Welcome to your August update

Dear member, welcome to the SBS Wealth KiwiSaver Scheme Investor Update for August 2025. Below you will find the latest performance data and market commentary from your SBS Wealth Investment Management Team. 

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Performance data  

Performance as at 31 July 2025. 

The Lifestages Auto Options invest in combinations of the SBS Wealth High Growth Fund and the SBS Wealth Income Fund in proportions that vary in accordance with pre-selected age bands. These options automatically adjust the risk profile of your investment by altering the proportions invested in the funds based on your age. 

Performance is shown after fees and before tax. For more information about how performance is calculated and more performance periods, click here. 

Market Update

Equity markets delivered a third month in a row of positive returns, amid greater clarity on trade tariffs for a 1 August deadline.

The US announced tariff deals with a number of major trading partners in advance of the deadline. Additionally, the House of Representatives approved President Trump’s flagship tax and spending bills.

Technology stocks continued their rebound from the falls suffered earlier in the year. Optimism over the potential of artificial intelligence (AI) powered related stocks higher. Several technology stocks also posted some well-received quarterly earnings during July. Meanwhile, there was an agreement by the US that semiconductor companies could resume shipments of some key advanced processors to the Chinese market.

Elsewhere, some more defensive sectors – including healthcare and Consumer Staples – underperformed during July.

Around the rest of the world Eurozone stocks also advanced amid relief on tariffs and positive corporate earnings updates. Japan was up on the back of a better than feared election outcome, and reaching a favourable trade deal with the US (benefitting exporters and global cyclicals). Emerging markets outperformed developed markets, thanks to strong performance from the heavyweights Taiwan, China and Korea.

Within global bonds, the market focused on trade negotiations and on renewed fiscal discipline concerns. This caused global government bond yields to rise (negative for fixed interest returns). Corporate bonds performed better, amid an improvement in economic sentiment.

The US has set a 15% tariff on New Zealand goods exports, which came into force 1 August (previously 10%). This equates to an extra $500m in tariffs each year that US importers will have to pay to purchase NZ goods exports. This could be a risk for beef, dairy and wine. Dairy is dependent on a good result from US-China trade negotiations. On the positive, the NZ property sector rebounded back in July, after a tough last 1-2 years.

This impacted on the New Zealand stock market, which while it was up 1.8%, it was below most other global stock markets. The Reserve Bank of New Zealand (RBNZ) kept the OCR at 3.25%, with a 0.25% reduction in August still expected.

The High Growth Fund returned 2.49% for July and 9.78% for the last quarter, on the back of three positive months. The Fund benefited from a high allocation to Technology stocks, in particular semi-conductors and data centres. An allocation to emerging markets and Australian equities also added value. A 15% global allocation to defensive sectors Healthcare and Consumer Staples detracted some of that value. Main contributors to the Fund’s 2.49% were US construction equipment manufacturer Caterpillar 16%, world leading healthcare science servicing Thermo Fisher 16.5%, US semi-conductor Nvidia 16%, Alphabet (Google) 12%, US healthcare giant Johnson & Johnson 10.9%, Microsoft 10.3%, Australian Resource company Fortescue +17.5%, Australian Healthcare company CSL +14.3%, Amazon 9.7%, Infratil 9.7%, and Kiwi Property Group 9.6%.

The Income Fund returned +0.20% for July and 0.62% for the last three months. The global fixed interest benchmark Bloomberg Barclays Global Bond Aggregate Index was down –0.20%. However, a 30% exposure to NZ fixed interest delivered +0.6% and a 13% exposure to short duration DFA PIEs returned +0.3% as it was protected members from increased global fixed interest yields. The Fund remains 60% exposed to global fixed interest (all hedged back to the NZD) and 40% exposed to New Zealand fixed interest and cash.

The Focused Growth Fund returned 3.92% for July and 9.67% for the quarter. The Fund benefited from a high concentration to Technology stocks, in particular semi-conductors and data centres. Top performers over July were US semi-conductor Nvidia 15.8% (our largest holding in the fund and now the largest listed company in the world), Alphabet (Google) 12%, Microsoft 10.3%, Amazon 9.7%, and Taiwan Semiconductor Manufacturing Company Ltd 9.7%.  A 20% exposure to defensive sectors Healthcare and Consumer Staples detracted some of that value, with Procter & Gamble and Eli Lilly both negative, -2.2% and 2.4% respectively.

The fund’s return was also negatively impacted by a 55% currency hedge on the fund. The New Zealand dollar was 2.8% weaker than the US dollar over July. This 2.8% has inflated the returns of the underlying companies, when reported back in NZ dollars. However, the hedge has negated that on 55% of the holdings. This is a reversal of NZ dollar strength earlier in May and June and we believe will occur again over the latter half of 2025.

The Cash Fund returned +0.27% for July and 0.77% for the quarter. There is a more balanced stance in the NZ fixed interest market, than its global peers, leading to a Fund with a good income stream from its underlying securities and expectation of future OCR cuts based on economic projections.