GMI Investment Strategy Team, 18 February 2010
The year began with yet another market step down, a trend we’d been battling since September 2007 which seems like an eternity ago. Our emphasis on wealth preservation meant we were less than half invested when 2009 began – something that had led to chunky outperformance of market benchmarks over 2008.
From March 2009 on we’ve been facing an almighty rally in markets, fuelled by governments printing money and spending taxpayers’ future income like crazy. This established a rally built on hope, and for many funds that took the big crash full in the face, it was a welcome relief from oblivion. We avoided the slump by being heavily cashed up as it began in 2007, and we missed the recovery to some degree as well, preferring instead to remain underweight in stocks rather than take a punt on the Mother of all Rallies at the point of maximum risk when it could have all turned to custard in 2009.
And it isn’t over yet. Right now markets are spewing again, this time because the PIIGS of Europe (Portugal, Italy, Ireland, Greece and Spain) are looking down the barrel at debt defaults. The world economy continues to run on government stimulus, and you can’t mortgage taxpayers forever. Property is as exposed as hell still, and we will continue to emphasise wealth preservation above all else as we navigate these waters.
We were very pleased to outperform benchmarks, for the 11th year running. This again highlights the benefits to clients of an active management approach. There’s no substitute for flexibility and the discretion to maintain a more defensive approach in the market conditions prevailing in 2009.
2009 PERFORMANCE
- Client Growth Portfolios returned 3.8% compared to their benchmark of 2.7% (after tax and fees)
- Client Balanced Portfolios returned 3.7% compared to their benchmark of 1.4% (after tax and fees)
- Client Income Portfolios returned 3.6% compared to their benchmark of 0.2% (after tax and fees)
Portfolio Performance Summary
Calendar Year and after tax and fee returns since 2003 |
| Portfolio Type |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
Average out- performance
over
benchmark |
| Income |
9.0% |
9.1% |
7.5% |
11.2% |
3.8% |
-4.0% |
3.6% |
|
| Benchmark |
0.3% |
2.0% |
6.4% |
7.2% |
0.9% |
-4.9% |
0.2% |
|
| Out-performance |
8.7% |
7.1% |
1.1% |
4.0% |
2.9% |
0.9% |
3.4% |
4.0% |
| |
| Balanced |
12.6% |
10.8% |
11.2% |
14.6% |
3.7% |
-8.9% |
3.7% |
|
| Benchmark |
2.2% |
2.0% |
9.2% |
10.6% |
0.2% |
-13.6% |
1.4% |
|
| Out-performance |
10.4% |
8.8% |
2.0% |
4.0% |
3.5% |
4.7% |
2.3% |
5.1% |
| |
| Growth |
17.4% |
11.5% |
17.6% |
16.0% |
4.0% |
-15.6% |
3.8% |
|
| Benchmark |
5.6% |
2.0% |
12.7% |
14.0% |
-0.5% |
-23.2% |
2.7% |
|
| Out-performance |
11.8% |
9.5% |
4.9% |
2.0% |
4.5% |
7.6% |
1.1% |
5.9% |
The key strategies over 2009
- Remaining underweight equities – we slowly moved from 43% to 85% invested over the year
- Defensive stock selection (companies with strong profitability and balance sheets).
- Staying well clear of direct holdings in financial sector stocks – we exited these back in 2007.
- Playing dodgems with a soaring NZ dollar – and we have to say not that successfully.
Looking forward to 2010
The best-case scenario for the global economy is that growth in the emerging economies pulls the world through sufficiently. We have our doubts. We think governments in developed economies will have to continue with their support measures—and the longer this is necessary the more likely the prospect becomes of a second serious crash. The danger remains and we are monitoring developments continually.
Long term performance
Since 1989 our average growth portfolio has returned 8.5% per annum compared to the world shares average return of 3.0% pa after tax, brokerage and fees. The NZ sharemarket has managed only 2.7% per annum over that period.
The 20-year track record is available here.
Click here for more detail about GMI’s 2009 performance.
THE GARETH MORGAN KIWISAVER SCHEME
Our KiwiSaver Scheme now has 46,000 members, and more than $300M under management. Our results as at 31 December:
| Fund |
1 month |
3 month |
12 month |
Since Inception |
| Conservative |
0.40% |
1.46% |
3.94% |
9.26% |
| Balanced |
0.60% |
2.12% |
3.74% |
0.79% |
| Growth |
-0.25% |
1.78% |
3.29% |
-9.98% |
These returns are reported after average fees but before tax. Individual member's returns will be different due to tax, the timing of contributions and personal investment mandate.
In 2008, 15% of new members were transfers from other KiwiSaver Schemes. In 2009, 30% of new members were transfers from other providers.
If you want to join our KiwiSaver Scheme or change your KiwiSaver account to GMK, you can do it here or contact our friendly member services team with your questions: email questions@gmk.co.nz or phone 0800 427 384.
Much more on KiwiSaver performance here.
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