Axiome Quarterly Report

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Over the quarter we saw continuing good returns from equity markets that have performed strongly over the past 12-months. On the flip side fixed income continued to struggle, but also posted positive returns for the quarter.

Our client education piece for this month reviews the fundamental problem with any notion of Market Timing. Predicting when to exit and re-enter the market is fraught with difficulty and runs the very real risk of missing out on large upside gains as markets rally.

Buffett Says $100 Billion Wasted Trying to Beat the Market

Warren Buffett, the "investment guru", made a bet a decade ago that passive funds would outperform hedge funds.

Currently he estimates that about $100 Billion has been wasted in the US from active hedge funds. This is not only from the average under-performance of these hedge funds, but also from the high fees they charge investors, which offsets much of the profit for the investment portfolios, to the benefit of the hedge fund managers.

He will almost certainly win the bet when it ends in December, with proceeds going to charity.       

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Axiome Quarterly Report

In our Investment Market Review we discuss the continuing improvement in economic conditions globally. Over the quarter we saw a solidifying of equity markets that have performed strongly this past 12-months. This has been on the backdrop of several developments in current affairs: Emmanuel Macron becoming French President, the inclusion of Chinese domestic equities to the MSCI Emerging Markets Index, and a winding down of quantitative easing programmes.  

Bond markets have also recovered somewhat, but by contrast remain fairly flat in the current environment. Our client education piece for this month is entitled “Understanding Bonds”.  This article discusses the key levers of bond performance, which I hope will be a useful refresher for clients in understanding the influences behind the lack lustre bond returns of the past 9-months. 

Axiome Quarterly Report

Economic conditions improved further since the beginning of the year. This was reflected in equity markets which, despite the political noise emanating from the US and Europe, have performed strongly over the quarter. However this strong growth has also seen the return of inflation, both in New Zealand and globally. Existing bond prices fell as markets factor in the growing likelihood of increases in interest rates to counter inflationary pressures.

This quarter's article focuses on the importance of diversifying across different asset classes, not just within them. Recent volatility in particular markets following political events has reminded us of the importance of investing in a range of different types of assets and markets. 

Axiome Quarterly Report

As markets absorbed the reality of a Trump election win in the US, we have seen the beginnings of a ‘great rotation’ out of global bonds and into global equities. In this report we discuss some of the investment principles that underlie the resulting modest drop in bond values. World bond markets are more than double the size of world equity markets, with massive trading volumes that rapidly assimilate new information into prices. As such, it is possible for the tradeable price of bond holdings to drop in response to an unexpected rise in the outlook for interest rates – as occurred with the Trump victory. This may surprise some investors who think of all fixed income securities as though they are term deposits held to maturity and then repaid. Whilst bond values are far less volatile than shares, the same core investment principles of risk, return and diversification are equally relevant. 

Axiome Quarterly Report

This quarter's Investment Market review discusses market movements and general economic influences in New Zealand and around the globe. Over the last quarter markets were generally favourable, having absorbed Brexit and the uncertainty around the upcoming US election.

Also in this issue we discuss a new perspective on investing and are excited to introduce the new Global Sustainability Fund that has been added into the model portfolios for many of our clients. 

Axiome Quarterly Report

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In this report our Investment Market Review looks at the main events in the markets over the past three months. The past quarter has seen equity prices bounce back from the uncertainty and fall in prices that were seen at the end of 2015. However focus remains on commodities both domestically as dairy prices remain low and abroad with oil regaining some of its recent price falls. Monetary policy is also highlighted as inflation continues to hover at a mere 0.1%.

In our Investor Education article we look at the importance of defining asset classes when constructing a diversified portfolio. Sorting financial securities on a statistical basis, rather than an industry one, provides the best basis for a diversified investment strategy. We explain why this is important in maintaining risk exposure that is in line with investor objectives and the danger of misinterpreting what defines an asset class.

Axiome Quarterly Report

This quarter’s Investment Market Review looks at the key highlights in the markets over the last three months. Although there is continuing concern around China’s growth figures, this is put into perspective with past market movements in Asia. This also comes on the backdrop of a generally robust global economy, particularly in the US, with diversified portfolios performing better than most news headlines would suggest. The quarter also saw low inflation pressure both the Reserve Bank of New Zealand and Federal Reserve in the US to lower interest rates.

Our report also highlights the role that emotions and psychology can play in investment decision making, particularly in the short-term. However, evidence supports the merit of maintaining both a long-term outlook and a disciplined approach in portfolio management.