WEBVTT - Investing in US markets via KiwiSaver 0:00:03.560 --> 0:00:03.920 Kyoda. 0:00:04.120 --> 0:00:06.960 Welcome to Shared Lunch, brought to you by Chase's. My 0:00:07.120 --> 0:00:10.200 name is Halen Madison. We're looking at two things today. 0:00:10.800 --> 0:00:14.200 The first is the new Chasy's US five hundred key 0:00:14.240 --> 0:00:17.720 we Save fund, and given that, what is the state 0:00:17.920 --> 0:00:21.079 of the US markets. I'll be joined by Christa Leiba, 0:00:21.360 --> 0:00:24.920 the head of Global and multi asset Investments at Harbor 0:00:25.000 --> 0:00:28.920 Asset Management, and by our very own Chaza's head of 0:00:28.960 --> 0:00:32.919 super and Funds, Matt McPherson. But before we get started, 0:00:33.159 --> 0:00:34.400 here's some important information. 0:00:34.800 --> 0:00:37.400 Investing involves the risk you might lose the money you 0:00:37.440 --> 0:00:40.720 start with. We recommend talking to a licensed financial advisor. 0:00:41.440 --> 0:00:45.280 We also recommend reading product disclosure documents before deciding to invest. 0:00:45.520 --> 0:00:47.879 Everything you're about to see and here is current at 0:00:47.920 --> 0:00:48.560 the time of record. 0:00:48.640 --> 0:00:50.680 Welcome Chris and welcome Matt to the program. 0:00:51.400 --> 0:00:51.880 Thanks Hellen. 0:00:52.120 --> 0:00:56.040 Chair Za's has just launched its own US five hundred fund, 0:00:56.440 --> 0:01:00.480 which is managed by Vanguard and tracks the famous S 0:01:00.520 --> 0:01:04.600 and P five hundred. Matt, that's been pretty popular. What 0:01:04.800 --> 0:01:07.800 is it about this fund that that is so popular? 0:01:08.360 --> 0:01:12.479 Yeah, really popular with our investors. The single most popular 0:01:12.880 --> 0:01:17.240 option on Chersey's and I guess there's a few reasons that. 0:01:17.880 --> 0:01:21.199 The first is it's a great way of getting exposure 0:01:21.319 --> 0:01:24.520 to those large US companies without having to go through 0:01:24.520 --> 0:01:31.039 and pickstocks yourself. So it comes with diversification because it's 0:01:31.080 --> 0:01:35.160 over five hundred companies in the index. I guess. The 0:01:35.480 --> 0:01:41.479 other point is that ETFs tend to be much lower 0:01:41.520 --> 0:01:44.880 cost than say a managed fund, So there's sort of 0:01:44.959 --> 0:01:48.000 combination of reasons that they are really really popular. 0:01:48.160 --> 0:01:51.200 Chris, the US markets have been up and down, as 0:01:51.240 --> 0:01:54.320 we know, Tariffs are on, they're off, they're paused all 0:01:54.360 --> 0:01:56.920 over the show, and there's been a concern about the 0:01:57.040 --> 0:02:01.160 US economy investing in US stocks. Now, what would you 0:02:01.200 --> 0:02:02.880 say investors need to think about? 0:02:03.760 --> 0:02:08.000 So far this year, it has been all about tariffs, 0:02:08.480 --> 0:02:10.320 but there are actually some other things that might be 0:02:10.360 --> 0:02:13.519 slipping under the radar a little bit for investors because 0:02:13.560 --> 0:02:17.480 the talk has been so dominated by tariffs. And something 0:02:17.560 --> 0:02:20.440 I draw out is that we're in the midst of 0:02:20.440 --> 0:02:23.519 the US earning season. Currently, we've had ninety percent of 0:02:23.639 --> 0:02:27.840 companies report, We've had seventy seven percent of those companies 0:02:27.960 --> 0:02:32.880 beat consensus earnings expectations, So a lot of your viewers 0:02:32.919 --> 0:02:36.320 will be thinking that well from the early part of April. 