May 14, 2025 • 29 mins
Curious about investing in the US market in more ways than one?
In our latest episode of Shared Lunch, we explore a new KiwiSaver option, the Sharesies US500 Fund—what it is, how it works, and what role it might play as a part of your KiwiSaver. We also cover why global diversification matters, the recent US market wobbles, your risk appetite, and how to think about US investing as part of your long-term financial plan.
For more or to watch on YouTube—check out http://linktr.ee/sharedlunch
Sharesies Investment Management Limited is the issuer of the Sharesies KiwiSaver Scheme. For the Product Disclosure Statement and to find out more about the Sharesies KiwiSaver Scheme go to http://sharesies.nz/kiwisaver
Shared Lunch is brought to you by Sharesies Australia Limited (ABN 94 648 811 830; AFSL 529893) in Australia and Sharesies Limited (NZ) in New Zealand. It is not financial advice. Information provided is general only and current at the time it’s provided, and does not take into account your objectives, financial situation and needs. We do not provide recommendations and you should always read the disclosure documents available from the product issuer before making a financial decision. Our disclosure documents and terms and conditions—including a Target Market Determination and IDPS Guide for Sharesies Australian customers—can be found on our relevant Australian or NZ website.
Investing involves risk. You might lose the money you start with. If you require financial advice, you should consider speaking with a qualified financial advisor. Past performance is not a guarantee of future performance.
Appearance on Shared Lunch is not an endorsement by Sharesies of the views of the presenters, guests, or the entities they represent. Their views are their own.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:03):
Kyoda.
Speaker 2 (00:04):
Welcome to Shared Lunch, brought to you by Chase's. My
name is Halen Madison. We're looking at two things today.
The first is the new Chasy's US five hundred key
we Save fund, and given that, what is the state
of the US markets. I'll be joined by Christa Leiba,
the head of Global and multi asset Investments at Harbor
(00:25):
Asset Management, and by our very own Chaza's head of
super and Funds, Matt McPherson. But before we get started,
here's some important information.
Speaker 3 (00:34):
Investing involves the risk you might lose the money you
start with. We recommend talking to a licensed financial advisor.
We also recommend reading product disclosure documents before deciding to invest.
Everything you're about to see and here is current at
the time of record.
Speaker 1 (00:48):
Welcome Chris and welcome Matt to the program.
Speaker 4 (00:51):
Thanks Hellen.
Speaker 2 (00:52):
Chair Za's has just launched its own US five hundred fund,
which is managed by Vanguard and tracks the famous S
and P five hundred. Matt, that's been pretty popular. What
is it about this fund that that is so popular?
Speaker 5 (01:08):
Yeah, really popular with our investors. The single most popular
option on Chersey's and I guess there's a few reasons that.
The first is it's a great way of getting exposure
to those large US companies without having to go through
and pickstocks yourself. So it comes with diversification because it's
(01:31):
over five hundred companies in the index. I guess. The
other point is that ETFs tend to be much lower
cost than say a managed fund, So there's sort of
combination of reasons that they are really really popular.
Speaker 2 (01:48):
Chris, the US markets have been up and down, as
we know, Tariffs are on, they're off, they're paused all
over the show, and there's been a concern about the
US economy investing in US stocks. Now, what would you
say investors need to think about?
Speaker 4 (02:03):
So far this year, it has been all about tariffs,
but there are actually some other things that might be
slipping under the radar a little bit for investors because
the talk has been so dominated by tariffs. And something
I draw out is that we're in the midst of
the US earning season. Currently, we've had ninety percent of
companies report, We've had seventy seven percent of those companies
(02:27):
beat consensus earnings expectations, So a lot of your viewers
will be thinking that well from the early part of April.
Actually markets have bounced back quite substantially. One of the
key reasons for that has been the earning season, but
it's it's also been the outlook statements from the companies
that we've seen. Outlook statements have actually been relatively strong,
(02:53):
a lot of resilience shown in the face of what
is quite an uncertain tariff environment. Coming in to the year,
the US market was expected to grow quite substantially. We
had the average price target the S and P five
hundred b substantially in the double digits from most south
(03:14):
side brokers. Obviously, what we've seen so far has been
a little bit disappointing, and part of that is a
reflection of where the economic data is lay. So so
far this year, the US has slowed down. In the
first quarter, it looked to be slowing down quite markedly.
So we have some real time measures of US GDP
(03:37):
like the GDP now measure, and that came down quite substantially. Subsequently,
though it's bounced back, So what we're seeing in the
US is a slow down, but actually from a relatively
high level. Now with tariffs, who knows is the real
comment there? We will see ebbs and flows, but what
(03:59):
I can point out over the last month is that
we've gone from a point we're thinking that this is
going to be absolutely disastrous and we're going to have
extremely high tariffs to the direction of travel being one
that's quite incrementally positive. But it is President Trump, and
we know that it can be unpredictable and that can
(04:20):
unsettle markets a bit. But I just don't think it's
all about tariffs. Take into account that the US economy
is slowing but not too bad, and earnings remain to
be resilient, and for long term investors, share prices tend
to follow earnings through time.
Speaker 1 (04:36):
Matt.
Speaker 2 (04:37):
When we look at the US five hundred fund that
Cheesy's has launched, this is a key we saber fund.
This is not just a fun that you can jump
into on your Cheesys app if you like. That's a
bit different pretty much to what has been out there. Now.
Speaker 1 (04:53):
Can you tell us how significant that changes.
Speaker 5 (04:57):
There are a few other key saber funds that allow
you to invest into the SMP five hundred already. I
guess what differentiates it from some of the other funds
that we offer, though, is that it's one hundred percent
invested into equities, so it comes it's classified as an
aggressive option, it comes with a higher risk indicator, which
(05:23):
means higher volatility people need to be comfortable with, and
it comes with the potential of higher returns over the
long term. Now, before we launched this fund, we actually
prioritize to feature that enables people to split their key
saver across multiple base funds. And the reason we did
(05:44):
that is because people said they wanted to invest more
than five percent of their kivsaver into the S and
P five hundred.
