic growth, particularly in the short term.

So, the only variable in the debt equation governments can really control is the budget deficit.

Austerity anyone?

Looking around the world, few politicians are even talking about deficit reduction.

Neither of the current US presidential candidates – Joe Biden or Donald Trump – is promising to bring the debt down.

On the contrary, Trump has promised to reintroduce the tax cuts which pushed the debt up during his first administration.

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That said, the US has one big advantage which means it may be able to get away with higher debt burdens than most. The dollar is the world’s “reserve currency” which means central banks, sovereign wealth funds and private investors all want to hold huge amounts of US government bonds even if US debt is high. That may give the US more leeway than most countries to borrow and spend.

Europe in bigger trouble Other countries face bigger problems. The then British Prime Minister Liz Truss’s 2022 budget triggered a panic in the government bond market. Investors took fright, causing mortgage rates to skyrocket and the pound to slump. Truss resigned after only 45 days in office.

Italy and, to a lesser extent, France are also running into fiscal difficulties. Problems in these countries could spill over to the rest of the euro zone as the region shares a

currency and has one central bank. In Italy, the budget deficit rarely features in political debates. In France, the government has a clear ambition to reduce the deficit, but it has run into strong opposition in parliament and on the streets. There have been huge protests in Paris against plans to raise the retirement age.

So, what does all this mean? One possibility is that, at some point in the coming year or two, countries will experience financial crises with the bond market selling off, causing interest rates to spike and currencies to collapse.

Perhaps the more likely scenario is that governments are forced to restrict public spending and keep tax rates high for many years to come.

So even in the world’s wealthiest economies, many people will feel that their standard of living is being squeezed and the quality of public services is deteriorating.

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KIWISAVER

KIWISAVER GUIDE 2024 Your KiwiSaver questions answered

• Should I enroll my child in KiwiSaver?

• Is it worth using KiwiSaver if I'm self-employed?

• How do I establish the best KiwiSaver portfolio to meet my needs?

Results of our KiwSaver survey, plus tricky KiwiSaver questions answered by the experts.

• Should I start to use a term-deposit instead of KiwiSaver.

• How often should I switch my scheme?

SURVEY

KIWISAVER SURVEY

Powered by

Taking an Inside Peek at KiwiSaver We reveal the results of our inaugural KiwiSaver survey, powered by InvestNow.

KiwiSaver Facts KiwiSaver launch date:

July 1, 2007 Number of active KiwiSaver members:

3,351,507 Number of closed KiwiSaver accounts:

549,526 Amount of scheme transfers in April 2024:

12,572 *Most recent data, April 2024, sourced from IRD

Established in July 2007, KiwiSaver is New Zealanders’ primary portal to the investment universe. According to IRD data, there are currently 3,351,507 active members in the scheme, with over $271 billion* currently invested.

These big picture stats provide a broad overview of the size and scope of the fund, but don’t offer personal insights. Survey data can fill the knowledge gap here, providing information that can be extrapolated into wider trends.

Our inaugural KiwiSaver survey helps paint a picture of how we are engaging with the scheme.

It’s a snapshot of a time and place and reveals insights that point to wider social and economic conditions.

We feature the results of our KiwiSaver survey in this special edition of Informed Investor. There are interesting take-outs here around investment behaviour by age, the range of assets we invest in, and our priorities when choosing funds.

Our KiwiSaver special also includes useful Q&As from experts in the field. If you’ve ever wondered whether to enrol your kids in KiwiSaver, if it’s a good idea to invest when you’re self-employed, or WI NTE R 2 0 2 4 | I N F O R M E D I NVESTO R 4 0

if it makes more sense to have your money in term deposits right now, you’ll find the answers here.

We hope you enjoy reading about KiwiSaver and use the insights to inform your own investment behaviour.

Strong engagement Te Ara Ahunga Ora Retirement Commission recently released figures around the average KiwiSaver balance. Sitting at $31, 605, it’s up over $4,000 on the 2023 figures, reflecting the recovery of the financial markets last year.

Our respondents reveal even stronger engagement with the scheme. Over 62 per cent have balances of $50,000 and over, with 33 per cent having between $100,000 and over in their accounts.

It’s interesting to note that nearly half of the respondents aged between 25 and 34 had $100,000-$200,000 in their accounts. In the 3550 age range, 44 per cent of respondents had between $100,000 and $200,000 in their fund.

Those aged 51-65 were more split when it comes to savings – 13 per cent listed their balance at between $20,000 and $50,000; 66 per cent had

KIWISAVER

How would you rate your level of confidence in your KiwiSaver knowledge?

Quite confident

36.5%

Very confident

28.9%

Averagely confident

25.6%

Not very confident

6.6%

No idea how it works!

2.4%

$20,000-$50,000

$100,000-$200,000

between $50,000 and $100,000. Outliers existed at both ends of the spectrum: 11 per cent of respondents had between $5,000 and $10,000, with 8.9 per cent having over $200,000.

“Kiwis are generally more aware of KiwiSaver, if for no other reason than it has been a feature on their payslips for over 17 years now,” says Mike Heath, general manager of InvestNow.

How much is your KiwiSaver portfolio balance today? $50,000-$100,000

‘There are interesting take-outs around investment behaviour’

28.8%

26.9%

21.2%

He adds the recent challenging housing market may have driven younger people to invest more in their KiwiSaver because they expect to need more for a first home loan.

“Or is it that they have ‘written off’ the prospect of their home being their retirement savings and have decided that KiwiSaver will play that role?”

“For older people, I’d imagine their priority has been to pay off their mortgages and then focus on their KiwiSaver with any discretionary cash that can be invested.”

Provider choices

Over $200,000

12%

KiwiSaver members are confident in choosing their own providers. Nearly 87 per cent choose their own provider, with just 13 per cent using a default provider.

Reputation of the provider and results/ performance were listed as the key priorities (52.7 per cent and 51.5 per cent respectively), with low fees (35.9 per cent) and ethical/sustainable reasons (21.6 per cent) also popular choices.

$5000-$10,000

4.8%

$10,000-$20,000

4.3%

This is reflected in respondents’ level of confidence in their knowledge of KiwiSaver: over 90 per cent claimed they were quite, average, or very confident.

Under $5000

1.9%

There is no doubt more people are familiar with/ aware of KiwiSaver, but that doesn’t always translate into understanding or knowledge about it, says Heath.

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SURVEY

KIWISAVER SURVEY

If you have chosen your own provider, what influenced your choice?

Reputation of provider

52.7%

Better results/performance

51.5%

Low fees

35.9%

Ethical/sustainable reasons

21.6%

Recommendation

17.4%

Other

12%

KiwiSaver Facts Largest active KiwiSaver age demographic:

25-35 year-olds 742,860 Smallest active KiwiSaver age group:

0-17 years old 193,063 Amount you need to contribute each year to get a government contribution:

$1042.86 Amount of government contribution:

$521.43 *Most recent data, April 2024, sourced from IRD

“If you look at some of the stats around contribution levels, how often people review their KiwiSaver portfolio, the very high percentage who have selected their own provider, they do all point to people having a high level of understanding, confidence and engagement.”

Wealth creation

We are loyal

It’s interesting to dig a bit deeper here. The stats reveal that, in the 25-35 age range, 53 per cent of respondents invest in shares. Once we get to the 5165 range, 64 per cent invest in shares.

We are living through tricky economic times. The cost of living is high, as are interest rates. Household finances are a struggle for many.

Interestingly, this isn’t changing our KiwiSaver behaviour. Nearly 75 per cent of respondents stated they had never taken a savings break, with 90 per cent claiming they don’t intend to take a break in the next 12 months.

This is a credit to Informed Investor readers, says Heath.

“They are engaged investors, and they understand the role of KiwiSaver and the material negative impact of taking any contribution holidays. And being savvy and engaged they are aware of other opportunities to manage any financial challenges, through better management of their other discretionary outgoings.”

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KiwiSaver is a useful tool in our investment arsenal, but for many it’s only one component of wealth creation.

Our respondents invest in a range of assets, with stocks (63 per cent), managed funds (52.8 per cent) and property (47 per cent) the top three choices.

This increase in assets over age is also reflected in property. In the 35-50 age range, 31 per cent invested in property, whereas 53 per cent of the 51-65 age range invest in property.

But there’s an interesting anomaly here. Although only a small percentage of respondents were aged between 25-34 (12 per cent), 53 per cent of these invested in property.

Any number of factors can influence survey data.

And one can make an assumption, given the nature of the survey, that the 25 to 34-year-olds who took time to engage in a survey around investment are highly engaged with the subject, and their investment behaviour would reflect this. *Data from Reserve Bank, February 2024.

KIWISAVER

What rate do you invest at?

3 per cent

38.2%

4 per cent

19.1%

10 per cent

15.7%

I am self-employed and invest at a different rate.

14.7%

Engaged audience It comes through clearly that the readers of Informed Investor are engaged and savvy when it comes to their KiwiSaver portfolios.

This is evidenced by the following:

6 per cent

8.3%

• 87 per cent selected their current KiwiSaver provider and aren’t simply relying on whatever results a default provider would deliver

8 per cent

3.9%

Mike Heath, from InvestNow, has interesting insights into the results of the KiwiSaver survey.

• 50 per cent check their portfolio annually. Having a plan and regularly reviewing your portfolio, against that plan, is a core investment principle and so it’s great to see your readers understand that as well • 53 per cent selected their provider based on reputation. Savvy investors understand that past performance is not a guarantee of future returns, and that it’s more important to consider the capabilities/strategies/expertise/ philosophies of the provider to ensure they align with them and what they are looking to achieve.

Convenience isn’t the answer It’s worrying to see people say their KiwiSaver portfolio is with their bank because it’s “easier”, “more convenient”, “I can see it alongside my other bank accounts”. Ease and convenience are not key investment principles and people should pay more attention to how their money is being managed. Passively engaging with your KiwiSaver is not a good approach.

Doing more It’s great to see that almost 50 per cent of the audience are contributing more than the three per cent minimum, with over a quarter contributing twice the minimum. The more you invest, and the sooner, the bigger your KiwiSaver portfolio will become. While it may feel a bit of a challenge to put in more than the minimum, once you start you soon get used to it, and seeing your portfolio grow is reward enough.

Do you invest in other assets aside from KiwiSaver?

If so, which?

Shares

63.7%

Managed funds

52.8%

Property

47.2%

Other

15.5%

Crypto

13.5%

Bonds

13%

Gold

6.7%

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I NVESTN OW

KIWISAVER Q&A

Getting the Best Out of KiwiSaver InvestNow takes a look at several ways KiwiSaver can be tailored to deliver the right results.

Can I split my KiwiSaver?

You can “split” your KiwiSaver investment across multiple funds if the KiwiSaver scheme you’re invested in offers multiple investment options.

For example, if available, you could “split” your investment across a growth fund and a balanced fund, or a balanced fund and a conservative fund.

