KiwiSaver funds take a hit after Brexit


Investors here are getting worried about what the Brexit could mean for investments like KiwiSaver.

European markets slumped on Friday, but analysts in New Zealand say KiwiSaver is for the long-term, and investors should hang in there.

On news of the UK's vote to exit, more than £100 billion was wiped off London's FTSE 100 -- the biggest fall in UK history.

Savvykiwi's Binu Paul says there's no doubt KiwiSaver funds will be impacted.

"Investment markets don't like uncertainty, so it is going to flow into KiwiSaver funds, but to what degree remains to be seen," he says.

Mr Paul says it's important to keep short-term falls in perspective.

"You could argue that a number of those falls are being over-exaggerated, driven by sentiment rather than by fundamentals."

KiwiSaver's growth-based funds tend to have around 45 percent invested in international shares, 33 percent in balanced funds and 20 percent in conservative funds.

Mr Paul says some losses can be offset by hedging.

"Hedging literally means that fund managers would be taking a position on the pound sterling versus the New Zealand dollar, so there could be a situation where the losses you made are compensated by the gains on currency," he says.

Analyst Mary Holm urges KiwiSaver investors to keep calm and not do anything rash, like moving to a lower risk fund, over the next few weeks.

She says most people still have 10 to 20 years before cashing in their KiwiSaver, so they should just ride the volatility out.

The lower growth and uncertainty that comes with Brexit could mean interest rates stay lower for longer.

Craigs Investment Partners says a cut in the official cash rate at the August meeting seems much more likely now.

"We should expect a growing chorus of economists and commentators to start talking about an OCR below 2 percent."

Craigs says banks may not cut mortgage rates accordingly this time, if banks funding costs go up.


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