Speaker 1 (05:51):
And that five percent is that because that's what the scheme.
Speaker 5 (05:54):
Has been a self select option since we launched our
scheme a couple of years ago. They won more than
five but they don't necessarily want to invest one hundred
percent of their kipsaver into a fund that only invests
in US equities. And that's how we're seeing it used
so far. People are generally adding some US five hundred
to their investment plan rather than replacing their managed fund
(06:17):
provider completely.
Speaker 1 (06:19):
So is that how it works.
Speaker 2 (06:20):
You actually need to be able to just you could
go one hundred percent. You obviously can go more than
five percent, which you can now with self select, but
you can't actually with self select invest in the US
can you?
Speaker 5 (06:32):
Yet you can via some of the inside x ETFs
that we offer.
Speaker 2 (06:37):
Chris, what do you think the risks are for investors
thinking about the US markets? You've said that things look
pretty positive yues has been a bit of a slow down.
Some of those companies are really well established, you know,
big balance sheets, all of that sort of thing, compared
to what's happening in Australasia. Anyway, there's still always risk
(06:58):
and there's volatility. So I suppose it depends on someone's appetite.
What would you say?
Speaker 4 (07:02):
Yeah? So one of the rests I draw out is
when you're investing in the US market, you're inheriting US
dollar exposure as well. So the US share market may
go really really well, but investors have to be prepared
for the potential outcome that currency, particularly over the shorter term,
might move things around a bit. So you could have
(07:24):
a scenario we are investing in the US market, US
market's done ten percent, you might be thinking your key
we save has done quite well. However, it could be
during a period where the US dollar is weakened and
if the US dollars a weekends by ten percent by
the time that is in New Zealand dollars, that that
would be a flat sort of return. Look, that's not
(07:47):
my base case by any means, but it's simply saying
that there are two key levers in this investments, how
the shares do, but also the currency on the US
market overall. It's the world's biggest market for a reason.
There's the key global share indices that people use tend
to have a sixty to sixty five percent allocation to
(08:09):
the US. So I wouldn't look at its risk profile
as being that different than say a global share fund.
There are some geographical considerations you need to take into account. Obviously,
the US market will have sensitivities more to US policy.
There can also be events that hit the US harder
(08:32):
than other economies around the world. So those are just
a few things to take into account when looking at
a fund of that nature.
Speaker 2 (08:39):
Even so, Matt, given what has been happening in the
US and the level of volatility, there would be some
viewers and listeners probably thinking is my key we say
was safe if I start investing even a proportion of
it in the US.
Speaker 5 (08:54):
Of For sure, I think one thing that gives me
a bit of confidence is there. There's a lot of
uncertainty and change at the moment. We all appreciate that.
I think if you go back in time, we would
often say that same thing. At the moment, things feel
very uncertain. And what we find is over time, those big,
(09:14):
well run, successful American companies there's a lot of energy
that comes from that and a lot of focus on
solving problems. So one of the reasons these companies have
become successful is because they are really good at solving
hard problems. And so I guess I take a little
bit of confidence that we've got some focus and some
(09:35):
very big brains working on how to solve whatever the
problem of the day is. And at the moment, it
feels like the problem of the day is maybe some
of the policies that's coming out of the States. But
go back a couple of years ago, we also had
at the time probably what felt like equally or even
larger issues with things like the pandemic. And this is
repeated over time.
Speaker 4 (09:56):
Matt. It's quite interesting. I was talking to a US
invest or the other and we're talking about this very thing,
and he said to me, just imagine that you were
sitting there in twenty nineteen and someone came up to
you and said, over the next five years, you're going
to have a global pandemic, so you're all going to
be locked down for months on end. Then once we
(10:18):
get out of it, you're going to have the worst
inflation that you've had in recorded history. Then we're going
to increase interest rates by the most that we ever
have in history, and the response to that will be
a second bear market? And what sort of return would
you expect over that time? And you kind of go, well,
(10:40):
that's a lot to put into five years, And the
answer is returns have actually been above average over that time. So,
I mean the lesson in that for me is that
sometimes when you look at the headlines, you can go, look,
this is really scary, But the reality is, is it
more or less scared than a pandemic, two or three
(11:02):
bear markets depending on the time, and the highest inflation
and interest rates ever, that probably seems a little bit
light or even on par relative to those particular events.
Speaker 5 (11:15):
Yeah, I guess that's why understanding your investment horizon is
probably the most important thing you can do before you're
making any decisions, because in any one of those situations.
If you were thinking short term, you probably would have
been really upset, and if you're thinking long term, you
probably would be you know, you're feeling confident that you've
made the right decisions.
Speaker 2 (11:36):
There are some fund managers in Europe and the Light though,
who have been pulling back a bit, not pulling out
of the US markets. They're still in there, but they
have been just gradually pulling back because they've been feeling
a bit skittish about the Trump administration and they are
actually thinking that structurally their allocation will be somewhat different.
And this may be a longer term thing because it
(11:56):
will happen gradually over time.
Speaker 1 (11:58):
Chris, just keen for your on that.
Speaker 4 (12:01):
Yeah, so starting point matters in this discussion because coming
into twenty twenty five, foreign ownership of US shares was
at all time highs. And if we think about the
narrative coming into twenty twenty five, it's that the US
has got the best companies at the forefront of AI
economy is chugging away really, really well. And it's actually
(12:25):
the reversal of some of those themes as opposed to
Donald Trump himself that's actually driving and it's not in
the figures I've seen is that they're certainly not leaving
in their droves. I would more classify it as being
they've gone from an overweight position and a very optimistic
view of the market to probably nearer to longer term benchmarks. So,
(12:49):
as I said, it's not all Trump. Deep seek was
a really big factor in this. So we had coming
into the year this deep consensus that the U US
is just going to completely own AI. China won't get
a look in because the US cut off the fastest
chips are to China. Now they're able to innovate. I
(13:10):
don't know how, it doesn't really matter how. The fact
is they're there. They're a player. It's not just Deep Secrets.