KiwiSaver Facts

19 per cent of active KiwiSaver members are in a default scheme

220,507 active KiwiSaver members are aged over 65

$30,147,122

But, as New Zealand legislation dictates, you can’t “split” your KiwiSaver balance across multiple KiwiSaver providers. And, as many providers only offer funds from a small handful of, or even just one, investment manager, this can leave investors with limited investment manager diversification.

As a business based on a firm desire to help people reach their investment goals, we found this significantly limiting from an investor perspective - as many financial experts will preach, diversification is a staple in any well-balanced investment strategy, including investment manager diversification.

We responded to this limitation by building a KiwiSaver scheme that offered Kiwis the ability to invest in 40-plus investment options, from 15 investment managers, like Milford, Smartshares, Fisher Funds, Foundation Series, and more.

withdrawals for hardship in April 2024

Learn more about KiwiSaver investment manager diversification, or as we call it The Power of And, by going to InvestNow.co.nz/powerofand.

163,310

How do I go about establishing a KiwiSaver portfolio to best meet my needs?

KiwiSaver withdrawals for hardship since August 2016 *Most recent data, April 2024, sourced from IRD

Your approach to building your KiwiSaver portfolio shouldn’t be too different from your general investment approach outside of KiwiSaver – it should be based on your investment timeframe, appetite for risk, and investment goals.

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Mike Heath Mike Heath has been leading the InvestNow service since launch, March 2017. Over the past 20+ years he has held senior management roles for some very well-known New Zealand and international businesses and brands – TAB, Contact Energy, Reuters and Rabobank.

The InvestNow investment principles listed below can provide a good overview of what we believe are key investment pillars of any investment strategy.

While the InvestNow platform itself can enable you to put these pillars into practice by giving you the ability to actually invest.

1. Invest now 2. Understand the risks 3. Asset allocation is (almost) everything 4. Diversification is essential 5. Individual risk tolerance matters 6. Have a plan 7. Stay informed, but don’t react to the noise 8. Investment styles can be complementary 9. Fees and tax are important (but not everything 10. Investing is not a game Although we want to empower you to take control of your own investment journey via our DIY platform, we acknowledge that making investment decisions can be challenging. If you need help, we strongly recommend engaging with a qualified financial adviser to consider your KiwiSaver requirements alongside your other financial goals and circumstances.

Go to investnow.co.nz/principles to learn about our 10 investment principles.

Interest rates are so good right now. Am I better to invest a lump sum into my KiwiSaver, or into a Term Deposit?

Firstly, it’s important to note that these are two fundamentally different investment products. There are a few things to consider in your decision-making.

1. Returns: Term Deposits offer a fixed interest rate valid at the time you book the Term

KIWISAVER

Deposit, whereas the return on your KiwiSaver investments is calculated retrospectively.

2. Tax: Term Deposits are taxed at your resident withholding tax rate (RWT) up to 39 per cent p.a., while KiwiSaver is taxed at your prescribed investor rate (PIR) at a maximum of 28 per cent p.a.

3. Fees: Term Deposits generally don’t have fees, while KiwiSaver and/or the underlying investment options do.

The above highlights the importance of making informed decisions and comparing options on a relevant and appropriate basis – comparing apples with apples.

The key message here is to do your homework, make sure you understand your investment options, and make informed decisions.

If you’d like a definitive answer to this question, we recommend speaking to a financial adviser to understand your full personal financial circumstances.

Should I be choosing my KiwiSaver provider on performance only, or are fees more important?

While performance and fees are important considerations when selecting a KiwiSaver provider, there are other factors, such as investment approach, customer service, range of choice, and your individual investment goals and risk appetite, that could be used in combination to make a more balanced decision.

A KiwiSaver provider’s reputation for delivering good returns for their investors is important, but past performance does not guarantee future performance, and therefore, past performance alone should not be used to select a KiwiSaver provider.

Likewise, fees alone are not the single best deciding

factor in your KiwiSaver provider selection, as fees can correlate with other characteristics, such as investment style and asset allocation, which can significantly impact performance outcomes.

Investors should read the KiwiSaver provider’s product disclosure statement(s) for more information and, as always, seek professional investment advice if needed.

How often should I consider switching KiwiSaver scheme/provider?

This, once again, will be determined by your investment goals and whether your investment needs are being met (or not) by your current KiwiSaver provider.

It’s our observation that an individual’s investment goals and needs will change over their lifetime, so choosing a KiwiSaver provider that offers a wide range of choice and flexibility to make changes will remove the need to unnecessarily change KiwiSaver providers.

Another consideration here is the “out-of-market” cost of switching KiwiSaver schemes. Something you can read more about by going to investnow. co.nz/hiddencost.

‘There are the 10 key investment principles we are always keen to share with our InvestNow customers’

Learn more about the InvestNow KiwiSaver Scheme and fund manager diversification a.k.a the Power of ‘And’ by scanning the QR code.

The information and opinions in this publication are based on sources that InvestNow believes are reliable and accurate. InvestNow makes no representations or warranties of any kind as to the accuracy or completeness of the information contained in this publication and disclaim liability for any loss, damage, cost or expense that may arise from any reliance on the information or any opinions, conclusions or recommendations contained in it, whether that loss or damage is caused by any fault or negligence on the part of InvestNow, or otherwise, except for any statutory liability which cannot be excluded. All opinions reflect InvestNow’s judgment on the date of this publication and are subject to change without notice. This disclaimer extends to any entity that may distribute this publication. The information in this publication is not intended to be financial advice for the purposes of the Financial Markets Conduct Act 2013, as amended by the Financial Services Legislation Amendment Act 2019. In particular, in preparing this document, InvestNow did not take into account the investment objectives, financial situation and particular needs of any particular person. Professional investment advice from an appropriately qualified adviser should be taken before making any investment.

The issuer and manager of the InvestNow KiwiSaver Scheme is FundRock NZ Ltd. For product disclosure statements go to investnow.co.nz.

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SIMPLICITY

KIWISAVER Q&A

Who Should Sign up for KiwiSaver?

Jennie O'Donovan Jennie O'Donovan has been a part of the Simplicity team since 2020, bringing with her 15-plus years in communications and education experience from the nonprofit sectors in New Zealand and the United Kingdom. She has a BA from Victoria University, Wellington, and a master’s degree in education from UCL.

Is it worth enrolling your kids in KiwiSaver? And what should you do if you’re self-employed? Jennie O’Donovan from Simplicity has the answers.

KiwiSaver Facts You must be in KiwiSaver for at least three years before you withdraw funds for your first home.

You can withdraw: • your contributions • your employer’s contributions • the government contribution • interest you have earned • fee subsidies (if you got these).

You must leave $1,000 in your account.

Should I sign my kids up for KiwiSaver?

Even though they won’t get government contributions (and are unlikely to get employer contributions) until they turn 18, starting early can make a significant difference over the lifetime of their investment. One major reason to sign your kids up to KiwiSaver early is the ability for them to use their funds towards a deposit on their first home, something that’s especially valuable given the high housing costs in New Zealand.

Making small regular payments could be a more affordable way for parents to contribute to their children’s future housing needs than coming up with a lump sum at the time. And it’s not just the parents or kids that can contribute to a child’s KiwiSaver account; making contributions at Christmas or on birthdays could be a great option for gifts from grandparents or other relatives.

When it comes to funding a child’s KiwiSaver account, there are various options. Parents can choose between making larger ad-hoc payment(s) at any time, or they can also make regular contributions, depending on their financial situation.

Each method has its benefits, with a larger lump sum early on potentially earning more through compounding returns, while regular contributions offer consistency and potentially a more affordable way for parents to help their kids save. If the rigidity of KiwiSaver isn’t the right fit for your family (the rules generally only allow them to withdraw WI NTE R 2 0 2 4 | I N F O R M E D I NVESTO R 4 6

from their KiwiSaver fund either to fund a first-home purchase or at retirement) there are alternatives like savings accounts, term deposits or non-KiwiSaver investment funds.

Long-term growth These options provide more flexibility in accessing funds but may not offer the same long-term growth potential or tax advantages as KiwiSaver. They also come with a slightly higher risk in terms of your kids having solo access to the savings on turning 18, which can be a good or bad thing depending on how responsible that child is at the turn of adulthood.

Having a KiwiSaver account established throughout childhood can encourage good financial habits and teach kids earlier about saving and investing. It’s a practical way to start conversations about money and long-term goals.

Ultimately, the key is to start saving or investing for your kids as soon as possible, even if you haven’t done so from birth. Every contribution counts and the earlier you start, the more time your child’s investments will have to grow. So, whether you opt for KiwiSaver or another investment vehicle, it’s a good idea to take action now for your child’s future financial well-being.

Is it worth being in KiwiSaver if I’m selfemployed?

KiwiSaver might not seem like a top priority when you’re juggling the many demands of being selfemployed. Without those employer contributions

KIWISAVER

sweetening the deal, it’s tempting to wonder if it’s worth diverting your hard-earned cash away from your business, mortgage, or the raft of other demands.

But before discounting KiwiSaver, consider this: there’s more to it than just employer perks. For starters there’s the annual government contribution.

By contributing at least $1,042.86 each year to your KiwiSaver account, if you’re eligible you’ll qualify for the maximum $521.43 government contribution.

That’s like a 50 per cent ROI on your contribution ... who doesn’t love free money?

If you want to ensure you get the maximum government contribution without having to suddenly find an extra thousand all at once, it can be a good idea to spread your contributions over the year, just like you would in paid employment. Set up contributions of $21 a week or $87 a month, and you’ll hit that sweet spot.

And sure, $521 might not seem like much to receive each year. But let’s say you’re in a KiwiSaver balanced fund from age 35, contributing your minimum amount to get the max government contributions each year, and voilà – by the time you’re 65 you could be looking at a nest egg of more than $100,000*.

Enrolment a breeze Despite these obvious perks, self-employed Kiwis often find themselves putting this in the “too hard” basket. Fear not, enrolment is a breeze. Simply pick a provider, sign up within five minutes and set up your contributions. If you’re not sure which provider or fund type to go with, there are plenty of great resources online to help, including Sorted.org’s fund finder tool.

And I know, I know, locking away cash while you’re far away from retirement can feel counterintuitive when you’re building your business empire now. But be careful not to put all your eggs in one proverbial basket. By diversifying your wealth building beyond your business, you’re spreading risk and safeguarding your financial future against several variables. After all, who knows what the future holds.

So why not treat yourself like an employee?

Regularly set aside a chunk of your business income – you can put in any amount you want but using the minimum employee contribution rate of 3 per cent is a good rule of thumb – and funnel it into your KiwiSaver fund when you pay your other business expenses.

It’s like giving yourself a regular mini bonus that works quietly away in the background building a safety net for the future. Whether you’re all in or dipping your toes, there should be a KiwiSaver investment strategy to suit every selfemployed hustler. *Calculation made using Sorted’s KiwiSaver Tool. Not adjusted for inflation.

