Risky assets show scars from Greek sovereign debt

Risky assets show scars from Greek sovereign debt crisis

Default KiwiSaver provider TOWER Investments says the basket of market indices it uses as benchmarks for its managed funds reveals effects of the Greek sovereign debt crisis on risky assets like shares and commodities.

“Risky assets like shares (equities) and commodities have clearly taken a hammering from the Greek financial crisis over the past quarter to the end of June, 2010, although sharemarket indices are still positive for investors on a year-on-year basis,” said Sam Stubbs, Chief Executive Officer of TOWER Investments.

“On an index basis, over the June 2010 quarter sharemarket investors gave up about half of their gains made since June, 2009,” he said.

“Even so, global equities were still the strongest performer on a local currency basis versus the other indices in the basket tracked by TOWER investments.”

“Global bonds stood out over the same comparison period and returned positively on a monthly, quarterly and annual basis to the end of June on a New Zealand dollar-hedged basis, and year-on-year came in not far behind global equities.”

“New Zealand bonds did even better than New Zealand shares on an index basis over the June year.”

“Investor risk aversion spurred on by the Greek sovereign debt crisis and its spreading impact has clearly shown flight-to-safety effects in the relative performances of bonds versus shares.”

“New Zealand commercial property returns for the year to June, 2010, were fairly close to New Zealand equity returns on an index basis.”

“Commodities were the poorest returning risky asset class on an index basis over the June year, but conservative New Zealand cash wasn’t that outstanding either due to low settings of the official cash rate (OCR).”

“Hedge funds did not do too badly on a June year index basis, but the past quarter clearly knocked them back with its high volatility.”

“Despite market turbulence over the June quarter, the merits of investing in a diversified portfolio spread across a range of asset classes were underscored by positive performances put in by cash and bonds.”

On a year-to-date basis to the end of June, 2010, the top three index basket performers in descending order were global equities (+12.1%, local currency), global bonds (+10.4%, NZD-hedged) and New Zealand bonds (+8.2%).

On a June 2010 quarter basis, the top three index basket performers in descending order were New Zealand bonds (+3.4%), global bonds (+2.9%, NZD-hedged), and New Zealand cash (+0.7%).

For the month of June, 2010, the top three index basket performers in descending order were New Zealand bonds (+1.3%), global bonds (+1.1%, NZD-hedged), and New Zealand property (0.8%).

Index Basket

The basket of market indices tracked as benchmarks for TOWER’s managed funds includes:

New Zealand cash: ANZ/NZX 90 Day Bank Bill Index (NZD)

New Zealand bonds: ANZ/NZX Government Stock Index (NZD)

New Zealand property: Mercer Property Index (NZD)

New Zealand equities: NZX50 Index (NZD)

Global bonds: Barclays Capital Global Aggregate Index (NZD Hedged)

Global equities: MSCI World Index (Local Currency)

Commodities: Dow Jones-UBS Commodity Index Total Return Index (USD)

Hedge funds: HFRX Global Hedge Fund Index (USD)

ENDS

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