It's Baidu, it's ten Cent, it's Ali Barber. So that
has been one of the reasons why we've seen some
investor interest go away from the US. The other is
(13:31):
what's happening in Europe at the moment. Now we're actually
starting to see some fiscal impulse in Europe, so we've
had some budget relaxation rules within the EU. It means
that Germany has past a spending package that is going
to pump a lot of stimulus into their economy. We're
(13:53):
starting to see at the margin a little bit more
stimulatory policy from France and Italy as well. So this
is from economies that have been in austerity for the
past fifteen years. So that has been a fundamental change
which has led people to reduce their overweight positions from
(14:14):
the US. I think we've just gone from a point
where investors thought that the US was probably just their
only choice or their best choice, to one where people
are looking at Europe saying, look, valuations are a bit
more reasonable over there, and actually things perhaps weren't as
bad as we thought overall.
Speaker 2 (14:33):
Are we seeing those fund managers in Europe particularly okay,
they might be investing in their own or they might
be investing in, say, Asian markets.
Speaker 1 (14:41):
What do you think of that?
Speaker 4 (14:42):
I think where the tide has rarely turned, as in
China and Hong Kong stocks. You'll remember the narrative around
just the past couple of years actually, of many people
questioning whether these stocks are investable or not. The latest
starter we're seeing is that investors are starting to go
(15:03):
back over there. Why well, we're starting to see a
little bit of stimulus come out of China. They know
that Trump's tariffs are going to be a big challenge
on their economy, so they're meaningfully pumping the accelerator when
it comes to stimulus in their economy. And actually the
other thing too is the stocks there are cheap. Now,
(15:26):
if we are to draw one criticism of the US market,
it is that the valuations in the market are relatively high.
So investors might look at some of the companies in
Asia and go, well, actually, relative valuation wise, although there's risks,
I'm happy to step in.
Speaker 1 (15:44):
Now.
Speaker 2 (15:45):
If we get back to the US five hundred fund
that she has launched. You said it was the most
popular feature that we've been asked for for key we Saver,
But are people putting me their money where their mouths?
Are they actually investing and deciding that will use this
for Keysaber.
Speaker 5 (16:02):
Yeah, we launched about a week ago. We've seen quite
a good response on people switching to our scheme. We've
also seen a lot of our members add the US
five hundred fund to their investment plans or rebalance their
portfolios to include more of it. And the third group
we've seen is around ten percent of the people who
(16:24):
have signed up in that last week haven't been in
key SABER before. And that's really interesting because I think
through a combination of great experience and access to a
wide range of product, we're managing to engage people who
for whatever reason, have not been part of KISABER in
the past. And what we see is that a lot
(16:46):
of these people are self employed.
Speaker 2 (16:48):
Of course, just thinking about other SCA classes, we've focused
on shares predominantly in this conversation, What about bonds?
Speaker 1 (16:56):
What about gold that's having another resurgence.
Speaker 2 (17:00):
Are you seeing with global investors and investors here at
home even thinking about other asset classes beyond equities?
Speaker 4 (17:09):
Yeah, so bond yeards been attractive for some time. We
saw as the market was really worried about tariffs, we
saw bond yields fall quite substantially, so they got down
to around three point eight percent for the US ten
year yield, So that provided a bit of a cushion
as shares were falling quite substantially over that time. Since then,
(17:32):
we've actually seen a bounce back up, and part of
that is just around the worry that the market has
around the amount of debt that the US might need
to raise and the more supply of bonds. Obviously that
puts pressure on bond yields, So the returns there have
been okay. I still think on a go forward basis
(17:55):
they look relatively attractive. Gold has been an interesting one,
and I suspect part of the resurgence that we've seen
in gold is there has been an uptick in the
US and inflation expectations. So there's a University of Michigan
measure where they go out and survey people and go,
(18:18):
you know, what do you think inflation will be over
particular timeframes. Now that measure for the five to ten
year inflation is at the highest level since the mid nineties,
So inflation expectations out there are quite high. So people
are looking at what are the inflation hedges that I
(18:40):
convest in, and gold through time has proven to be
quite a solid inflation hedge for people. I think the
other aspect, too, is there is some talk around about
the US continuing to be the world's global reserve currency.
I think that's been over egged a little bit. I
(19:01):
think the US has a very solid position as continuing
to be the world's reserve currency. But at these times
where you talk about tariffs, you can sometimes get these
narratives taking on a life of their own. So I
think that has led people to say, okay, well, let's
diversify our holdings a bit. We'll have some holdings in
(19:22):
US dollars, holdings in euro, holdings in Japanese yen, which
is a popular safe haven currency, but let's also have
an allocation to gold as well. And that really skyrip,
isn't it?
Speaker 1 (19:36):
Just thinking about more modern asset classes.
Speaker 2 (19:39):
If you like crypto, do you see a time when
people be able to put their key we save it
into crypto in the same way that we're offering the
share options.
Speaker 5 (19:47):
Yeah, I mean right at the moment, we're looking at
us self select, which is the next chapter after the
US five hundred fund for us with our product, and
you know, we're trying to work out what to include.
We start with a principle that we want to provide
as much access as we can and let our members
(20:07):
decide on where to put their own money. And so
the crypto ETFs that have launched, they are widely held,
there is a lot of liquidity. Some of them have
actually considerably lower volatility than some of the big name companies,
say at the top of the S and P five
hundred list. So I think it's a really good argument
(20:29):
to say, maybe via an ETF, that crypto should be
something that people can allocate. Again, with our guardrails kind
of process built into our product, that may be up
to five percent of your portfolio with exposure to crypto
is something that someone can make a choice about rather
than us making that choice.
Speaker 4 (20:49):
For Matt, what's interesting with cryptocurrency is the trends that
we're seeing come out of the US with regards to this.