The information provided and opinions expressed in this article are intended for general guidance and are not financial advice or a recommendation. Simplicity NZ Ltd is the issuer of the Simplicity KiwiSaver Scheme and Investment Funds. For Product Disclosure Statements please visit simplicity.kiwi.

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CONSILIUM

KIWISAVER Q&A

Ben Brinkerhoff

The Gap Between Saving and Investing

As head of advice for Consilium, Ben Brinkerhoff works with over 140 independent financial advice firms across New Zealand, helping to grow and develop their ideal advice practice. Brinkerhoff has worked with Consilium since its inception in 2012, which now holds over $8 billion in funds under administration. He has over 20 years’ experience in financial services and has held roles including chief operations officer of Index Funds Advisers (US).

What’s the difference between investing in my KiwiSaver of $30,000 vs $100,000 and what advice should I seek?

KiwiSaver Facts Reasons you may be able to withdraw funds (other than turning 65): • To help buy your first home • If you’re moving permanently to a different country • If you’re experiencing significant financial hardship

The difference between a KiwiSaver balance of $30,000 and $100,000 is really the difference between saving and investing.

Someone with $100,000 in their KiwiSaver is likely to have been in the scheme longer and also likely to be older than someone with a $30,000 balance.

Imagine you are on a wage of $100,000, contributing 3 per cent with a standard employer match. Your total contributions from salary, your employer, and the government are $5,531.

In other words, someone with a $100,000 balance is probably closer to retirement and has less years to grow their balance. In this respect, they may have a greater need and hopefully willingness, to receive personalised financial advice.

• If you have a KiwiSaver balance of $30,000, this is about 18 per cent of the value of your account.

If you earned a 10 per cent return on investment, your balance would increase by only $3,000.

• If you have a KiwiSaver balance of $100,000, this is about 6 per cent of the value of your account.

If you earned a 10 per cent return on investment, your balance would increase by $10,000.

• If you have a serious illness

The point is that when your KiwiSaver balance is $30,000, contributions are having a bigger impact than investment returns. This is why people with balances at this level tend to regard it as another form of savings account.

• If you have a lifeshortening congenital condition.

However, as balances grow, average investment returns eventually start to outweigh contributions, and people with balances of $100,000 tend to regard it more as an investment account.

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When seeking out advice one of the most important things to look for is an adviser who will consider your overall needs.

• An adviser should be able to help you identify your likely spending needs in the future, what proportion of those needs will be satisfied by KiwiSaver or other assets, and where the gaps may be, if any.

• Good advice should also go beyond just looking at your willingness to withstand inevitable market ups and downs. It should educate you about markets and investments, so you feel more comfortable and confident with your chosen approach.

Ideally, the advice provider should also be independent. Many KiwiSaver schemes have a

KIWISAVER

We recommend getting advice from someone who will look out for you. And if your KiwiSaver balance is closer to $100,000, it’s probably time you looked at taking advice that considers your specific needs and future goals. There are many outstanding advisers out there willing to help.

Consilium recently launched the KiwiWRAP KiwiSaver Scheme which allows advisers to create a personalised portfolio for investors from over 400 unique investment options.

With a minimum balance requirement of $50,000, it’s ideally suited for those with higher KiwiSaver balances wanting to benefit from personalised advice.

I’m now 60. Should I switch to a more conservative KiwiSaver fund or keep riding my luck in growth?

Switching to a more conservative strategy or staying in growth are two options. There is also a third option: get some personalised advice.

The right answer depends on individual information relevant only to you (your needs, your time horizon and much more).

For example: • When do you want to spend your money?

How much per year and over how many years?

• Do you have additional assets outside KiwiSaver or is KiwiSaver all you have to help fund your retirement?

̀ With true advice, the focus is on the investor, not the product being recommended.́

sales force where the advice leads solely to their own funds. This advice may be sound, but how can you be sure their product will be best suited to your needs? It’s best to seek advice from an adviser that can recommend any investments they feel are best suited to your personal needs and goals.

With true advice, the focus is on the investor, not the product being recommended, and your adviser should regularly check in with you to determine if your retirement plan is on track.

Life changes The best advice is intentional and responds to changes in your life, changes in markets, or changes in financial products available.

Many KiwiSaver plans are on autopilot, having adopted a “set and forget” approach. However, the investment environment continues to evolve, and financial products are generally becoming more diversified and available at a lower cost.

Sadly, most investors aren’t taking advantage of these changes because they don’t notice, and no-one is specifically looking out for their best interests.

• Do up and down markets make you uncomfortable, or do you see them as an inevitable part of investing; perhaps even an opportunity?

The one thing we know is you are 60.

Common advice is that the older you are, the less portfolio volatility you should have, but it’s not always that simple. If you’re 60 and want to spend until you’re 100, that’s 40 more years. By any measure that’s a long-time horizon.

Moving into a more conservative allocation may decrease your portfolio volatility, but evidence suggests it also increases the chance you outlive your money.

Here’s another question. What’s riskier – up and down prices, or running out of money too soon?

They both matter. Many would argue the latter matters more.

Get some personalised advice that considers these sorts of issues to get clarity on the right decision for you.

Consilium NZ Limited is the issuer and manager of the KiwiWRAP KiwiSaver Scheme. The Product Disclosure Statement and a full list of investment options for the KiwiWRAP KiwiSaver Scheme is available at www.kiwiwrap.co.nz.

The information provided and opinions expressed in this article are intended for general guidance and are not financial advice or a recommendation.

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GoalsGetter Funds

N I K KO A M

GoalsGetter Growth Funds Generate Focused Growth Fund (95% Growth; 5% Income) Harbour Active Growth Fund (65% Growth; 30% Income; 5% Other) Milford Active Growth Fund (78% Growth; 22% Income) Nikko AM Growth Fund (78% Growth; 17% Income; 5% Other) Pathfinder Ethical Growth Fund (66.8% Growth; 28.2% Income; 5% Other) Salt Sustainable Growth Fund (80% Growth; 20% Income)

GoalsGetter Balanced Funds Generate Balanced Fund (60% Growth; 40% Income) Harbour Sustainable Impact Fund (55% Growth; 27.5% Income; 17.5% Other) Milford Balanced Fund (61% Growth; 39% Income) Nikko AM Balanced Fund (59% Growth; 36% Income; 5% Other)

GoalsGetter Conservative Funds Milford Conservative Fund (18% Growth; 82% Income) Nikko AM Conservative Fund (23% Growth; 77% Income)

GoalsGetter Other Funds Generate Thematic Fund (98% Growth; 2% Income) Nikko AM NZ Cash Fund (0% Growth; 100% Income) Nikko AM Corporate Bond Fund (0% Growth; 100% Income) Nikko AM SRI Equity Fund (100% Growth; 0% Income) Nikko AM Global Shares Fund (100% Growth; 0% Income) Nikko AM ARK Disruptive Innovation Fund (100% Growth; 0% Income)

The Journey to a Successful, Diversified Portfolio

Sam Bryden Sam Bryden is head of distribution at Nikko AM NZ. With over 18 years’ experience in investment management and financial markets, the last six of these at Nikko AM, he is responsible for leading the firm’s sales, marketing and client servicing.

Understanding your appetite for risk is an investment fundamental, but aligning it with your investor profile and stage in life is key to getting the most from a diversified KiwiSaver strategy, writes Sam Bryden.

As KiwiSaver investors, we generally get the opportunity to select from variations of conservative, balanced or growth options. These risk settings shouldn’t necessarily reflect our own tolerance for fear or danger, rather they should align with where we are in our KiwiSaver journey.

For instance, whether you’re a legal exec or a lion tamer, if you’re in the early or middle stage of your career with decades of gainful employment ahead of you (good luck if you’re the lion tamer), then there’s a strong argument for you to be more inclined towards growth funds.

This is because history shows us that while they are subject to greater volatility, equities will typically outperform the likes of bonds and cash over time and therefore give you the greatest opportunity to accelerate the growth of your retirement wealth.

However, as you get closer to a life milestone, like your retirement or first-home purchase, you may be more inclined to change your settings to reduce risk and protect what you have saved.

Your personal investor profile is defined by more than just your comfort with volatility at varying life WI NTE R 2 0 2 4 | I N F O R M E D I NVESTO R 5 0

stages. It reflects a range of factors, including your personal beliefs, preferences, knowledge, and the time, skills and resources you might have to devote to researching and monitoring performance.

Aligning your risk appetite with your personal investor profile may lead you to specific fund managers whose investment philosophy you share, whose vision you align with, or whose performance history gives you greatest confidence. It will also likely lead you to more than one type of fund.

We’ve introduced the GoalsGetter KiwiSaver Scheme to support your ability to make good, informed choices from a curated mix of funds from New Zealand’s leading fund managers; diversifying risk and, with the help of either your financial adviser or our inbuilt robo-advice, connecting you with expert strategies tailored to your KiwiSaver ambition.

To the left you’ll find the funds we have handpicked to enable you to create a multi-manager, multi-fund portfolio tailored to your unique personality and circumstance. For more information on how to find your ideal combination, hop on to Goalsgetter.co.nz or chat to your financial adviser.

M A R K E T U P D AT E

Snapshot News, events and innovations from around the world that grabbed our attention and are likely to impact the global economy going forward.

UNITED KINGDOM

According to a recent Deloitte survey, nearly three-quarters of UK business leaders will be increasing the amount they invest in AI next year. The survey revealed that 73 per cent of respondents are adopting the technology at a “fast” or “very fast” pace – versus 40 per cent of organisations with “some” level of expertise. Close to 2,000 business leaders took part in this survey.

UNITED STATES

Gallup’s annual Economy and Personal Finance survey revealed real estate was the best investment for the long-term. Thirty-six per cent of respondents choose real estate; this was followed by stocks or mutual funds (22 per cent); gold (18 per cent), and savings accounts (13 per cent). Only four per cent of Americans considered bonds the best, with cryptocurrency sitting at three per cent. “Safe as houses” may be a cliché, but they are still viewed as the most secure investment option.

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INDIA

The Indian economy is predicted to keep growing in 2024, according to a United Nations report. The World Economic Situation and Prospects paper has predicted 6.9 per cent growth this year, with 6.6 per cent growth predicted in 2026. Public investment and private consumption are considered the drivers of the growth. This is upwards from previous projections, which stood at 6.2 per cent.

AUSTRALIA

Clean energy is getting a major boost from the federal government in Australia in the 2024-2025 budget. On May 14, Treasurer Dr Jim Chalmers announced the need to invest in the green economy by developing clean energy manufacturing in the country and turning Australia into a “renewable energy superpower”. The move is part of the Future Made in Australia package, which will see A$22.7 billion invested over the next 10 years.

Correct at May 22, 2024.

