Welcome to your June update

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

Performance data  

Performance as at 31 May 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 bounced back in May to such an extent that all the losses in 2025 have now been recovered in all countries except at home in New Zealand. The retrenching on tariffs by Donald Trump was the catalyst for the equity market rebound. US and China agreed a 90-day suspension of tariffs on most goods. In late May, the US Supreme Court ruled that President Trump’s “Liberation Day” tariff proposals are illegal as he did not have the authority to use the emergency economic powers legislation that he cited when he imposed them. The White House is appealing the ruling.

However, the more encouraging news was the announcement of some robust Q1 corporate earnings. The biggest benefiter was US technology stocks, up 10% for May. Communication Services and Consumer Discretionary were not far behind, around 9.5%. Healthcare was the only detractor during May, as Trump announced a drug pricing reform.

European equities continue to lead the way in 2025, up 20% ytd. Japanese equity markets rallied strongly, driven by strong large-cap performance. Emerging Markets also rose during May, particularly the markets of Taiwan, Korea and Hong Kong, which were supported by renewed investor optimism about artificial intelligence.

The US dollar continues to weaken, with the Japanese Yen joining it in May. This has a negative performance impact on our US shares in the funds.

The New Zealand and Australian sharemarkets were both up 4% during May. Generally smaller capitalisation stocks performed better than larger capitalisation stocks. The Technology sector, like it was globally, was the main benefactor, with Communication Services and Financials also doing well. Utilities, Consumer Staples, and Healthcare lagged the others.

May was another volatile month for global bond markets. Some concerns around US fiscal sustainability, and Moody’s cutting its US sovereign rating to Aa1 (aligning itself with the other major credit rating agencies), led to sovereign bond yields rising, delivering a small negative return for bond funds in May. The New Zealand Reserve Bank reduced the OCR by another 25 basis points in May, down to 3.25%. However, they did signal that there may only be one or two further cuts to occur this year.

The High Growth Fund returned 4.73% during May, with almost all underlying assets rebounding from the February, March and April losses. This, however, was slightly offset by 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). Stocks that rebounded the most during May were Mainfreight +26.6%, Disney, Nvidia, & Tesla all up +23%, Meta +17%, and Microsoft +16%.

The Fund continues to focus on growth outside of New Zealand, with over 85% of the fund invested offshore. The largest exposure by sector is still Technology, just under 20%, with a key focus on Generative AI & Digital Advertising, Cybersecurity, Datacentres, Cloud Infrastructure, Semiconductors, and Networking.

The Income Fund returned –0.25% over May. There was positive news as most central banks continue to lower official cash rates, including the RBNZ reducing another 0.25%. However, this was offset on concerns about debt sustainability and Moody’s downgrade of US sovereign bonds. This led to a slight negative return for both global bonds and NZ bonds. The Income Fund had some protection against this, by holding about ¼ of its assets in short-dated securities. These securities were not affected from the rising longer-term yields. In fact, they provided a positive return for May.

We launched two new funds at the end of April. It is great to see members started investing in them during May. The Focused Growth Fund, which invests in 16 global companies immediately benefited from the rebound in global sharemarkets, returning 2.39%. Twelve of the sixteen stocks went up during the month. The standouts were the world’s largest semiconductor company, Nvidia, (based in the US) returning +18.6%, Schneider Electric, (Industrial company based in France, which engages in the energy management and industrial automation businesses worldwide), returned +10.7%, and Amazon, (large consumer discretionary business based in the US), returned +9.6%. The Cash Fund returned 0.23% for May, delivering exactly what it is expected to, a low risk, stable returning fund.