So you mention ETFs, well, what that has enabled is
for people to have a really safe way to get
exposure to cryptocurrency. That's actually helped enable better institutional participation
(21:12):
in the cryptocurrency market. So it's interesting in the US,
You've got the likes of Yale Harvard who have said
that they have exposure to cryptocurrencies. You're also starting to
see kind of state pension funds and even some sovereign
wealth funds participate. To be honest, i'm surprised, you know,
(21:34):
back in many years ago, I kind of looked at
it and didn't quite get it. But it really has
come a long way in terms of just who can participate, accessibility,
but also institutional support for the sector as well.
Speaker 2 (21:50):
Matt, So how long before we might see self select
stocks individual stocks in the US being available for people
in their key we say a scheme.
Speaker 5 (21:57):
Well, the good thing is, in order to launch the
US five hundred fund, a lot of the hard work,
I suppose the infrastructure is in place for us. So
that is our next priority that we've started actively working
on now, as you self select won't put absolute time
on it because it's really important that we go through
(22:19):
our testing and validation steps and get this right before
we release it. Current best estimate is I think middle
of the year.
Speaker 2 (22:28):
What about things like private equity, because it's pretty popular infrastructure,
that kind of thing.
Speaker 5 (22:33):
Yeah, private equity has been really topical in twenty twenty five,
and for good reason. If we look at Ossie, which
we always do because they had a fifteen year head
start on us with superannuation, their super funds have a
much higher exposure to private assets. They're super funds are
investing in anything from large infrastructure projects to small startup companies.
(23:00):
We tend to be a little bit less adventurous in
New Zealand at this stage, but there's a lot of
talk about it, and I think there's actually a lot
of will we need to overcome some of the challenges
with regard to valuations and liquidity because that's tough for
private companies. But yeah, I'm confident. I think as kwisaver
(23:21):
continues to mature, that'll happen. We're at that kind of
tipping point at the moment where these things start becoming
really viable for super funds.
Speaker 2 (23:30):
We've got the budget coming up. There is if you like,
rumors that the government might cut its contribution, which is
five hundred plus dollars a year. Chris, do you think
that's going to have any effect at all.
Speaker 4 (23:44):
I'm not sure it will on Kiwi saber participation because
key We Saber fulfills a few key functions.
Speaker 3 (23:52):
You know.
Speaker 4 (23:52):
One, it's really well regulated and people get accessed to
a wide range of investments, right, some lower cost and
more passive and some high cost and more active. So
I think it's working really well in Most people I
talk to are really positive about key We Saver. Second,
(24:13):
obviously you still get your employer contribution, which as meaningful
might not be quite as high as Australia, but it's
still meaningful for people. So I think overall it would
be a shame. Don't get me wrong to see changes,
because I think what makes schemes popular is actually when
(24:34):
they're largely left alone by politicians so people can invest
with confidence.
Speaker 5 (24:40):
Might take almost sorry, Chris, I must take the opposite here.
I think we're overdue for a policy review KEYSAB. We're
only a tiny little scheme, but I think we've tried
to be as vocal as we can. I'll come back
to agreeing with Chris now. With the government contribution is
that it's not targeted anyway, and what I'd like to
(25:00):
see actually is targeted and targeted at the people that
are being left behind. And I mentioned self employed before,
and you mentioned the kickstart and children. The fact that
the government contribution is not available to anyone under eighteen
seems contrary to good sense, which would be to get
people involved in QPSAB as early as possible and incentivize that,
(25:23):
and incentivize people who are self employed because they are
not receiving having if they receive an employer contributions coming
out of their own pocket twice and so you know,
there's I think let's have a look at the policy settings.
But I do take your point that the more that
you that you kind of mess around with it, So
(25:44):
any changes need to be really well signaled.
Speaker 4 (25:47):
Oh look, and I'm more thinking about messing with it
in a negative way, and if want to mess with
it in a positive way around higher contributions.
Speaker 1 (25:56):
We've actually looked at that ourselves, haven't We met.
Speaker 5 (25:59):
What we heard when we got involved in kvsaver is
industry saying that contributions need arise, and we heard the
Retirement Commission say largely the same thing. But the voice
that was kind of missing from that was the people
who were going to have to make the higher contributions,
and that's you and me, that's the members. So we
(26:22):
went out and asked a bunch of our investors, not
our necessarily our KIV saver members, but just people on
the Cheesies platform. It was overwhelming how many people said,
I get it. I'd prefer to have a little bit
less in my take home this week in order to
have more retirement. It was seventy eight percent who supported
that idea, which is phenomenal because it's counter to everything
(26:47):
that we assumed people would think, Like at the height
almost of the cost of living crisis.
Speaker 2 (26:56):
Chaps, we probably need to wrap it up there, just
wondering what would you like to see with key We
savor on terms of innovation in the near turn, not
so much the long term the near term.
Speaker 4 (27:08):
So I think the private asset discussions really interesting. It's
one where I think we need a little bit of
a mindset shift around fees. For example, is one of
them right? You know, these are more expensive assets to
get your hands on, but they can come with a
(27:29):
higher reward as well. I think the other part of that, too,
is that there is a global trend of companies staying
private for longer, and we see companies realizing more of
their value in the private markets in many cases than
they do in the public markets. I also saw a
stat the other day, and I won't get the percentage
(27:52):
completely right, but the amount of companies valued over one
hundred million dollars in the uses that are private versus
public is something like three or four to one. So
when we look at our investments, why do we have
all of it in the area that has less exposure.
(28:14):
We've got companies out of New Zealand like Crimson Education,
Black Halter. We've got companies that are really starting to
be relevant on the global stage. We've seen a few
of them even acquired this year, so that's global investors
going I want to slice of that company. So I'd
love to see that development further, and hopefully as an industry,
(28:36):
we can get together, navigate the challenges, and just make
it happen.
Speaker 5 (28:40):
I guess as an innovator, we're asked all the time
who we're competing against, who do we see as our
biggest threat, And the answer is consistently just apathy. It's
just that whole thing that people don't think about their kipisaver.