0:02:36.760 --> 0:02:40.280 Actually markets have bounced back quite substantially. One of the 0:02:40.360 --> 0:02:42.800 key reasons for that has been the earning season, but 0:02:42.840 --> 0:02:45.959 it's it's also been the outlook statements from the companies 0:02:45.960 --> 0:02:51.760 that we've seen. Outlook statements have actually been relatively strong, 0:02:53.000 --> 0:02:55.920 a lot of resilience shown in the face of what 0:02:56.160 --> 0:03:00.600 is quite an uncertain tariff environment. Coming in to the year, 0:03:01.120 --> 0:03:07.359 the US market was expected to grow quite substantially. We 0:03:07.440 --> 0:03:10.119 had the average price target the S and P five 0:03:10.200 --> 0:03:14.880 hundred b substantially in the double digits from most south 0:03:14.919 --> 0:03:18.399 side brokers. Obviously, what we've seen so far has been 0:03:18.560 --> 0:03:22.040 a little bit disappointing, and part of that is a 0:03:22.080 --> 0:03:26.200 reflection of where the economic data is lay. So so 0:03:26.320 --> 0:03:30.240 far this year, the US has slowed down. In the 0:03:30.280 --> 0:03:33.840 first quarter, it looked to be slowing down quite markedly. 0:03:33.960 --> 0:03:36.760 So we have some real time measures of US GDP 0:03:37.280 --> 0:03:42.480 like the GDP now measure, and that came down quite substantially. Subsequently, 0:03:42.600 --> 0:03:45.840 though it's bounced back, So what we're seeing in the 0:03:45.960 --> 0:03:49.000 US is a slow down, but actually from a relatively 0:03:49.120 --> 0:03:55.240 high level. Now with tariffs, who knows is the real 0:03:55.320 --> 0:03:59.840 comment there? We will see ebbs and flows, but what 0:03:59.880 --> 0:04:02.680 I can point out over the last month is that 0:04:02.960 --> 0:04:06.440 we've gone from a point we're thinking that this is 0:04:06.480 --> 0:04:09.120 going to be absolutely disastrous and we're going to have 0:04:09.120 --> 0:04:12.920 extremely high tariffs to the direction of travel being one 0:04:13.240 --> 0:04:16.919 that's quite incrementally positive. But it is President Trump, and 0:04:16.960 --> 0:04:20.080 we know that it can be unpredictable and that can 0:04:20.160 --> 0:04:22.840 unsettle markets a bit. But I just don't think it's 0:04:22.880 --> 0:04:26.159 all about tariffs. Take into account that the US economy 0:04:26.200 --> 0:04:29.440 is slowing but not too bad, and earnings remain to 0:04:29.520 --> 0:04:33.440 be resilient, and for long term investors, share prices tend 0:04:33.480 --> 0:04:34.840 to follow earnings through time. 0:04:36.600 --> 0:04:36.920 Matt. 0:04:37.240 --> 0:04:40.200 When we look at the US five hundred fund that 0:04:40.279 --> 0:04:43.680 Cheesy's has launched, this is a key we saber fund. 0:04:43.880 --> 0:04:46.240 This is not just a fun that you can jump 0:04:46.279 --> 0:04:49.520 into on your Cheesys app if you like. That's a 0:04:49.560 --> 0:04:53.279 bit different pretty much to what has been out there. Now. 0:04:53.320 --> 0:04:56.279 Can you tell us how significant that changes. 0:04:57.200 --> 0:05:02.000 There are a few other key saber funds that allow 0:05:02.040 --> 0:05:05.720 you to invest into the SMP five hundred already. I 0:05:05.720 --> 0:05:08.799 guess what differentiates it from some of the other funds 0:05:08.839 --> 0:05:11.960 that we offer, though, is that it's one hundred percent 0:05:12.120 --> 0:05:17.080 invested into equities, so it comes it's classified as an 0:05:17.120 --> 0:05:23.240 aggressive option, it comes with a higher risk indicator, which 0:05:23.279 --> 0:05:27.159 means higher volatility people need to be comfortable with, and 0:05:27.240 --> 0:05:30.200 it comes with the potential of higher returns over the 0:05:30.240 --> 0:05:34.799 long term. Now, before we launched this fund, we actually 0:05:34.880 --> 0:05:40.280 prioritize to feature that enables people to split their key 0:05:40.400 --> 0:05:44.039 saver across multiple base funds. And the reason we did 0:05:44.080 --> 0:05:48.520 that is because people said they wanted to invest more 0:05:48.560 --> 0:05:50.760 than five percent of their kivsaver into the S and 0:05:50.760 --> 0:05:51.640 P five hundred. 