SNAPSHOT

THAILAND

CANADA

Microsoft has committed to building new cloud and AI infrastructure in Thailand. The development is set to provide upskilling opportunities for over 100,000 people in the country. The commitment builds on a memorandum of understanding with the Thai government around moving towards a digital-first, AIpowered future.

S&P Global have announced they expect Canada’s GDP to grow 0.9 per cent in full-year 2024, up slightly from the 0.7 per cent forecast last November. They believe the economy should fare better in 2024 than it did during the last three quarters of 2023; and some metrics are outperforming our expectations from last November, including consumer spending and home sales.

SOUTH AFRICA

UKRAINE

According to Statista, the current unemployment rate in South Africa is 32.1 per cent. This makes it the worst rate in the world, according to World Bank figures. The election results, which may see ANC lose its majority, may complicate the economic crisis further, especially if a coalition is formed.

The Internation Monetary Fund (IMF) has forecast a 3.2 per cent GDP growth for 2024. Despite ongoing attacks from Russia on the nation’s power grid and advancement of its offensive into Ukraine, the country continues to remain resilient.

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SIMPLICITY

Are KiwiSaver Funds Really Diversified?

Diversification has the twin charm of being a golden rule and a free gift, but are KiwiSaver and fund managers really making the most of this option?

Sam Stubbs takes a look.

By investing in the companies listed in the world’s largest share and bond indexes, for example the S&P 500, it’s pretty simple to construct a global portfolio with thousands of different investments.

But that doesn’t necessarily mean you have all the benefits of diversification, because correlation between bond and share price movements can be high at times.

There are other asset classes not correlated to shares or bonds, or only very loosely. And these asset classes are well established and understood, with billions invested in them overseas. However, we don’t seem to do the same in New Zealand. A recent report by the Centre for Sustainable Finance highlighted that in Australia 18 per cent of superannuation funds are invested in private assets. In New Zealand, only 2 per cent are. So, what are these asset classes that can help increase diversification?

The first and obvious category for investment is Venture Capital, which is less about interest rates and market movements, and more about the founders of promising startups and their ability to deliver success. The second is Private Equity, for the same reasons – albeit via more established private companies which have already proven their potential.

More options A third is investing in mortgages. If loaned conservatively, their value isn’t significantly affected when interest rates change. A fourth investment option is physical property. If there’s only modest leverage in these property investments, they can also display more resilience to interest rate changes.

A fifth option is physical commodities, which often don’t correlate with interest

rates, depending on the product. Some commodities, like gold, are specifically bought as a store of value and for their traditionally uncorrelated characteristics.

And sixth is more esoteric investments like crypto currencies, which were created to differ from other investments, and behave as such.

So, do KiwiSaver managers have much invested in these asset classes? In a word, no.

Why is that? To my mind, there are several excuses.

The first is a lack of liquidity for account withdrawals and/or switches. This argument says that because KiwiSaver investors can switch managers at any time, or withdraw all their money after 65, it’s necessary for all investments to be instantly sellable, aka highly liquid. But if properly managed, it’s unlikely that enough investors will switch or redeem KiwiSaver funds to cause a liquidity problem for the manager or be inequitable for the investors that remain.

Fees and assets The second excuse is that regulators don’t like illiquid investments in KiwiSaver, because the fees could be unreasonable and the assets hard to sell. This is simply not true. Regulators don’t like too much invested in illiquid investments, and their job is to ensure fairness and equity for all investors. But that doesn’t mean they don’t allow careful investing in private assets.

Regulators understand that, if done well, investment in private assets can dampen volatility and enhance returns. It’s why some KiwiSaver managers are already investing this way.

For managers to say they are concerned fees will seem “unreasonable” is to assume a) that it costs more to manage private assets

and that b) their fees were reasonable to start with. Both are dubious assertions, in my opinion.

The third excuse is with illiquid assets not being priced daily, it’s hard to have them in an investment scheme where investors can move their money any time they wish. That certainly makes holding and valuing illiquid assets harder but shouldn’t put them into the too-hard basket. The KiwiSaver industry, and its supervisors, now have plenty of experience in valuing alternative assets.

The real reason Despite all these excuses, to my mind the only real reason managers don’t invest much in alternative and illiquid assets is that it’s simply harder to invest this way and can be more expensive. Many KiwiSaver managers don’t like hard, especially if they can rely on the power of their franchise more than the investment returns; banks being an obvious example.

And as KiwiSaver fees are likely to be over $700 million in total this year, they should be willing to pay any manager of illiquid assets what it takes to get investment returns relatively higher.

Instead, fees seem to remain consistent and, in some cases, high, but very few are putting those fees towards the “harder” investments that could help diversify funds further. The sad reality is that alternative investments, which could enhance returns and dampen volatility, are not de-rigueur for KiwiSaver managers. It seems that the status quo might just be too easy, and too profitable.

It shouldn’t be that way and isn’t overseas.

But from what I can see, it is here.

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PROPERTY

It’s an Upturn, But an Underwhelming One Stretched affordability, high mortgage rates and the recent rise in market listings have all had an impact, writes Kelvin Davidson.

After a solid end to 2023 as confidence levels rose, the property market has kicked off 2024 in relatively subdued fashion.

Yes, sales volumes are rising strongly in percentage terms, but that’s coming off a low base in terms of the number of deals.

Similarly, property values are rising, but momentum has faded a bit in the past couple of months.

That’s consistent with stretched affordability, high mortgage rates and the recent rise in market listings. Buyers have the ascendency at present and, in a nutshell, it’s an upturn, but it’s underwhelming.

Sales and values Taking a quick look at the key market metrics, sales volumes have now been higher than a year earlier for 11 months in a row, with March’s increase sitting at 9 per cent. That’s certainly an upwards trend, but you also need to acknowledge that volumes are still about 20 per cent lower than where they’d normally be for this (peak) time of year.

Part of the rise in agreed sales has probably reflected the increase in listings coming to market, which has greased the gears for deal-making activity, but also shifted pricing power back in favour of buyers as their choice of stock has grown. No surprises, then, that property value WI NTE R 2 0 2 4 | I N F O R M E D I NVESTO R 5 6

growth has moderated, and after monthly gains of 0.7 per cent and 1 per cent on the CoreLogic House Price Index in November and December last year, we’ve had figures closer to 0.5 per cent or less this year.

Making hay One consistent and shining light among some of the gloomy housing stats has been first-home buyers, who have continued to account for more than 25 per cent of property purchases in the past few months, which are record highs. Of course, it’s never easy to buy that first property. But at least FHBs have been able to draw on their KiwiSaver balances, tap the low deposit lending allowances at the banks and operate in an environment where other buyer groups are a bit less active.

Indeed, mortgaged investors are currently only running at around 20-21 per cent of activity. Still a presence, but less than they have been in the past. To be fair, some investors are no doubt starting to ponder another purchase again in coming months, with deposit requirements set to loosen and mortgage interest deductibility coming back.

But for most typical investment purchases rents will still be a long way short of covering the mortgage, so it would be a surprise to see that positive sentiment actually transform into a wave of purchasing activity.

DTI restrictions Looking ahead, the property market seems set to continue to grow in 2024 in terms of sales volumes and house prices, but there are significant headwinds, which mean that the upturn might prove to be quite slow – certainly compared to the post-Covid boom.

Chief on that list of headwinds is the “higher for longer” outlook for mortgage rates, in an environment where the Reserve Bank is still having to work hard to quell inflation, especially domestically generated pressures such as council rates, insurance and rent (on the back of high net migration).

Overall, we’re anticipating sales volumes to rise around 10 per cent this year (from a low base) and house prices nationally by about 5 per cent on average.

Mortgage rate falls into 2025 would ordinarily stoke house prices, but this time around the likely caps on debt to income (DTIs) ratios would dampen that effect.

DTIs will tend to tie house prices more closely to incomes over the long term and restrict the number of properties people can own at any point in time. After all, to keep growing a portfolio your income will need to rise, and that’s not normally a rapid process.

C ORELO GIC

Average Property Value

Northland

$748,456 1.6%

CoreLogic House Price Index Percentage change last three months

Bay Of Plenty

$893,117 3.2%

Auckland

$1,301,369 0.6%

Gisborne

Waikato

$599,940 1.8%

$815,307 -0.4% Taranaki

$651,392 2.3% Manawatu/Whanganui

Hawke’s Bay

$560,771 0.8%

Tasman

$746,926 0.3%

$798,649 3.0%

Wellington

$903,441 1.1% Nelson

$789,335 1.1%

Marlborough

$698,576 0.1%

West Coast

$384,193 2.2%

Canterbury

$730,159 0.8% Southland

$469,635 2.2%

Otago

$887,959 1.4%

New Zealand Average

$934,151 2.0% WI NTE R 2 0 2 4 | I N F O R M E D I NVESTO R 5 7

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COMMERCIAL PROPERTY

Taking the Risk Out of Investment Diversification is one of the key benefits of investing in property, but what does this mean? Sally Lindsay finds out.

“Don’t put all your eggs in one basket” is a popular saying, used all over the world, which perfectly summarises the importance of the concept of investment diversification when creating a portfolio.

As an investment principle, diversification is all well and good. As many investors know there are clearly different layers of diversification – one asset class to another, further diversification within an asset class and diversification from specialist knowledge and expertise.

One of the fundamental reasons for diversifying an investment property portfolio is risk mitigation.

The real estate market is not immune to fluctuations. Different factors, such as economic conditions, local market dynamics, or unforeseen events (like a pandemic) can impact property values and rental income. By diversifying, investors reduce their exposure to the risks associated with a single property or location.

Many people who invest in residential property do so to diversify away from equities or managed funds. Few gain exposure to commercial property, missing out on further diversification benefits and opportunities.

This is despite many investors recognise the importance of diversifying their property portfolio in spreading risk, taking advantage of different wealth creation tactics and gaining exposure to alternative markets.

As an asset class, commercial property behaves differently from the residential market in many aspects, but when combined into a diversified property portfolio, these

differences can also support the evolving needs of investors.

So, what are the key characteristics of the two asset classes?

Residential property has historically recorded higher growth rates than commercial property.

Most property investors will start in the residential sector, with the idea being they will leverage capital growth from these higher-growth properties to build and expand their portfolio.

From a cash flow perspective, residential properties will generally provide a lower rental return than commercial assets, with the typical net rental income ranging from 3-4 per cent.

This is in part because of the high proportion of costs borne by residential landlords, such as maintenance, rates and insurance.

While many residential investors will focus on long-term capital growth as their primary wealth creation strategy, investors with a higher risk tolerance can also look towards more aggressive equity-building strategies such as property development to accumulate wealth across a shorter time.

Focus on cashflow Commercial property behaves differently from residential. It typically has a stronger focus on cashflow and more consistent long-term returns.

Commercial assets are also valued differently based on the income return they provide to investors – known as the capitalisation (or cap) rate.