They'll put more time into thinking about what they're can
(29:00):
have for tonight, then they will about where their retirement
is invested, and no matter who it's invested, I just
want people to just to try and give that a
little bit more time. I guess the innovation is important
because it comes along from time to time and maybe
it helps people to consider. So I don't not really,
(29:23):
I don't have a strong place on where the innovation
comes from. I just want to see it continue so
that people will continue to engage a little bit more
with their retirement savings.
Speaker 1 (29:31):
Yep, I think everyone would like to see that.
Speaker 2 (29:34):
Thanks both of you for being with us today and
thanks to you for joining us You can watch shed
Lunch on YouTube or listen on your favorite podcast app.
Leave us a rating and tell us what you'd like
to hear next. Ma Tawa
Kyoda.
Speaker 2 (00:04):
Welcome to Shared Lunch, brought to you by Chase's. My
name is Halen Madison. We're looking at two things today.
The first is the new Chasy's US five hundred key
we Save fund, and given that, what is the state
of the US markets. I'll be joined by Christa Leiba,
the head of Global and multi asset Investments at Harbor
(00:25):
Asset Management, and by our very own Chaza's head of
super and Funds, Matt McPherson. But before we get started,
here's some important information.
Speaker 3 (00:34):
Investing involves the risk you might lose the money you
start with. We recommend talking to a licensed financial advisor.
We also recommend reading product disclosure documents before deciding to invest.
Everything you're about to see and here is current at
the time of record.
Speaker 1 (00:48):
Welcome Chris and welcome Matt to the program.
Speaker 4 (00:51):
Thanks Hellen.
Speaker 2 (00:52):
Chair Za's has just launched its own US five hundred fund,
which is managed by Vanguard and tracks the famous S
and P five hundred. Matt, that's been pretty popular. What
is it about this fund that that is so popular?
Speaker 5 (01:08):
Yeah, really popular with our investors. The single most popular
option on Chersey's and I guess there's a few reasons that.
The first is it's a great way of getting exposure
to those large US companies without having to go through
and pickstocks yourself. So it comes with diversification because it's
(01:31):
over five hundred companies in the index. I guess. The
other point is that ETFs tend to be much lower
cost than say a managed fund, So there's sort of
combination of reasons that they are really really popular.
Speaker 2 (01:48):
Chris, the US markets have been up and down, as
we know, Tariffs are on, they're off, they're paused all
over the show, and there's been a concern about the
US economy investing in US stocks. Now, what would you
say investors need to think about?
Speaker 4 (02:03):
So far this year, it has been all about tariffs,
but there are actually some other things that might be
slipping under the radar a little bit for investors because
the talk has been so dominated by tariffs. And something
I draw out is that we're in the midst of
the US earning season. Currently, we've had ninety percent of
companies report, We've had seventy seven percent of those companies
(02:27):
beat consensus earnings expectations, So a lot of your viewers
will be thinking that well from the early part of April.
Actually markets have bounced back quite substantially. One of the
key reasons for that has been the earning season, but
it's it's also been the outlook statements from the companies
that we've seen. Outlook statements have actually been relatively strong,
(02:53):
a lot of resilience shown in the face of what
is quite an uncertain tariff environment. Coming in to the year,
the US market was expected to grow quite substantially. We
had the average price target the S and P five
hundred b substantially in the double digits from most south
(03:14):
side brokers. Obviously, what we've seen so far has been
a little bit disappointing, and part of that is a
reflection of where the economic data is lay. So so
far this year, the US has slowed down. In the
first quarter, it looked to be slowing down quite markedly.
So we have some real time measures of US GDP
(03:37):
like the GDP now measure, and that came down quite substantially. Subsequently,
though it's bounced back, So what we're seeing in the
US is a slow down, but actually from a relatively
high level. Now with tariffs, who knows is the real
comment there? We will see ebbs and flows, but what
(03:59):
I can point out over the last month is that
we've gone from a point we're thinking that this is
going to be absolutely disastrous and we're going to have
extremely high tariffs to the direction of travel being one
that's quite incrementally positive. But it is President Trump, and
we know that it can be unpredictable and that can
(04:20):
unsettle markets a bit. But I just don't think it's
all about tariffs. Take into account that the US economy
is slowing but not too bad, and earnings remain to
be resilient, and for long term investors, share prices tend
to follow earnings through time.
Speaker 1 (04:36):
Matt.
Speaker 2 (04:37):
When we look at the US five hundred fund that
Cheesy's has launched, this is a key we saber fund.
This is not just a fun that you can jump
into on your Cheesys app if you like. That's a
bit different pretty much to what has been out there. Now.
Speaker 1 (04:53):
Can you tell us how significant that changes.
Speaker 5 (04:57):
There are a few other key saber funds that allow
you to invest into the SMP five hundred already. I
guess what differentiates it from some of the other funds
that we offer, though, is that it's one hundred percent
invested into equities, so it comes it's classified as an
aggressive option, it comes with a higher risk indicator, which
(05:23):
means higher volatility people need to be comfortable with, and
it comes with the potential of higher returns over the
long term. Now, before we launched this fund, we actually
prioritize to feature that enables people to split their key
saver across multiple base funds. And the reason we did
(05:44):
that is because people said they wanted to invest more
than five percent of their kivsaver into the S and
P five hundred.
Speaker 1 (05:51):
And that five percent is that because that's what the scheme.
Speaker 5 (05:54):
Has been a self select option since we launched our
scheme a couple of years ago. They won more than
five but they don't necessarily want to invest one hundred
percent of their kipsaver into a fund that only invests
in US equities. And that's how we're seeing it used
so far. People are generally adding some US five hundred
to their investment plan rather than replacing their managed fund
(06:17):
provider completely.
Speaker 1 (06:19):
So is that how it works.
Speaker 2 (06:20):
You actually need to be able to just you could
go one hundred percent. You obviously can go more than
five percent, which you can now with self select, but
you can't actually with self select invest in the US
can you?