0:05:51.800 --> 0:05:54.960 And that five percent is that because that's what the scheme. 0:05:54.920 --> 0:05:57.760 Has been a self select option since we launched our 0:05:57.800 --> 0:05:59.960 scheme a couple of years ago. They won more than 0:06:00.160 --> 0:06:03.640 five but they don't necessarily want to invest one hundred 0:06:03.640 --> 0:06:06.960 percent of their kipsaver into a fund that only invests 0:06:07.000 --> 0:06:10.839 in US equities. And that's how we're seeing it used 0:06:10.920 --> 0:06:14.400 so far. People are generally adding some US five hundred 0:06:14.440 --> 0:06:17.440 to their investment plan rather than replacing their managed fund 0:06:17.480 --> 0:06:18.360 provider completely. 0:06:19.040 --> 0:06:20.120 So is that how it works. 0:06:20.160 --> 0:06:23.200 You actually need to be able to just you could 0:06:23.240 --> 0:06:26.640 go one hundred percent. You obviously can go more than 0:06:26.680 --> 0:06:29.440 five percent, which you can now with self select, but 0:06:29.520 --> 0:06:32.279 you can't actually with self select invest in the US 0:06:32.360 --> 0:06:32.599 can you? 0:06:32.720 --> 0:06:36.080 Yet you can via some of the inside x ETFs 0:06:36.080 --> 0:06:36.640 that we offer. 0:06:37.120 --> 0:06:40.160 Chris, what do you think the risks are for investors 0:06:40.200 --> 0:06:43.120 thinking about the US markets? You've said that things look 0:06:43.200 --> 0:06:46.159 pretty positive yues has been a bit of a slow down. 0:06:46.960 --> 0:06:50.240 Some of those companies are really well established, you know, 0:06:50.320 --> 0:06:52.440 big balance sheets, all of that sort of thing, compared 0:06:52.440 --> 0:06:57.440 to what's happening in Australasia. Anyway, there's still always risk 0:06:58.200 --> 0:07:01.560 and there's volatility. So I suppose it depends on someone's appetite. 0:07:01.600 --> 0:07:02.280 What would you say? 0:07:02.880 --> 0:07:05.040 Yeah? So one of the rests I draw out is 0:07:05.080 --> 0:07:08.480 when you're investing in the US market, you're inheriting US 0:07:08.560 --> 0:07:12.160 dollar exposure as well. So the US share market may 0:07:12.240 --> 0:07:15.760 go really really well, but investors have to be prepared 0:07:16.040 --> 0:07:21.360 for the potential outcome that currency, particularly over the shorter term, 0:07:21.720 --> 0:07:24.320 might move things around a bit. So you could have 0:07:24.360 --> 0:07:27.239 a scenario we are investing in the US market, US 0:07:27.240 --> 0:07:30.320 market's done ten percent, you might be thinking your key 0:07:30.320 --> 0:07:33.760 we save has done quite well. However, it could be 0:07:33.880 --> 0:07:36.840 during a period where the US dollar is weakened and 0:07:36.880 --> 0:07:39.640 if the US dollars a weekends by ten percent by 0:07:39.680 --> 0:07:43.520 the time that is in New Zealand dollars, that that 0:07:43.560 --> 0:07:47.280 would be a flat sort of return. Look, that's not 0:07:47.440 --> 0:07:50.760 my base case by any means, but it's simply saying 0:07:50.800 --> 0:07:53.400 that there are two key levers in this investments, how 0:07:53.400 --> 0:07:56.960 the shares do, but also the currency on the US 0:07:56.960 --> 0:08:00.760 market overall. It's the world's biggest market for a reason. 0:08:01.360 --> 0:08:05.040 There's the key global share indices that people use tend 0:08:05.120 --> 0:08:08.960 to have a sixty to sixty five percent allocation to 0:08:09.120 --> 0:08:12.640 the US. So I wouldn't look at its risk profile 0:08:12.880 --> 0:08:16.560 as being that different than say a global share fund. 0:08:17.000 --> 0:08:24.160 There are some geographical considerations you need to take into account. Obviously, 0:08:24.200 --> 0:08:28.560 the US market will have sensitivities more to US policy. 