The higher yield of commercial properties is largely due to the fact commercial investors are able to pass on their rental outgoings as part of their rental rates, with tenants typically responsible for expenses such as council rates, utilities and maintenance.

Another reason commercial property is often an attractive option for yield-focused investors is the length of commercial leases.

While the typical length for residential lease agreements is about 12 months, it’s not unusual for commercial properties to have an initial lease term of five years and often more, with the option to extend this further after the initial term.

The fundamentals There are understandably several roadblocks that prevent investors from gaining exposure to the commercial sector. With high-quality commercial assets typically priced in excess of $5 million, the high entry costs mean that few investors have the financial capacity to buy directly.

Demand, particularly for industrial property, has surged in the past few years and the entire commercial property market is expected to reach $363.4 billion this year and grow at 3.07 per cent a year to $415.5 billion by 2028.

The fundamentals for successful commercial investment boil down to location, nature of the property (office/industrial etc), supply/ demand within those sectors, construction, including earthquake strength, current rentals to market, alternate uses of the property, and is the property fit for purpose (ie an older industrial property may not have the floor loading and stud height to deal with existing requirements).

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PROPERTY

‘Commercial investors are able to pass on their rental outgoings.’

With more investors recognising the strategic benefits of diversifying into commercial property, they are turning towards joint investment opportunities as a means of overcoming these high barriers.

Commercial property funds can offer investors the opportunity to enjoy the asset performance of larger and high-quality commercial assets with the benefits of lower barriers to entry and the guidance of a professional management team.

Tauranga-founded unlisted commercial property fund manager PMG says commercial real estate presents a solid opportunity for investors looking for regular cash returns and the potential for value growth, which typically hedges well against inflation over the long-term.

PMG chief executive Scott McKenzie says unlike residential properties, commercial assets often come with longer lease terms and higher rental yields, providing a more predictable income stream and lower tenant turnover rates.

Combining property types Property investment company Erskine Owen, based in Auckland, has clients who own residential and commercial and have also invested in its property syndicates.

If something goes wrong with a residential property, Henderson says the owner/ landlord is responsible for all the expenses, whereas in commercial property those costs fall back onto the tenant.

Erskine Owen director Alan Henderson says it’s helpful for investors to have this diversification because each sector has a different profile.

That gives diversification away from risk, he says. Diversifying geographically is also important, Henderson says.

McKenzie says by combining different property types in a portfolio, an investor creates a more consistent cashflow. Even if one property experiences a temporary vacancy or rent reduction, the income from others can help offset the loss, ensuring there is a steady stream of revenue.

He says this income stability is especially important for property investors who rely on rental income to cover mortgage payments and other expenses.

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He points out that within commercial property it pays to have a spread of investments across a mix of properties in the industrial, office and retail sectors to give access to bigger properties and potentially better-quality tenants. “It reduces risk because what diversification is doing is diversifying an investor’s risk profile as well.”

McKenzie backs up the risk factor. He says investing through diversified property funds gives direct exposure to multiple

commercial properties typically spread across different geographies, sectors and tenants.

This contrasts with syndicates, for instance, which typically own a single property or a small number of properties, often with higher gearing than funds.

“Should something not go to plan from, say, tenant default or vacancy, the impact on the syndicate income and overall asset value is naturally far greater, where there are often less levers to pull to solve the problem. Diversified funds offer investors the opportunity to gain access to the benefits of investing directly in commercial property with less risk.”

Henderson says when buying property for syndication, yield is also important. Erskine Owen has recently picked up a Countdown property at 9 per cent and other properties

COMMERCIAL PROPERTY

for 8 per cent, all on net yield. “In residential, investors would be lucky to get 4 per cent gross. When expenses are taken out it is more like a 3 per cent yield.”

High barrier to entry To get a decent commercial property, individual investors have to pay $5 millionplus and that is far too high a barrier for most. While there are properties in the $1 million-plus range, competition is fierce.

He says the more an investor can spend, the better quality of tenant they will get.

By clubbing together with friends, some investors can spend a reasonable amount on a commercial property. “That is pretty much how property syndication started.

An investor says to a few mates, ‘why don’t we join together and buy the property together?’ It expands from there.

“That’s where property funds or syndicates

come into their own because $50,000 will get investors into many syndicates, particularly wholesale investors. What investors are buying is the property’s income stream.”

He has found that once clients dip their toe into the commercial property water they don’t go back. Mostly, investors keep their residential holdings but find commercial is more interesting and they can do more with it once they get their head around it.

“The potential for growing value is huge. Commercial investors don’t have the same tenant headaches as they do with residential, and they can move into generating a passive income.”

Henderson says many people still believe buying residential is high yielding and the best strategy for investment. “That’s a fallacy and they get led up the garden path.”

It’s not that residential property is delivering really bad returns. “There are some great properties selling at great profits. It’s just when they are rented, they are returning only a 3 per cent yield.

Serious investors get frustrated, start to look about and see they can get a 6 per centplus return on commercial property.”

However, Henderson is seeing a few, but not many, residential investors selling and moving into commercial property. Where it is mainly happening is when investors are approaching retirement and want a passive income.

Property funds and syndication give residential investors, who are giving up work, the opportunity to diversify without having to have a massive deposit to buy on their own or with others.

Another benefit, says McKenzie, is tax efficiencies these funds provide. This can enhance net returns to investors when contrasted with other investment products.

PMG’s retail funds, for example, are all multi-rate Portfolio Investment Entities (PIE funds), which means investors pay tax on income derived from the fund, capped at a maximum of 28 per cent.

Riding it out Savills Real Estate head of industrial sales and leasing Paddy Callesen says syndicated and unlisted funds serve a good purpose.

While syndicates have had a chequered history, Callesen says four out of five times the property market is either okay or good. “This is one of the 20 per cent of times there is a bad market and some syndicates and unlisted funds have stopped distributions as high interest rates, lower property valuations and costs have caught up with them. It’s difficult for investors because the syndicates and funds are mainly illiquid and that is the risk when investing.

“There will always be times they are not performing and investors just have to ‘guts’ it out until the tenancy is renewed, the rents have been reviewed and the market’s a bit better – everything is in alignment – so they can sell their units or shares or go to the syndicator and say, as a collective, we think now is the right time to sell the property. It’s all about risk and reward.”

Some syndicates have ridden the hard times and are now listed property funds, with investors becoming shareholders who have liquidity by being able to sell their shares.

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PROPERTY

How Commercial Property Funds Build Diversification Into Their Portfolios – And Yours Often referred to as 'the only free lunch in investing', diversification is a fundamental risk management concept embraced by astute investors across the board.

While it sounds straightforward enough, diversification by no means a simple case of pick ‘n mix. For commercial property fund managers, it can take many forms.

Most obviously it might see a fund portfolio strategically structured to provide exposure to a range of sectors.

However, diversification can also be achieved within single-sector portfolios through geographic, sub-sector and property size variances. Done well, diversification doesn’t just offer a protective cloak during the bad times, it provides greater opportunity for growth in the good.

We spoke to Scott McKenzie, CEO of PMG Funds, about how they’ve shaped their business model around diversification, not only to mitigate risk but to deliver regular returns, long-term growth and encourage investor confidence across a nationwide portfolio that’s grown to be worth over $850 million*.

Shifting to a fund model PMG Funds has been in the commercial property investment market for over 30 years, which has been long enough to see them successfully weather multiple economic cycles and downturns, including the Asian and Global Financial Crisis and, most recently, the Covid-19 pandemic.

McKenzie says it was the experience of these earlier crises that influenced what he WI NTE R 2 0 2 4 | I N F O R M E D I NVESTO R 6 2

calls one of the most important shifts in the company’s history to date; a move in 2014 from standalone syndication to a diversified managed funds model.

“Our view has always been that quality, well-managed commercial property will remain an attractive long-term investment proposition. But history has taught us that the performance of individual sectors or industries will be subject to changing trends and external influences.”

Where syndicates typically focus on one sector or type of property, a fund manager can be more active in the pursuit of diversified holdings.

“This means that during economic downtimes (such as the last 12 to 18 months), those invested in diversified commercial real estate funds are less exposed to the ability of a single business, sector or region to ride out the bad times,” says McKenzie.

“If a tenant’s business fails or payments default in the single property that you partown, the income hit will be immediate and potentially severe. However, if that tenant is one of several across a diversified portfolio, then this can be far more easily absorbed.

“Diversification also goes hand-in-hand with adaptability – so not only does it help us to mitigate risk, it enables us to be positioned to embrace opportunities and capitalise on emerging trends.”

A broader stroke Through its nationwide retail funds portfolio, PMG own properties in major cities and growing regions from Whangārei to Invercargill. These properties include high-quality office buildings, warehouses, early childhood educational facilities and large-format retail properties.

“We look to acquire high-quality assets that we can still improve – be it through additions or, for example, sustainability enhancements – that will make them even more attractive to tenants and therefore increase their defensive characteristics over the long term,” says McKenzie.

“Maintaining an appropriately balanced portfolio diversified across sector, region and tenant means we’re well positioned to weather market fluctuations and better preserve investor capital.”

Boost to portfolios McKenzie says the secret to getting the most from diversification is to understand the specific characteristics of each individual asset class and structure your investment portfolio according to your objectives.

“As an advocate for diversification, I believe there’s room in an investor’s portfolio for a great variety of investment vehicles and

asset classes and, within this, commercial property continues to merit its place.

“A diversified commercial property fund can enhance an individual portfolio, not only by reducing exposure to the risks associated with a single building or tenant, but by providing steady returns and a hedge against inflation over the long term.”

If you have a long-term horizon for your investments and you’re looking for a way to add diversification to your portfolio, McKenzie suggests talking to your financial adviser about whether commercial property funds could be the right fit.

“Given the cost of the asset base, it’s very

hard for an individual investor to achieve diversification in commercial real estate on their own,” says McKenzie.

“Our funds give investors an affordable way to own high-quality commercial property throughout New Zealand – and position their portfolios to capitalise on the next growth phase of the economic cycle.” * Metrics correct as at March 31, 2024.

Disclaimer: The information in this article is of a general nature and was current on May 1, 2024. It is not intended to be regulated financial advice for the purpose of the Financial Markets Conduct Act 2013 and does not take your individual circumstances and financial situation into account. PMG does not provide financial advice. Please seek advice from a licenced financial advice provider before making any investment decisions.

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We've been using our property and investment smarts to help Kiwis get ahead for over 30 years.

Get in touch with our team today for more information.

Providing four successive generations of investors with cashflow through regular returns and a pathway to financial freedom through long-term capital growth.

Better still, we’ve done this by providing New Zealand businesses and their staff with quality, sustainable premises from which to make their mark on the world.

07 578 3494 pmgfunds.co.nz

The information in this advertisement is of a general nature and was current as at 1 February 2024. It is not intended to be regulated financial advice for the purpose of the Financial Markets Conduct Act 2013 and does not take your individual circumstances and financial situation into account. PMG does not provide financial advice. Please seek advice from a licenced financial advice provider before making any investment decisions.

