Welcome to your May update
Dear investor, welcome to the SBS Wealth Investment Funds Investor Update for May 2025. Below you will find the latest performance data and market commentary from your SBS Wealth Investment Management Team.
Performance data
Performance as at 30 April 2025.
| Strategy | 1M | 3M | 6M |
| High Growth Strategy | -2.18% | -8.67% | -1.63% |
| Growth Strategy | -1.59% | -6.71% | -0.83% |
| Balanced Strategy | -1.0% | -4.73% | -0.06% |
| Conservative Strategy | -0.11% | -1.70% | 1.05% |
| Portfolio | 1M | 1Y | 5Y pa |
| World Equity Portfolio | -2.62% | 8.43% | 12.03% |
| Australasian Equity Portfolio | -0.84% | 0.80% | 5.20% |
| World Bond Portfolio | 0.66% | 5.47% | 0.32% |
| New Zealand Bond Portfolio* | 0.93% | 8.08% | 0.91% |
* Previously Corporate Bond Portfolio
Performance is shown after fees and before tax. For more information about how performance is calculated and more performance periods, click here.
Market update
The month was dominated by US President Donald Trump’s unexpected ‘Liberation Day’ tariffs. This included 10% duties on New Zealand and Australia plus up to 145% on China. This immediately triggered volatility in equity markets across the globe, even though no data was made available as to what the real effort of these tariffs on individual companies was going to be. No market was left unscathed, though US equities suffered more than others, and in particular the technology and consumer discretionary large cap stocks. Small capitalisation stocks in the US also fell considerably, as these are less likely to absorb the extra costs.
Despite the volatility and gloom in the equity markets in April, the US Q1 earnings season showed a high proportion of companies beating consensus expectations and reversing downgrades from previous quarters. This was particularly notable in several of our large mega-cap technology companies that we own within the Scheme. For examples Microsoft’s Azure revenues were up 35% year-on-year. Meta, Apple and Amazon also all bet their first quarter revenue forecasts.
We saw a recovery in equity markets over the last ten days of the month, reversing the losses from the first three weeks, as investors started seeing stocks becoming more attractively priced and good buying opportunities.
Closer to home the Australian equity market performed will in April, up around 1.5%, avoiding most of the tariff speculation to date. Holding defensive sectors like banks, supermarkets and resources, and avoiding technology and consumer discretionary stocks benefited the Scheme.
The New Zealand central bank responded with a 25-basis point OCR cut to 3.50%, signalling scope to lower the OC further as appropriate. Inflation for the first quarter of 2025 was up slightly to 2.5%. This is still within the 1-3% target band. The OCR is forecast to continue to fall throughout 2025. While this should lead to lower term deposit rates, it will be a benefit to fixed interest investments and our conservative risk profiles.
The World Equity Fund fell 2.62% during April, on the back of the Liberation Day tariff announcements and a strengthening New Zealand dollar against the US dollar (a stronger NZ dollar reduces the valuation of offshore shares when reported back in the Fund). This was partly offset with a 50% currency hedging policy. Stocks that felt the most impact from the tariff news were United Heath Group –25%, Thermo Fisher –18%, Pepsico –14%, and Disney –12%. Bucking the trend were a number of our defensive stocks, which held up well throughout the month. L’Oreal was up 13.4%, Walmart +5.7%, Tesla +3.9%, Eli Lilly +3.9%, Toyota +3.4%, and Kernel Global Infrastructure Fund +1.2%.
The Australasian Equity Fund fell 0.84% during April. The local market measured by the NZX50 was down -3%. However, the Fund managed to avoid a lot of this by allocating 35% of the Fund to Australian equities (which performed much better than NZ and global equities) and holding more companies that had a better return than the market average. Stocks to standout in the month were CBA +8.2%, Wesfarmers +6.6%, Telstra +5.0%, and Woolworths +4.8%. Stocks that led to the slight negative return for the month were Mainfreight –10%, Auckland International Airport –7.9% and Port of Tauranga –7.2%.
The World Bond Fund was up +0.66% during April. This was mainly on the back of the regular income stream coming off the fixed interest securities, but there were also some capital gains as longer term interest rates fell slightly. The Fund is still slightly defensive in terms of duration and credit quality, as fears of inflation increasing in the US remain.
The New Zealand Bond Fund was the best performing fund for the month, returning +0.93%. This was on the back of the Reserve Bank of New Zealand reducing the OCR by 0.25% and forecasts of further cuts. Our underlying fund manager Harbour also added value to the Fund with good security selection and a longer duration versus the benchmark.