Speaker 5 (06:32):
Yet you can via some of the inside x ETFs
that we offer.
Speaker 2 (06:37):
Chris, what do you think the risks are for investors
thinking about the US markets? You've said that things look
pretty positive yues has been a bit of a slow down.
Some of those companies are really well established, you know,
big balance sheets, all of that sort of thing, compared
to what's happening in Australasia. Anyway, there's still always risk
(06:58):
and there's volatility. So I suppose it depends on someone's appetite.
What would you say?
Speaker 4 (07:02):
Yeah? So one of the rests I draw out is
when you're investing in the US market, you're inheriting US
dollar exposure as well. So the US share market may
go really really well, but investors have to be prepared
for the potential outcome that currency, particularly over the shorter term,
might move things around a bit. So you could have
(07:24):
a scenario we are investing in the US market, US
market's done ten percent, you might be thinking your key
we save has done quite well. However, it could be
during a period where the US dollar is weakened and
if the US dollars a weekends by ten percent by
the time that is in New Zealand dollars, that that
would be a flat sort of return. Look, that's not
(07:47):
my base case by any means, but it's simply saying
that there are two key levers in this investments, how
the shares do, but also the currency on the US
market overall. It's the world's biggest market for a reason.
There's the key global share indices that people use tend
to have a sixty to sixty five percent allocation to
(08:09):
the US. So I wouldn't look at its risk profile
as being that different than say a global share fund.
There are some geographical considerations you need to take into account. Obviously,
the US market will have sensitivities more to US policy.
There can also be events that hit the US harder
(08:32):
than other economies around the world. So those are just
a few things to take into account when looking at
a fund of that nature.
Speaker 2 (08:39):
Even so, Matt, given what has been happening in the
US and the level of volatility, there would be some
viewers and listeners probably thinking is my key we say
was safe if I start investing even a proportion of
it in the US.
Speaker 5 (08:54):
Of For sure, I think one thing that gives me
a bit of confidence is there. There's a lot of
uncertainty and change at the moment. We all appreciate that.
I think if you go back in time, we would
often say that same thing. At the moment, things feel
very uncertain. And what we find is over time, those big,
(09:14):
well run, successful American companies there's a lot of energy
that comes from that and a lot of focus on
solving problems. So one of the reasons these companies have
become successful is because they are really good at solving
hard problems. And so I guess I take a little
bit of confidence that we've got some focus and some
(09:35):
very big brains working on how to solve whatever the
problem of the day is. And at the moment, it
feels like the problem of the day is maybe some
of the policies that's coming out of the States. But
go back a couple of years ago, we also had
at the time probably what felt like equally or even
larger issues with things like the pandemic. And this is
repeated over time.
Speaker 4 (09:56):
Matt. It's quite interesting. I was talking to a US
invest or the other and we're talking about this very thing,
and he said to me, just imagine that you were
sitting there in twenty nineteen and someone came up to
you and said, over the next five years, you're going
to have a global pandemic, so you're all going to
be locked down for months on end. Then once we
(10:18):
get out of it, you're going to have the worst
inflation that you've had in recorded history. Then we're going
to increase interest rates by the most that we ever
have in history, and the response to that will be
a second bear market? And what sort of return would
you expect over that time? And you kind of go, well,
(10:40):
that's a lot to put into five years, And the
answer is returns have actually been above average over that time. So,
I mean the lesson in that for me is that
sometimes when you look at the headlines, you can go, look,
this is really scary, But the reality is, is it
more or less scared than a pandemic, two or three
(11:02):
bear markets depending on the time, and the highest inflation
and interest rates ever, that probably seems a little bit
light or even on par relative to those particular events.
Speaker 5 (11:15):
Yeah, I guess that's why understanding your investment horizon is
probably the most important thing you can do before you're
making any decisions, because in any one of those situations.
If you were thinking short term, you probably would have
been really upset, and if you're thinking long term, you
probably would be you know, you're feeling confident that you've
made the right decisions.
Speaker 2 (11:36):
There are some fund managers in Europe and the Light though,
who have been pulling back a bit, not pulling out
of the US markets. They're still in there, but they
have been just gradually pulling back because they've been feeling
a bit skittish about the Trump administration and they are
actually thinking that structurally their allocation will be somewhat different.
And this may be a longer term thing because it
(11:56):
will happen gradually over time.
Speaker 1 (11:58):
Chris, just keen for your on that.
Speaker 4 (12:01):
Yeah, so starting point matters in this discussion because coming
into twenty twenty five, foreign ownership of US shares was
at all time highs. And if we think about the
narrative coming into twenty twenty five, it's that the US
has got the best companies at the forefront of AI
economy is chugging away really, really well. And it's actually
(12:25):
the reversal of some of those themes as opposed to
Donald Trump himself that's actually driving and it's not in
the figures I've seen is that they're certainly not leaving
in their droves. I would more classify it as being
they've gone from an overweight position and a very optimistic
view of the market to probably nearer to longer term benchmarks. So,
(12:49):
as I said, it's not all Trump. Deep seek was
a really big factor in this. So we had coming
into the year this deep consensus that the U US
is just going to completely own AI. China won't get
a look in because the US cut off the fastest
chips are to China. Now they're able to innovate. I
(13:10):
don't know how, it doesn't really matter how. The fact
is they're there. They're a player. It's not just Deep Secrets.
It's Baidu, it's ten Cent, it's Ali Barber. So that
has been one of the reasons why we've seen some
investor interest go away from the US. The other is
(13:31):
what's happening in Europe at the moment. Now we're actually
starting to see some fiscal impulse in Europe, so we've
had some budget relaxation rules within the EU. It means
that Germany has past a spending package that is going
to pump a lot of stimulus into their economy. We're
(13:53):
starting to see at the margin a little bit more
stimulatory policy from France and Italy as well. So this
is from economies that have been in austerity for the
past fifteen years. So that has been a fundamental change
which has led people to reduce their overweight positions from
(14:14):
the US. I think we've just gone from a point
where investors thought that the US was probably just their
only choice or their best choice, to one where people
are looking at Europe saying, look, valuations are a bit
more reasonable over there, and actually things perhaps weren't as
bad as we thought overall.