WYNN WILLIAMS

Taking the Commercial Plunge Diving into commercial property can be attractive for investors, but it pays to do some homework first, writes Andrew Logie.

Diving into commercial property can be attractive for investors, either because of the prospect of charging rent on a per square metre basis or because they are drawn to having a more business-like tenant as opposed to residential.

Commercial property investment is different in several ways to its residential counterpart and requires a different level of forethought and due diligence before committing.

How does it shake?

The Building Act 2004 (Building Act) imposes minimum requirements buildings must meet to limit threats to life posed by earthquakes. This quality is measured using the percentage based New Build Standard (NBS). A building which has 100 per cent NBS as assessed by a structural engineer will meet Parliament’s minimum threshold for minimising loss of life in a seismic event.

To take into account varying degrees of property age and seismic performance, the Building Act allows buildings to operate between 100 and 34 per cent of NBS, without compelling owners to strengthen their buildings. Properties below 34 per cent are placed on a national earthquakeprone building register and will be required by their territorial authority to do strengthening work to raise the NBS above a 34 per cent threshold by a certain date, which depends on the regions.

Tenants are becoming more educated and interested in seismic building qualities and many corporates will only lease buildings with high NBS ratings to minimise health and safety risk and potential business interruption caused by future strengthening work or damage resulting from an event.

Consulting the earthquake-prone register and a detailed seismic assessment for existing commercial buildings is essential for purchasers.

How strong is the lease?

Leases maintain income for commercial

properties and therefore require close assessment before being bound to a purchase. Reviewing the strength and resilience of the tenant business, the lease term, maintenance and reinstatement requirements, rent review rights and checking for unusual or onerous terms form part of baseline due diligence.

If there are multiple tenancies at a property, then a level of diversification between industries will usually be positive and it will be necessary to check leases do not conflict.

As contact with tenants will be limited until the deal is unconditional, seeking written confirmation of lease compliance from the vendor can also serve as an additional layer of comfort.

Does it stack up?

One of the first steps we see clients take when investigating a possible purchase is seeking valuation advice. Valuers will check the rental is up to date with the market and produce a value for the property to justify a purchase price or support an application for finance. Valuers’ reports also include a summary of lease terms, title documents and zoning requirements, which can be verified by your team of advisers.

building must have for certain uses, and it requires that specific systems in buildings (eg fire-fighting and other automatic systems) be annually reviewed. These requirements are enforced by territorial authorities.

Thorough due diligence involves a review of the specified systems within a building and their inspection, together with confirmation that the current use of the building mirrors what the authorities believe it’s being used for.

Legal review As with any property purchase, the usual legal review of LIM and title documents still applies. These, in addition to the matters listed above, include key considerations of what legal due diligence will look like in the commercial setting.

This will be done in conjunction with other due diligence such as insurance and financial reviews. The level of legal due diligence requested of us will always depend on the particular property and the risk appetite of the purchaser.

Andrew Logie is a senior associate in the commercial property team of Wynn Williams.

Due diligence In addition to seismic requirements, the Building Act specifies characteristics a WI NTE R 2 0 2 4 | I N F O R M E D I NVESTO R 6 5

O P E S PA R T N E R S

Diversify and Thrive

To spread risk and enjoy higher returns you need to buy in different areas, which is a form of diversification, writes Andrew Nicol.

It bugs me when developers try to sell property investment as a sure thing.

They’ll usually show you a graph of the New Zealand property market and proclaim: “Look, the New Zealand property market goes up almost every year.”

It seems true, right? When you see it on a graph it does look like property prices almost always go up. But the median property price in New Zealand is an average of all the property markets in the country.

Sometimes Auckland is down, while Wellington is flat. Sometimes it’s the other way around.

This is why you can’t just buy in one area.

If you want to spread your risk and get higher returns, you need to buy in different areas around the country. This is called diversification.

Let’s compare the Auckland and Gisborne property market and talk about how a diversified portfolio can impact your portfolio.

House prices in Gisborne have risen by about the same amount as the rest of the country. They’re 7.25-times what they were in 1992. About the same as New Zealand as a whole, at 7.5-times what they were at that time.

Boom and bust But individual markets like Gisborne don’t go up smoothly like the graph of the New

Zealand property market ... far from it.

Gisborne is more boom and bust than the country’s average.

In its worst year, New Zealand house prices were down 14 per cent, but in Gisborne’s worst year, prices were down 21 per cent. In the best year, NZ prices were up 31 per cent, and in Gisborne they screamed up by more than 43 per cent.

So, individual regions have more ups and downs than the country’s average; they’re more volatile. Sure, over the long term (31 years-plus), property prices go up at roughly the same rate.

But what happens if: •

You need to sell in five years, and your market is down?

•

Or you want to borrow more against your investment in 10 years, but the market is flat?

The rough periods can slow you down if you only invest in one region and one way to smooth things out is to buy in different regions.

Let’s say back in 1992 “Mike” bought two properties: one in Auckland and one in Gisborne. Both those properties were the same value. Over the next 31 years, those two properties had their share of ups and downs. Sometimes Auckland is up while Gisborne is down; sometimes it’s the other way around.

So, what is the impact on Mike’s portfolio when you average those property prices as a portfolio? The overall value more closely mirrors the New Zealand property market.

There aren’t as many ups and downs, and that does two things. #1 – You’re less likely to give up People stop investing in property when things get too hard. If Mike had only invested in Gisborne in 2007, he would have had almost 10 years of a flat market.

At that point, Mike might have thought: “Nah, property investing isn’t for me”. But because Mike had another property in the Auckland market going gangbusters, he held his nerve. You’re more likely too as well. #2 – It helps grow your portfolio Let’s say one market is down, but the other is up. You may be able to borrow against the better-performing property. You can use some of that money to buy another investment property. Bottom line: If you only buy in one region, you’re more at the mercy of what one market is doing at any one time.

Buying around the country (diversifying) evens out your returns. That way, your portfolio grows more consistently. This keeps your wealth more in line with the overall property market ... it smooths out the bumps.

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T H E S TAY H U B

Up for Sale And Still Earning Rent

have struggled to sell when the housing market has hit low periods. For real estate agents, a partnership with The Stay Hub provides potential clients with the perfect added incentive to choose their services, particularly when their home isn’t tenanted, or they are moving overseas or to another property.

The Stay Hub offers a short-term way to keep your or your client's house on the market while earning rent until you find the right buyer and price.

While long-term renting operates on a fixed pricing model with little room for change, short-term renting has dynamic daily rates that are optimised throughout the year, depending on seasons, holidays, weekends and events. Occupancy does not need to be 100 per cent year-round to bring in a high yield.

Selling a property or trying to and not getting the right buyer for yourself or your client? Join The Stay Hub’s short-term rental management services for a set duration, keep the house on the market, and earn rental income while you find the perfect homeowner and price.

Free appraisal Better yet, The Stay Hub can provide buyers with a free appraisal highlighting their expected annual earnings in the short-stay market, something they may wish to continue once purchased.

This is a great option if you have a vacant or soon-to-be vacant home, particularly with the end of peak selling season in the housing market. Short-term renting allows buyers to visit the property between guests without locked-in tenants, while our team will ensure it’s kept in top-notch condition with cleaning after each stay, routine maintenance and inspections.

Short-term, long-term, The Stay Hub has you covered on both fronts. Our close working relationship with our sister company, Hammond & Co Property Management, offers owners a seamless transition between markets should they wish to switch.

We take care of everything, so you don’t have to.

We are one of Auckland’s largest Airbnb, short-term rental, and holiday home management providers, spanning the entire greater region, with properties also located in Taupo.

The Stay Hub has already worked with property owners and real estate agents who

Placing 14th in the Deloitte Fast 50 Awards last year as one of the country’s fastest-

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growing companies, our in-house expertise includes data-driven pricing strategies and revenue management experts, marketing strategy and implementation, the full guest experience, experienced property managers, and housekeeping and maintenance teams.

The Stay Hub is your gateway to hands-off short-term rental property management, with a local presence in Auckland. We work with property owners, investors, developers and real estate agents.

One umbrella For property developers, there’s no need to deal with multiple property management companies to ensure buyers have the right information on both markets, we can do this alongside our sister company and revenue and marketing teams, providing collateral for your development brochures to attract homeowners and investors.

If you’re interested in learning more about our management services or partnering with The Stay Hub for your clients or developments, book an appointment with our Business Development Manager, Craig Henry.

You can contact him directly on 027 363 1560.

Alternatively, email craig@thestayhub.co.nz or visit our website to request a free appraisal via www.thestayhub.co.nz.

Make your property search simple.

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Central Park, Ellerslie, Auckland

Commercial Property Poised for Growth Commercial property investment remains a defensive asset class. Head of investor relations, Mat Harvie, explains how unlisted property funds are moving through what is likely to be the bottom of this economic cycle.

In the ever-evolving investment landscape, investors will be familiar with the cyclical nature of the markets.

After a challenging two-year period, banking and finance communities are signalling the country is nearing what seems to be the bottom of a challenging economic cycle – and this dynamic is reflected in what Oyster Property Group is seeing on the ground in the commercial property sector.

In an environment where elevated interest rates have impacted virtually every asset class, a mix of challenges and growth opportunities present themselves, making this a critical moment for current and potential commercial property investors to pay close attention to.

Opportunities emerge Forecasts predicting lower interest rates and the possibility of increased valuations point to a more positive outlook for the property sector beyond the current financial year.

As the property sector transitions through the current economic cycle, opportunities to unlock long-term capital gains and income growth are emerging for investors willing to adopt a longterm perspective.

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PROPERTY

‘Across multiple investment cycles, Oyster has been delivering results to investors and tenants for more than two decades.’

Commercial property in particular stands out as an asset class approaching an exciting juncture.

Albany Lifestyle Centre

Mat Harvie, head of investor relations at Oyster, says those who recognise its potential and move promptly will be able to take advantage of the upside.

For more than 20 years, Oyster has provided Kiwis with access to a range of quality commercial property investment options, democratising an otherwise hard-to-access asset class by catering to those who can invest for as little as $10,000, through to wholesale investors.

Its portfolio of quality office, industrial, retail and large format retail properties valued at around $1.8 billion is managed by an in-house team of experts with deep sector knowledge.

As a landlord of choice, Oyster tenants experience the benefits of a dedicated property management team, which oversees every facet of the property lifecycle.

Millennium, Ellerslie, Auckland

“Oyster’s investment structures and hands-on approach are big drawcards for investors,” Harvie says.

Real estate, by nature, typically offers less immediate liquidity, especially during times of negative sentiment.

“While residential property is typically the more mainstream choice for New Zealanders, Oyster funds offer an alternative path to owning real estate that’s professionally managed, offers the potential for regular income and provides portfolio diversification at a point in the economic cycle that looks increasingly attractive.