0:08:28.960 --> 0:08:31.800 There can also be events that hit the US harder 0:08:32.240 --> 0:08:35.560 than other economies around the world. So those are just 0:08:35.600 --> 0:08:38.720 a few things to take into account when looking at 0:08:38.720 --> 0:08:39.720 a fund of that nature. 0:08:39.960 --> 0:08:42.600 Even so, Matt, given what has been happening in the 0:08:42.679 --> 0:08:46.120 US and the level of volatility, there would be some 0:08:46.240 --> 0:08:49.640 viewers and listeners probably thinking is my key we say 0:08:49.640 --> 0:08:52.240 was safe if I start investing even a proportion of 0:08:52.240 --> 0:08:53.280 it in the US. 0:08:54.040 --> 0:08:57.680 Of For sure, I think one thing that gives me 0:08:57.720 --> 0:09:00.480 a bit of confidence is there. There's a lot of 0:09:00.559 --> 0:09:03.319 uncertainty and change at the moment. We all appreciate that. 0:09:04.120 --> 0:09:05.960 I think if you go back in time, we would 0:09:06.040 --> 0:09:09.320 often say that same thing. At the moment, things feel 0:09:09.440 --> 0:09:14.400 very uncertain. And what we find is over time, those big, 0:09:14.480 --> 0:09:18.000 well run, successful American companies there's a lot of energy 0:09:18.040 --> 0:09:21.440 that comes from that and a lot of focus on 0:09:21.480 --> 0:09:24.480 solving problems. So one of the reasons these companies have 0:09:24.520 --> 0:09:27.880 become successful is because they are really good at solving 0:09:27.920 --> 0:09:30.520 hard problems. And so I guess I take a little 0:09:30.520 --> 0:09:33.439 bit of confidence that we've got some focus and some 0:09:35.760 --> 0:09:38.600 very big brains working on how to solve whatever the 0:09:38.600 --> 0:09:40.280 problem of the day is. And at the moment, it 0:09:40.280 --> 0:09:43.040 feels like the problem of the day is maybe some 0:09:43.080 --> 0:09:46.000 of the policies that's coming out of the States. But 0:09:46.160 --> 0:09:48.439 go back a couple of years ago, we also had 0:09:48.520 --> 0:09:51.400 at the time probably what felt like equally or even 0:09:51.480 --> 0:09:54.200 larger issues with things like the pandemic. And this is 0:09:54.240 --> 0:09:56.480 repeated over time. 0:09:56.640 --> 0:09:59.160 Matt. It's quite interesting. I was talking to a US 0:09:59.240 --> 0:10:02.000 invest or the other and we're talking about this very thing, 0:10:02.840 --> 0:10:06.040 and he said to me, just imagine that you were 0:10:06.080 --> 0:10:09.800 sitting there in twenty nineteen and someone came up to 0:10:09.800 --> 0:10:12.560 you and said, over the next five years, you're going 0:10:12.600 --> 0:10:15.079 to have a global pandemic, so you're all going to 0:10:15.120 --> 0:10:18.200 be locked down for months on end. Then once we 0:10:18.280 --> 0:10:21.600 get out of it, you're going to have the worst 0:10:21.720 --> 0:10:25.640 inflation that you've had in recorded history. Then we're going 0:10:25.679 --> 0:10:28.840 to increase interest rates by the most that we ever 0:10:29.240 --> 0:10:32.120 have in history, and the response to that will be 0:10:32.440 --> 0:10:37.960 a second bear market? And what sort of return would 0:10:37.960 --> 0:10:40.160 you expect over that time? And you kind of go, well, 0:10:40.160 --> 0:10:43.600 that's a lot to put into five years, And the 0:10:43.679 --> 0:10:48.240 answer is returns have actually been above average over that time. So, 0:10:48.440 --> 0:10:51.319 I mean the lesson in that for me is that 0:10:51.400 --> 0:10:54.160 sometimes when you look at the headlines, you can go, look, 0:10:54.200 --> 0:10:59.040 this is really scary, But the reality is, is it 0:10:59.080 --> 0:11:02.720 more or less scared than a pandemic, two or three 0:11:02.760 --> 0:11:05.840 bear markets depending on the time, and the highest inflation 0:11:05.920 --> 0:11:10.280 and interest rates ever, that probably seems a little bit 0:11:10.400 --> 0:11:14.640 light or even on par relative to those particular events. 