Kiwisaver Strategy

[Sideshow Bob]

Moved to 100% Conservative with Kiwisaver about a week ago. Looked at the returns in the Milford fund and was around 6% over the last year - no doubt helped by currency.

Question is whether current turbulence is just a few bumps, or on the way to a bigger correction. But went for capital preservation in the meantime.

[smpl]

Rising rates, asset class sell off.

70% intl shares, and 30% NZ

100% in equities and presumably 100% NZD hedged too, these portfolios will be hit hardest.

100% Conservative

Do you think that you are safe in bonds?

[blackcap]

Rising rates, asset class sell off.

100% in equities and presumably 100% NZD hedged too, these portfolios will be hit hardest.

Do you think that you are safe in bonds?

That is the question I have too. Rising interest rates could decimate a bond fund. Or do these funds just buy at par when a bond is issued and hold till maturity and take the interest along the way, ignoring the rise and fall in the actual value of the underlying securities?

[huxley]

That is the question I have too. Rising interest rates could decimate a bond fund. Or do these funds just buy at par when a bond is issued and hold till maturity and take the interest along the way, ignoring the rise and fall in the actual value of the underlying securities?

Isn't the unit price of the fund still marked to the current market clearing price of the assets under management? So if you hold a fund with a high exposure to vanilla fixed interest bonds you'll get a capital gain when rates fall and a loss if the rates rise.

[GTM 3442]

That is the question I have too. Rising interest rates could decimate a bond fund. Or do these funds just buy at par when a bond is issued and hold till maturity and take the interest along the way, ignoring the rise and fall in the actual value of the underlying securities?

AFAIK, because they have money coming in all the time, they have no option but to buy on the secondary market.

[blackcap]

AFAIK, because they have money coming in all the time, they have no option but to buy on the secondary market.

Thanks for thee replies. Ok that makes sense. So a conservative "bond" fund can then quite easily suffer capital losses in a time when the discount rate is rising. Interesting.

[heisenberg]

Moved to 100% Conservative with Kiwisaver about a week ago. Looked at the returns in the Milford fund and was around 6% over the last year - no doubt helped by currency.

Question is whether current turbulence is just a few bumps, or on the way to a bigger correction. But went for capital preservation in the meantime.

So Bob, did you buy back in to growth funds?