Speaker 2 (14:33):
Are we seeing those fund managers in Europe particularly okay,
they might be investing in their own or they might
be investing in, say, Asian markets.
Speaker 1 (14:41):
What do you think of that?
Speaker 4 (14:42):
I think where the tide has rarely turned, as in
China and Hong Kong stocks. You'll remember the narrative around
just the past couple of years actually, of many people
questioning whether these stocks are investable or not. The latest
starter we're seeing is that investors are starting to go
(15:03):
back over there. Why well, we're starting to see a
little bit of stimulus come out of China. They know
that Trump's tariffs are going to be a big challenge
on their economy, so they're meaningfully pumping the accelerator when
it comes to stimulus in their economy. And actually the
other thing too is the stocks there are cheap. Now,
(15:26):
if we are to draw one criticism of the US market,
it is that the valuations in the market are relatively high.
So investors might look at some of the companies in
Asia and go, well, actually, relative valuation wise, although there's risks,
I'm happy to step in.
Speaker 1 (15:44):
Now.
Speaker 2 (15:45):
If we get back to the US five hundred fund
that she has launched. You said it was the most
popular feature that we've been asked for for key we Saver,
But are people putting me their money where their mouths?
Are they actually investing and deciding that will use this
for Keysaber.
Speaker 5 (16:02):
Yeah, we launched about a week ago. We've seen quite
a good response on people switching to our scheme. We've
also seen a lot of our members add the US
five hundred fund to their investment plans or rebalance their
portfolios to include more of it. And the third group
we've seen is around ten percent of the people who
(16:24):
have signed up in that last week haven't been in
key SABER before. And that's really interesting because I think
through a combination of great experience and access to a
wide range of product, we're managing to engage people who
for whatever reason, have not been part of KISABER in
the past. And what we see is that a lot
(16:46):
of these people are self employed.
Speaker 2 (16:48):
Of course, just thinking about other SCA classes, we've focused
on shares predominantly in this conversation, What about bonds?
Speaker 1 (16:56):
What about gold that's having another resurgence.
Speaker 2 (17:00):
Are you seeing with global investors and investors here at
home even thinking about other asset classes beyond equities?
Speaker 4 (17:09):
Yeah, so bond yeards been attractive for some time. We
saw as the market was really worried about tariffs, we
saw bond yields fall quite substantially, so they got down
to around three point eight percent for the US ten
year yield, So that provided a bit of a cushion
as shares were falling quite substantially over that time. Since then,
(17:32):
we've actually seen a bounce back up, and part of
that is just around the worry that the market has
around the amount of debt that the US might need
to raise and the more supply of bonds. Obviously that
puts pressure on bond yields, So the returns there have
been okay. I still think on a go forward basis
(17:55):
they look relatively attractive. Gold has been an interesting one,
and I suspect part of the resurgence that we've seen
in gold is there has been an uptick in the
US and inflation expectations. So there's a University of Michigan
measure where they go out and survey people and go,
(18:18):
you know, what do you think inflation will be over
particular timeframes. Now that measure for the five to ten
year inflation is at the highest level since the mid nineties,
So inflation expectations out there are quite high. So people
are looking at what are the inflation hedges that I
(18:40):
convest in, and gold through time has proven to be
quite a solid inflation hedge for people. I think the
other aspect, too, is there is some talk around about
the US continuing to be the world's global reserve currency.
I think that's been over egged a little bit. I
(19:01):
think the US has a very solid position as continuing
to be the world's reserve currency. But at these times
where you talk about tariffs, you can sometimes get these
narratives taking on a life of their own. So I
think that has led people to say, okay, well, let's
diversify our holdings a bit. We'll have some holdings in
(19:22):
US dollars, holdings in euro, holdings in Japanese yen, which
is a popular safe haven currency, but let's also have
an allocation to gold as well. And that really skyrip,
isn't it?
Speaker 1 (19:36):
Just thinking about more modern asset classes.
Speaker 2 (19:39):
If you like crypto, do you see a time when
people be able to put their key we save it
into crypto in the same way that we're offering the
share options.
Speaker 5 (19:47):
Yeah, I mean right at the moment, we're looking at
us self select, which is the next chapter after the
US five hundred fund for us with our product, and
you know, we're trying to work out what to include.
We start with a principle that we want to provide
as much access as we can and let our members
(20:07):
decide on where to put their own money. And so
the crypto ETFs that have launched, they are widely held,
there is a lot of liquidity. Some of them have
actually considerably lower volatility than some of the big name companies,
say at the top of the S and P five
hundred list. So I think it's a really good argument
(20:29):
to say, maybe via an ETF, that crypto should be
something that people can allocate. Again, with our guardrails kind
of process built into our product, that may be up
to five percent of your portfolio with exposure to crypto
is something that someone can make a choice about rather
than us making that choice.
Speaker 4 (20:49):
For Matt, what's interesting with cryptocurrency is the trends that
we're seeing come out of the US with regards to this.
So you mention ETFs, well, what that has enabled is
for people to have a really safe way to get
exposure to cryptocurrency. That's actually helped enable better institutional participation
(21:12):
in the cryptocurrency market. So it's interesting in the US,
You've got the likes of Yale Harvard who have said
that they have exposure to cryptocurrencies. You're also starting to
see kind of state pension funds and even some sovereign
wealth funds participate. To be honest, i'm surprised, you know,
(21:34):
back in many years ago, I kind of looked at
it and didn't quite get it. But it really has
come a long way in terms of just who can participate, accessibility,
but also institutional support for the sector as well.
Speaker 2 (21:50):
Matt, So how long before we might see self select
stocks individual stocks in the US being available for people
in their key we say a scheme.