0:11:15.080 --> 0:11:18.680 Yeah, I guess that's why understanding your investment horizon is 0:11:18.760 --> 0:11:21.760 probably the most important thing you can do before you're 0:11:21.760 --> 0:11:24.760 making any decisions, because in any one of those situations. 0:11:24.760 --> 0:11:29.000 If you were thinking short term, you probably would have 0:11:29.040 --> 0:11:31.960 been really upset, and if you're thinking long term, you 0:11:32.080 --> 0:11:34.679 probably would be you know, you're feeling confident that you've 0:11:34.720 --> 0:11:35.640 made the right decisions. 0:11:36.200 --> 0:11:38.960 There are some fund managers in Europe and the Light though, 0:11:39.000 --> 0:11:41.800 who have been pulling back a bit, not pulling out 0:11:41.960 --> 0:11:44.720 of the US markets. They're still in there, but they 0:11:44.760 --> 0:11:47.120 have been just gradually pulling back because they've been feeling 0:11:47.120 --> 0:11:50.560 a bit skittish about the Trump administration and they are 0:11:50.600 --> 0:11:54.720 actually thinking that structurally their allocation will be somewhat different. 0:11:54.760 --> 0:11:56.920 And this may be a longer term thing because it 0:11:56.920 --> 0:11:58.520 will happen gradually over time. 0:11:58.760 --> 0:12:00.520 Chris, just keen for your on that. 0:12:01.160 --> 0:12:05.720 Yeah, so starting point matters in this discussion because coming 0:12:05.840 --> 0:12:10.960 into twenty twenty five, foreign ownership of US shares was 0:12:11.000 --> 0:12:13.560 at all time highs. And if we think about the 0:12:13.679 --> 0:12:17.240 narrative coming into twenty twenty five, it's that the US 0:12:17.320 --> 0:12:19.959 has got the best companies at the forefront of AI 0:12:21.000 --> 0:12:25.280 economy is chugging away really, really well. And it's actually 0:12:25.280 --> 0:12:28.480 the reversal of some of those themes as opposed to 0:12:28.520 --> 0:12:33.360 Donald Trump himself that's actually driving and it's not in 0:12:33.520 --> 0:12:36.640 the figures I've seen is that they're certainly not leaving 0:12:36.640 --> 0:12:39.360 in their droves. I would more classify it as being 0:12:39.679 --> 0:12:43.200 they've gone from an overweight position and a very optimistic 0:12:43.280 --> 0:12:49.440 view of the market to probably nearer to longer term benchmarks. So, 0:12:49.600 --> 0:12:53.000 as I said, it's not all Trump. Deep seek was 0:12:53.120 --> 0:12:56.400 a really big factor in this. So we had coming 0:12:56.440 --> 0:13:00.280 into the year this deep consensus that the U US 0:13:00.480 --> 0:13:04.040 is just going to completely own AI. China won't get 0:13:04.040 --> 0:13:06.480 a look in because the US cut off the fastest 0:13:06.559 --> 0:13:10.400 chips are to China. Now they're able to innovate. I 0:13:10.440 --> 0:13:14.319 don't know how, it doesn't really matter how. The fact 0:13:14.480 --> 0:13:18.080 is they're there. They're a player. It's not just Deep Secrets. 