However, its resilience shines through in the long run and, when incorporated into a diversified portfolio held long-term, investors only realise losses if they sell during downturns.

“It’s a way New Zealanders can gain access to a tangible, bricks-and-mortar investment, minus the administrative burden and the high barriers to entry associated with owning commercial property on your own.”

“When considering investments, its crucial to recognise that your manager’s expertise is as vital as the properties themselves.

Seasoned experts In recent years investment markets have experienced significant volatility and property has not been immune to these fluctuations.

With more than two decades of experience navigating multiple market cycles, Oyster provides invaluable insight and value to investors seeking exposure to commercial property.

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“Navigating the complexities of real estate investment requires a nuanced understanding of market dynamics,” Harvie says.

"This is precisely where Oyster’s seasoned team of experts excel."

“As the cycle transitions and the market begins to recover, Oyster is well positioned to capture growth opportunities not only within our existing portfolio but also through selective acquisitions and portfolio diversification.

“When it comes to commercial property, investors who maintain a long-term perspective and commit to regular investment throughout each phase of the cycle tend to outperform those investors who attempt to time the market."

To learn more about Oyster Property Group or to explore adding commercial property to your investment portfolio, scan our QR code or visit oystergroup.co.nz

Ready to unlock your site’s potential with a

Free Site Assessment?

YOUR HOUSE

YOUR OPPORTUNITY

Let us help you take the first step to gaining greater returns for your property.

With Ashcroft Homes’ Site Feasibility Assessment, you will discover what you can achieve on your site, including: What is permitted under your zoning and planning.

A proposed layout using Ashcroft Homes’ standard plans.

Review of the site and its development potential.

Indicative costs for the build, siteworks and subdivision.

Visit ashcrofthomes.co.nz or call us on 0800 377 588

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Fashion Update

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The colours and styles of winter 2024.

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1. Christian Louboutin Panaroot Dune – $2038, 2. R.M.Williams Draughtsman Overshirt – $349, 3. Levi’s Utility Zip Off Pants, – $169.90, 4. R.M.Williams Farrier Holdall, – $1049, 5. Timberland Abbot Road Waterproof Boot – $400, 6. COS Wool Jacquard Pants Slim – $250, 7. MYKITA STUDIO 12.1 sunglasses – $1170, 8. R.M.Williams Tweedale Rugby – $159, 8. Ahlem "Paris Future" AW24 Campaign, Simplon Opticals – $835 WI NTE R 2 0 2 4 | I N F O R M E D I NVESTO R 7 4

FA S H I O N

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1. Kathryn Wilson, Margot Loafer in Orchid Suede – $329, 2. Aēsop Tacit Eau de Parfum – $220, 3. Kowtow Zinnia Top – $259, 4. Birkenstock Kyoto – $400, 5. Kowtow Drape Pant – $189, 6. Scarpa Hawke black – $579, 7. twenty-seven names, TSN universe dress – $980, 8. MOSCOT Sheister Sun – $610, 9. CAMILLA AND MARC Majorelle Bodysuit – $420.00, CAMILLA AND MARC Parker Skirt – $540.00 WI NTE R 2 0 2 4 | I N F O R M E D I NVESTO R 7 5

I NVE ST I N YO U R S E L F

Here Comes the ‘Wolf’ Without Sheep’s Clothing The Amarok offers a blend of rugged capability, refined design and advanced technology, writes Liz Dobson.

It was only a decade ago that the ute was a vehicle only farmers or tradies used ... heaven forbid they were seen as a daily drive in the big smoke.

That all changed in 2014 with the launch of the Ford Ranger. That year went down in New Zealand’s motoring history, as Hilux lost its 32-year reign as the top-selling ute.

Since then, the Ranger has gone on to be the vehicle of choice for many city dwellers.

Instead of sheep or timber in the tray, urbanites swapped their SUVs for the Ranger as the mode of transportation for their mountain bikes.

The ute market was so strong that Mercedes-Benz launched its X-Class, but as a right-hand-drive vehicle only, it didn’t have the numbers needed to make it profitable.

But there was another European ute that did have the numbers and it’s an allrounder: the Volkswagen Amarok.

The ‘mud’ option The Pan American and Aventura diesel both have a three-litre V6 engine (184kW/600Nm) and selectable four-wheel-drive, including options such as “mud”.

The Aventura petrol has a 2.2-litre fourcylinder turbo (222kW/452Nm) and selectable four-wheel-drive, making it a lifestyle vehicle without having to pay the diesel road user charges.

The Amarok, which means “wolf” in the Inuit language, has been a success for VW Commercial NZ. First launched in 2016, the second-generation model was launched here last year as diesel only, but now a petrol version has been added.

“With cutting-edge design and Volkswagen refinement, the new ute brings with it a new level of safety and driver aids along with some great features that will make it exceptional to drive,” says Kevin Richards, general manager of Volkswagen Commercial Vehicles NZ.

Five models are now available, with diesels starting at the $67,000 Life, moving up to $77,500 for the Style. The Pan American is $95,000, while the Aventura is $96,000.

Boasting not only an impressive exterior, the significantly modified design delivers more double-cab space, a longer body, and towing capacity for daily use, while less overhang and greater fording depth increase the new generation Amarok’s off-road capabilities.

The petrol version of the Aventura is also priced at $96,000.

The Life has a two-litre four-cylinder diesel engine producing 125kW of power and 405Nm of torque paired with a six-speed transmission and 4MOTION part-time fourwheel-drive. The Style’s two-litre diesel is a four-cylinder twin-turbo (154kW/500Nm) with a 10-speed transmission, also with part-time four-wheel-drive.

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Preconfigured driving modes allow drivers to take on practically any challenge, with more than 30 driver-assist systems – 20 new to the Amarok – meaning adventures are tackled in the safest way possible.

With a robust chassis, versatile engine options and cutting-edge technology, the Amarok sets itself apart in the fiercely competitive

landscape of midsize utes in NZ. But there comes a twist when it comes to the top-selling Ranger and Amarok; they are motoring twins.

Dedicated team During the development of the new Amarok, Volkswagen Germany assigned a dedicated team of engineers to work alongside the Ranger team in Australia, with one significant difference: Ford and Volkswagen’s designers worked in isolation. That way each ute’s styling would be faithful to its parent brand.

And that shows when it comes to the Amarok. From the front, the bold lines and distinctive grille exude an aura of dominance, while the sleek LED headlights add a touch of modernity.

The muscular wheel arches seamlessly integrate with the body, underscoring the truck’s robust stature. Moving towards the rear, the sculpted tailgate, adorned with the iconic Volkswagen badge, enhances aesthetics and functionality.

The Amarok is a big beast at 5350mm long, 1910mm wide and 1886mm high, which are, of course, close to the Ranger’s dimensions.

Volkswagen’s legendary 4MOTION allwheel-drive system is engineered to conquer a myriad of terrains with confidence and

MOTORING

‘The second-generation was launched here last year as diesel only, but now there’s a petrol version.’

composure. Whether traversing rugged trails or navigating urban landscapes, the Amarok ensures exceptional traction and stability, enhancing on-road dynamics and off-road capability.

While both utes offer commendable performance and versatility, the Amarok sets itself apart with its premium interior appointments and sophisticated features.

to strike a balance between comfort and control, absorbs bumps with finesse, ensuring a smooth and composed ride.

Adventure element In terms of off-road capability, the Amarok holds its ground against the Ford Ranger, if not surpassing it. With a comprehensive suite of off-road aids and a proven track record of conquering challenging terrain, the Amarok instils confidence in drivers seeking adventure beyond the city roads.

Where the Amarok distinguishes itself is off the beaten path. Equipped with advanced off-road features, including hill descent control and an electronic differential lock, it tackles challenging terrain with confidence. As you can see from the photos, the diesel Amarok took on challenging terrain at Parihoa farm in Muriwai, West Auckland.

On bitumen the Amarok excels in delivering a refined driving experience, with precise handling and responsive steering. The suspension system, meticulously tuned

The robust construction and generous ground clearance enable the truck to surmount obstacles with ease, while the selectable driving modes cater to various

off-road conditions, empowering drivers to explore with confidence.

The Amarok emerges as a contender in the midsize ute market, offering a blend of rugged capability, refined design and advanced technology.

Whether navigating urban landscapes, such as your local supermarket, or venturing into the back blocks, the Amarok is ready to conquer every terrain with composure and a touch of European class.

Liz Dobson is the former motoring editor of the New Zealand Herald’s Driven publication and website. In 2020, she established AutoMuse.co.nz and in 2022 was made a judge for Women’s World Car of the Year.

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Photos: Liz Dobson

The ergonomically designed cabin, adorned with high-quality materials and intuitive controls, exudes luxury typically associated with upscale SUVs. Plus, there is Volkswagen’s latest infotainment system, complete with a responsive touchscreen interface and seamless smartphone integration, which ensures a connected driving experience.

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National Treasure Joanna Mathers enters a world of fine jewellery and high-end watches to discover the glittering history behind a very special anniversary.

Luxury is a parallel universe. Stepping from Queen St into Partridge Jewellers’ headquarters is transcendence – gritty inner city to rarified opulence.

It’s a cloudy Wednesday in Auckland and I’m meeting Grant Partridge. He’s the owner of New Zealand’s pre-eminent watch and jewellery retailer, and keen to chat about their 160-year anniversary – and the six generations of Partridges who’ve made it happen.

Partridge’s Rolex and Patek Philippe store is Monte Carlo-style luxe. I’m greeted by a besuited staff member, led up the grand staircase into the dining room and an opulent bar. I’m offered a hot drink.

Grant enters, takes a seat, and we talk about heritage.

The Partridge story spans hemispheres.

Grant’s great-great-great grandfather, James Partridge, ushered in the Partridge era when he erected a sign with the family name above his jewellers in the small market town of Kingsbridge, Devon.

It was 1864.

James Partridge had taken over a family business. He was a celebrated craftsman, with ambitions beyond the small town.

Many small business owners looking for a better life were heading south to the Antipodes in the 19th century so, in 1874, he and his family (wife, six children) boarded the SS Waipa and set sail for New Zealand.

Prized skills They made a home in the port town of Timaru. It was bustling and an opportune locale for a skilled jeweller; immigrants from the United Kingdom wanting a taste of the motherland. His talents were prized, he crafted medals, trophies and Masonic collars for those of local importance.

The passion for jewellery was passed on to his sons; Oswald and Roland WI NTE R 2 0 2 4 | I N F O R M E D I NVESTO R 7 8

founded jewellery stores in Timaru and Christchurch. But it was Linnaeus, the youngest son, who really made a mark.

Linnaeus had ambition and skill. He made the move to the North Island, setting up a Partridge jewellery store in Willis Street, Wellington.