Speaker 5 (21:57):
Well, the good thing is, in order to launch the
US five hundred fund, a lot of the hard work,
I suppose the infrastructure is in place for us. So
that is our next priority that we've started actively working
on now, as you self select won't put absolute time
on it because it's really important that we go through
(22:19):
our testing and validation steps and get this right before
we release it. Current best estimate is I think middle
of the year.
Speaker 2 (22:28):
What about things like private equity, because it's pretty popular infrastructure,
that kind of thing.
Speaker 5 (22:33):
Yeah, private equity has been really topical in twenty twenty five,
and for good reason. If we look at Ossie, which
we always do because they had a fifteen year head
start on us with superannuation, their super funds have a
much higher exposure to private assets. They're super funds are
investing in anything from large infrastructure projects to small startup companies.
(23:00):
We tend to be a little bit less adventurous in
New Zealand at this stage, but there's a lot of
talk about it, and I think there's actually a lot
of will we need to overcome some of the challenges
with regard to valuations and liquidity because that's tough for
private companies. But yeah, I'm confident. I think as kwisaver
(23:21):
continues to mature, that'll happen. We're at that kind of
tipping point at the moment where these things start becoming
really viable for super funds.
Speaker 2 (23:30):
We've got the budget coming up. There is if you like,
rumors that the government might cut its contribution, which is
five hundred plus dollars a year. Chris, do you think
that's going to have any effect at all.
Speaker 4 (23:44):
I'm not sure it will on Kiwi saber participation because
key We Saber fulfills a few key functions.
Speaker 3 (23:52):
You know.
Speaker 4 (23:52):
One, it's really well regulated and people get accessed to
a wide range of investments, right, some lower cost and
more passive and some high cost and more active. So
I think it's working really well in Most people I
talk to are really positive about key We Saver. Second,
(24:13):
obviously you still get your employer contribution, which as meaningful
might not be quite as high as Australia, but it's
still meaningful for people. So I think overall it would
be a shame. Don't get me wrong to see changes,
because I think what makes schemes popular is actually when
(24:34):
they're largely left alone by politicians so people can invest
with confidence.
Speaker 5 (24:40):
Might take almost sorry, Chris, I must take the opposite here.
I think we're overdue for a policy review KEYSAB. We're
only a tiny little scheme, but I think we've tried
to be as vocal as we can. I'll come back
to agreeing with Chris now. With the government contribution is
that it's not targeted anyway, and what I'd like to
(25:00):
see actually is targeted and targeted at the people that
are being left behind. And I mentioned self employed before,
and you mentioned the kickstart and children. The fact that
the government contribution is not available to anyone under eighteen
seems contrary to good sense, which would be to get
people involved in QPSAB as early as possible and incentivize that,
(25:23):
and incentivize people who are self employed because they are
not receiving having if they receive an employer contributions coming
out of their own pocket twice and so you know,
there's I think let's have a look at the policy settings.
But I do take your point that the more that
you that you kind of mess around with it, So
(25:44):
any changes need to be really well signaled.
Speaker 4 (25:47):
Oh look, and I'm more thinking about messing with it
in a negative way, and if want to mess with
it in a positive way around higher contributions.
Speaker 1 (25:56):
We've actually looked at that ourselves, haven't We met.
Speaker 5 (25:59):
What we heard when we got involved in kvsaver is
industry saying that contributions need arise, and we heard the
Retirement Commission say largely the same thing. But the voice
that was kind of missing from that was the people
who were going to have to make the higher contributions,
and that's you and me, that's the members. So we
(26:22):
went out and asked a bunch of our investors, not
our necessarily our KIV saver members, but just people on
the Cheesies platform. It was overwhelming how many people said,
I get it. I'd prefer to have a little bit
less in my take home this week in order to
have more retirement. It was seventy eight percent who supported
that idea, which is phenomenal because it's counter to everything
(26:47):
that we assumed people would think, Like at the height
almost of the cost of living crisis.
Speaker 2 (26:56):
Chaps, we probably need to wrap it up there, just
wondering what would you like to see with key We
savor on terms of innovation in the near turn, not
so much the long term the near term.
Speaker 4 (27:08):
So I think the private asset discussions really interesting. It's
one where I think we need a little bit of
a mindset shift around fees. For example, is one of
them right? You know, these are more expensive assets to
get your hands on, but they can come with a
(27:29):
higher reward as well. I think the other part of that, too,
is that there is a global trend of companies staying
private for longer, and we see companies realizing more of
their value in the private markets in many cases than
they do in the public markets. I also saw a
stat the other day, and I won't get the percentage
(27:52):
completely right, but the amount of companies valued over one
hundred million dollars in the uses that are private versus
public is something like three or four to one. So
when we look at our investments, why do we have
all of it in the area that has less exposure.
(28:14):
We've got companies out of New Zealand like Crimson Education,
Black Halter. We've got companies that are really starting to
be relevant on the global stage. We've seen a few
of them even acquired this year, so that's global investors
going I want to slice of that company. So I'd
love to see that development further, and hopefully as an industry,
(28:36):
we can get together, navigate the challenges, and just make
it happen.
Speaker 5 (28:40):
I guess as an innovator, we're asked all the time
who we're competing against, who do we see as our
biggest threat, And the answer is consistently just apathy. It's
just that whole thing that people don't think about their kipisaver.
They'll put more time into thinking about what they're can
(29:00):
have for tonight, then they will about where their retirement
is invested, and no matter who it's invested, I just
want people to just to try and give that a
little bit more time. I guess the innovation is important
because it comes along from time to time and maybe
it helps people to consider. So I don't not really,
(29:23):
I don't have a strong place on where the innovation
comes from. I just want to see it continue so
that people will continue to engage a little bit more
with their retirement savings.
Speaker 1 (29:31):
Yep, I think everyone would like to see that.
Speaker 2 (29:34):
Thanks both of you for being with us today and
thanks to you for joining us You can watch shed
Lunch on YouTube or listen on your favorite podcast app.
Leave us a rating and tell us what you'd like
to hear next. Ma Tawa
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