0:13:18.160 --> 0:13:22.679 It's Baidu, it's ten Cent, it's Ali Barber. So that 0:13:22.920 --> 0:13:26.400 has been one of the reasons why we've seen some 0:13:26.640 --> 0:13:31.440 investor interest go away from the US. The other is 0:13:31.480 --> 0:13:35.080 what's happening in Europe at the moment. Now we're actually 0:13:35.120 --> 0:13:39.800 starting to see some fiscal impulse in Europe, so we've 0:13:39.840 --> 0:13:44.880 had some budget relaxation rules within the EU. It means 0:13:44.920 --> 0:13:50.360 that Germany has past a spending package that is going 0:13:50.440 --> 0:13:53.280 to pump a lot of stimulus into their economy. We're 0:13:53.280 --> 0:13:56.640 starting to see at the margin a little bit more 0:13:56.679 --> 0:14:01.840 stimulatory policy from France and Italy as well. So this 0:14:02.120 --> 0:14:06.240 is from economies that have been in austerity for the 0:14:06.280 --> 0:14:09.720 past fifteen years. So that has been a fundamental change 0:14:10.040 --> 0:14:14.040 which has led people to reduce their overweight positions from 0:14:14.120 --> 0:14:16.760 the US. I think we've just gone from a point 0:14:17.040 --> 0:14:21.240 where investors thought that the US was probably just their 0:14:21.320 --> 0:14:24.640 only choice or their best choice, to one where people 0:14:24.680 --> 0:14:27.600 are looking at Europe saying, look, valuations are a bit 0:14:27.640 --> 0:14:31.720 more reasonable over there, and actually things perhaps weren't as 0:14:31.760 --> 0:14:33.520 bad as we thought overall. 0:14:33.760 --> 0:14:36.880 Are we seeing those fund managers in Europe particularly okay, 0:14:36.920 --> 0:14:39.320 they might be investing in their own or they might 0:14:39.320 --> 0:14:41.120 be investing in, say, Asian markets. 0:14:41.480 --> 0:14:42.320 What do you think of that? 0:14:42.880 --> 0:14:46.520 I think where the tide has rarely turned, as in 0:14:46.640 --> 0:14:51.239 China and Hong Kong stocks. You'll remember the narrative around 0:14:51.840 --> 0:14:54.640 just the past couple of years actually, of many people 0:14:54.720 --> 0:15:00.560 questioning whether these stocks are investable or not. The latest 0:15:00.560 --> 0:15:03.800 starter we're seeing is that investors are starting to go 0:15:03.960 --> 0:15:07.160 back over there. Why well, we're starting to see a 0:15:07.200 --> 0:15:10.400 little bit of stimulus come out of China. They know 0:15:10.680 --> 0:15:13.160 that Trump's tariffs are going to be a big challenge 0:15:13.200 --> 0:15:18.440 on their economy, so they're meaningfully pumping the accelerator when 0:15:18.480 --> 0:15:22.520 it comes to stimulus in their economy. And actually the 0:15:22.520 --> 0:15:26.520 other thing too is the stocks there are cheap. Now, 0:15:26.600 --> 0:15:29.560 if we are to draw one criticism of the US market, 0:15:29.840 --> 0:15:33.040 it is that the valuations in the market are relatively high. 0:15:33.520 --> 0:15:38.120 So investors might look at some of the companies in 0:15:38.160 --> 0:15:42.480 Asia and go, well, actually, relative valuation wise, although there's risks, 0:15:42.560 --> 0:15:43.520 I'm happy to step in. 0:15:44.880 --> 0:15:45.040 Now. 0:15:45.120 --> 0:15:48.560 If we get back to the US five hundred fund 0:15:48.600 --> 0:15:50.920 that she has launched. You said it was the most 0:15:51.040 --> 0:15:54.000 popular feature that we've been asked for for key we Saver, 0:15:54.720 --> 0:15:57.280 But are people putting me their money where their mouths? 0:15:57.320 --> 0:16:00.920 Are they actually investing and deciding that will use this 0:16:01.000 --> 0:16:01.720 for Keysaber. 0:16:02.000 --> 0:16:04.800 Yeah, we launched about a week ago. We've seen quite 0:16:04.800 --> 0:16:08.960 a good response on people switching to our scheme. We've 0:16:08.960 --> 0:16:13.400 also seen a lot of our members add the US 0:16:13.440 --> 0:16:16.360 five hundred fund to their investment plans or rebalance their 0:16:16.400 --> 0:16:20.600 portfolios to include more of it. And the third group 0:16:20.680 --> 0:16:24.240 we've seen is around ten percent of the people who 0:16:24.240 --> 0:16:26.880 have signed up in that last week haven't been in 0:16:26.960 --> 0:16:32.440 key SABER before. And that's really interesting because I think 0:16:32.480 --> 0:16:36.800 through a combination of great experience and access to a 0:16:36.800 --> 0:16:40.640 wide range of product, we're managing to engage people who 0:16:40.680 --> 0:16:43.840 for whatever reason, have not been part of KISABER in 0:16:43.880 --> 0:16:46.720 the past. And what we see is that a lot 0:16:46.760 --> 0:16:48.480 of these people are self employed. 