He, too, was celebrated for his skills and sought after. The esteem with which he was held can be measured by a commission in 1908 – the crafting of a silver model of the ship Tutanekai for the prime minister and his wife, Sir Joseph and Lady Ward, on their silver wedding.

“I’ve got pictures of him working,” says Grant. “They had a big workshop of about 30 or 40 people making jewellery. In those days they used to make everything.”

The business was passed on to Linnaeus’ son Cecil (Grant’s grandfather), who passed it on to his son Ray (Grant’s father). It was from Ray that Grant learned the art of jewellery retailing.

School’s out Grant wasn’t particularly good at school.

“I went back from a second year in the sixth form and realised that I shouldn’t be there ... or the teachers told me I shouldn’t be there!”

His parents allowed him to leave at 16 and he was offered a job in a bank. But Ray could see where Grant really wanted to be.

“He said, ‘you really want to come work here, don’t you?’ I said, ‘yes, I’ve always wanted to work here’. So, I worked for my dad at 16, serving in the shop and doing all the menial jobs, the tough work. He was a tough taskmaster; he’d make people work hard, but I loved working for him. He was my idol.”

By the age of 21 he had his own store, and the ambition to move the business forward.

Ray retired in 1995, leaving Grant to run the business, and within three or four years “things started accelerating”.

While previous Partridges were all “jewellers at the bench” Grant’s talent was for creating and elevating customer experiences. He was also a visionary –

J EWE L L E RY

‘I have some of the best goldsmiths in the country working for me.’

especially Patek and Rolex. Some brands have ups and downs, but they are very stable.”

doesn’t feel those who invest in watches and jewellery are looking for Insta-ready moments, but personal enjoyment.

While the watches bring gravitas and economic security to the company, Grant’s passion is jewellery. Partridge has just hired a new French designer (“she is very clever”) and he says the jewellery team is exceptional. “We have some great people making the jewellery for us, they’re very good. I have some of the best goldsmiths in the country working for me.”

“The watches and jewellery that we sell give people pleasure. They are a reward, an object of desire. Or they may represent a challenge, a goal that someone has to work hard for,” he says.

Grant buys all the stones (“except diamonds, I have a person who does that because that’s a little bit more standard, there’s a grade and you buy that grade”).

He deals with gemstone merchants in Germany and Thailand and has just returned from a buying trip in Switzerland.

The next 18 months to two years will see a push into the engagement market.

“We have a lot of great things lined up.

I’m really looking forward to seeing what happens in this space.”

Social media Social media has seen brand recognition explode and while Grant says he doesn’t engage with this, he acknowledges brands have boomed in recent years. But he

The 160-year anniversary is a big deal and will be marked by “some very, very special pieces of one-off jewellery”. There will be a “grand finale” in mid-November, attended by people from around the world.

But the continuation of the family business may be the best celebration of all. Grant’s three sons are, or soon will be, working alongside him.

One of them currently runs the Rolex/ Patek Philippe store. Another, a lawyer, is going to join the business after time overseas. And his younger son, who works at PwC as a consultant, is also set to join.

“They’re all quite different. They all like the watches, but their girlfriends are all pushing them into the jewellery side of things,” he laughs.

able to predict trends and get ahead of the market.

Work of genius Gaining the rights distributions of Rolex and Patek Philippe watches, well before the brands were established in the public consciousness, was a work of genius.

There was no magic formula for securing the brands; he credits the acquisition to good manners, a positive attitude, and the company’s provenance.

“We were a family company; we had a long history. And we were a long way away and couldn’t do any [reputational] harm if we didn’t get it right!”

Watches are now the mainstay of Partridge (they have 18 brands) – Omega, Cartier, Breguet – and a raft of other exclusive offerings. This is fortuitous as the watches (especially Rolex and Patek) sell to a client base that isn’t generally affected by economic downturns.

“We’re very lucky that we went the watch brand way. Because in a tougher economy, certainly the watch brands still sell; WI NTE R 2 0 2 4 | I N F O R M E D I NVESTO R 7 9

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Luxury Inspiration for Winter Interior Designer Mary-anne Tobin, of Design Addiction, provides helpful ways to keep the fire alive in your home for a mid-winter glow up.

The latest fashion trends appear to have a pronounced weave. We can see a chevron and tartan trend is emerging from the latest Esmaee coats from Ruby Rose, in the Lyon and Celine fabrics.

This translates into our interiors as we start to see more cushions in tartan, stripes, and geometric grid/checkerboard patterns.

The colour palettes this winter appear to be a subtle contrast, so this winter is very tonal.

If you love refined lines, and understated tones, maybe this is the year you have been waiting for.

Custom creations Our options with home decor are unfortunately limited if buying off the shelf; I find myself going into stores and seeing the same items everywhere.

Now that the Covid home renovation boom is over, it may be a wise option to select custom fabrics for your interior accessories.

If you are the daring kind, maybe an international fabric would be more to your liking; it could take slightly longer, but also may be worth the wait.

I feel that somewhere along the years we have lost the ability to use our patience for great things (even I am like this). Therefore, we adapt to solutions that are quick and easy to purchase, rather than taking our time to play and experiment creatively.

Smaller upholstered pieces such as ottomans and bench seats are accessories that can create a cosy ambience in your home.

Custom upholstery is heavily underrated in my opinion. It can add dimension, shape, and customise your home to make it even more to your individual preference.

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Chanut upholstery from Casamance.

DESIGN ADDICTION

Hot tips for cool weather Eco standard There are many options being introduced into the market with recycled fabric compositions, which is great to see. Zepel Fabrics have a beautiful range labelled Zepel Eco Standard, meaning they must have at least 50 per cent recycled, or organic content, or a combination of both.

Seasonal candles

Adding a textured fabric can make an item a show piece. You can experiment by mixing and matching fabrics in similar tones, so the cushions align with the bench or ottoman without overdoing it.

Candles are a wonderful addition to any home. They help introduce a soothing aroma, and the flickering of flames creates a sense of ambience that is beautiful to watch, bringing a sense of ease and relaxation. Mecca has a beautiful range from Maison Margiela Replica; my favourite is the white musk scent, Lazy Sunday Morning fragrance. For a different note, try changing the scent with each season.

If you have a great designer, it all starts coming together. You may find people coming into your home and saying, “Oh look at this, it’s just so you!”

Latte tones As winter approaches, beautiful auburn, latte and copper tones set the scene for the coming winter months. With winter comes thicker textured fabrics, especially for the iconic New Zealand villa.

An easy solution to keep a villa snug and cosy can be as simple as a new rug and drapes.

Many villas have a heightened ceiling of three metres-plus, so it’s common to have custom curtains (off the shelf options may not provide the best solution, unfortunately).

James Dunlop has many beautiful fabrics in an array of collections (see above). The Banksia range is a stunning heavy fabric (it would keep any cold drafts at bay). I am also enjoying the Satori Stonewash by MOKUM collection – it’s a wide fabric, perfect for those larger drops needed for a high-stud home (see above right). With these new collections, choose a colourway that has dreamy latte tones, soft browns or caramels.

Detail, darling In previous articles I have mentioned a trend towards more organic and natural stone throughout our homes, and we are seeing more detailing when it comes to fireplace

Luxe winter warmers 1. Oversized sheepskin beanbag and racoon fur throw (Hawthorne Collections)

surrounds, both indoor and outdoor.

Everyone loves an outdoor entertainment area with a fireplace. There seems to be an emerging trend with barbecue smokers too.

Grilling a fine baby back rib is a hobby for many, so it’s important to accommodate this in your outdoor entertaining design.

In the Waikato we are fortunate to have the beautiful Hinuera natural stone as a resource.

Historically, we have seen the popularity of indoor conservatories, which are great as a sunroom (likely now to be converted into an additional room). However, over time these appear to have been replaced with an outdoor portico. One may ask, is there a better alternative?

Given the climate changes, we opt for to invest in an outdoor area that is suited to summer months that last three of the 12 months of the year.

2. Maison Margiela Replica, Lazy Sunday Morning candle. (Mecca) 3. Custom cushions (custom made to order at Design Addiction) 4. Lazlo chair in James Dunlop Fabric Fleece-colour merino. (David Shaw).

5. Esmaee Lyon or Celine Coat. (Ruby Rose, see above).

Sinking into merino I have always thought that if you have a unique side table, armchair and beautiful décor, this is what makes a space memorable. Almost like a bizarre science, the rule of three. To keep it cosy this winter, the James Dunlop Fleece Merino would be a wonderful fit for any furniture in need of a refresh – it sounds like wool, looks like wool, but is 100 per cent synthetic.

It adds so much texture and warmth to a space.

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Earn a fixed return of 11-12%p.a. with interest paid monthly secured by first mortgage Minimum investment of $100,000

Finbase provides private investors, family offices and high net worth individuals who meet relevant wholesale investor criteria an investment backed by First Mortgage Security.

Wholesale investors only

Investor security: Funds are utilised to provide First ranking mortgages to commercial borrowers for the purposes of short term property projects, maximum 12 month term of any loan.

No costs or fees deducted Returns are pre-tax

Maximum lending of 60% of property value.

Recently funded investments:

Fairfield, Hamilton

Takaka, Tasman

Westgate, Auckland

First mortgage security

First mortgage security

First mortgage security

Security description: Circa 90m² residential

Security description: Large residential home, on

Security description: Freehold section with a land

home on 776m² of freehold land

circa 1,240m² of freehold land

area of circa 200m² (Land only)

CV: $700,000

Purchase price: $365,000

CV: $565,000

Loan advance: $100,000

Loan request: $100,000

Loan request: $162,600

Loan to value ratio (LVR): 14%

Loan to value ratio (LVR): 27%

Loan to value ratio (LVR): 29%

Term: 12 months

Term: 12 months

Term: 12 months

Interest rate: 11%p.a. paid monthly in arrears

Interest rate: 12%p.a. paid monthly in arrears

Interest rate: 11%p.a. paid monthly in arrears

Purpose of funds: Fund renovations on the

Purpose of funds: Funds are being used to build

Purpose of funds: Equity release for business

property

an additional tiny home on the security property

purposes

Exit strategy: On-sell the property for profit

Exit strategy: Refinance to main bank to repay the

Exit strategy: Sale of the security asset to repay

debt upon completion of the tiny home

the debt

Finbase is proud to have never missed an investor interest payment nor suffered a single loss of investor capital.

We will cover your legal and accounting fees of up to $2,500 to discuss this investment opportunity with your professional advisors, with no obligation for you to invest after doing so.*

For investment opportunities contact our portfolio managers: Hayden Thompson

Pernell Callaghan

Jordan Evans

021 253 7816 hayden@finbase.nz

021 143 4291 pernell@finbase.nz

021 375 636 jordan@finbase.nz

For more information visit our website at www.finbase.nz Finbase is registered as a Financial Services Provider under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 of New Zealand. Its registered number is FSP1003560. *Terms and conditions apply. For marketing purposes the images are of suburb locations, not the specific property.