0:16:48.640 --> 0:16:51.600 Of course, just thinking about other SCA classes, we've focused 0:16:51.640 --> 0:16:56.280 on shares predominantly in this conversation, What about bonds? 0:16:56.600 --> 0:16:59.240 What about gold that's having another resurgence. 0:17:00.360 --> 0:17:04.600 Are you seeing with global investors and investors here at 0:17:04.640 --> 0:17:08.399 home even thinking about other asset classes beyond equities? 0:17:09.040 --> 0:17:13.040 Yeah, so bond yeards been attractive for some time. We 0:17:13.240 --> 0:17:18.000 saw as the market was really worried about tariffs, we 0:17:18.040 --> 0:17:21.400 saw bond yields fall quite substantially, so they got down 0:17:21.440 --> 0:17:23.560 to around three point eight percent for the US ten 0:17:23.640 --> 0:17:26.440 year yield, So that provided a bit of a cushion 0:17:26.920 --> 0:17:32.000 as shares were falling quite substantially over that time. Since then, 0:17:32.040 --> 0:17:35.679 we've actually seen a bounce back up, and part of 0:17:35.760 --> 0:17:39.560 that is just around the worry that the market has 0:17:39.760 --> 0:17:42.920 around the amount of debt that the US might need 0:17:42.960 --> 0:17:47.359 to raise and the more supply of bonds. Obviously that 0:17:47.760 --> 0:17:51.159 puts pressure on bond yields, So the returns there have 0:17:51.280 --> 0:17:55.120 been okay. I still think on a go forward basis 0:17:55.160 --> 0:17:59.159 they look relatively attractive. Gold has been an interesting one, 0:18:00.800 --> 0:18:05.520 and I suspect part of the resurgence that we've seen 0:18:05.600 --> 0:18:08.720 in gold is there has been an uptick in the 0:18:08.840 --> 0:18:13.879 US and inflation expectations. So there's a University of Michigan 0:18:14.280 --> 0:18:18.080 measure where they go out and survey people and go, 0:18:18.200 --> 0:18:20.480 you know, what do you think inflation will be over 0:18:20.560 --> 0:18:26.480 particular timeframes. Now that measure for the five to ten 0:18:26.560 --> 0:18:31.280 year inflation is at the highest level since the mid nineties, 0:18:31.359 --> 0:18:36.200 So inflation expectations out there are quite high. So people 0:18:36.240 --> 0:18:40.280 are looking at what are the inflation hedges that I 0:18:40.320 --> 0:18:43.800 convest in, and gold through time has proven to be 0:18:43.880 --> 0:18:48.399 quite a solid inflation hedge for people. I think the 0:18:48.440 --> 0:18:52.800 other aspect, too, is there is some talk around about 0:18:52.840 --> 0:18:57.200 the US continuing to be the world's global reserve currency. 0:18:57.640 --> 0:19:01.200 I think that's been over egged a little bit. I 0:19:01.720 --> 0:19:05.960 think the US has a very solid position as continuing 0:19:06.000 --> 0:19:10.160 to be the world's reserve currency. But at these times 0:19:10.200 --> 0:19:13.520 where you talk about tariffs, you can sometimes get these 0:19:13.600 --> 0:19:16.840 narratives taking on a life of their own. So I 0:19:16.880 --> 0:19:19.520 think that has led people to say, okay, well, let's 0:19:19.560 --> 0:19:22.399 diversify our holdings a bit. We'll have some holdings in 0:19:22.520 --> 0:19:27.760 US dollars, holdings in euro, holdings in Japanese yen, which 0:19:27.800 --> 0:19:30.840 is a popular safe haven currency, but let's also have 0:19:30.880 --> 0:19:35.680 an allocation to gold as well. And that really skyrip, 0:19:36.040 --> 0:19:36.399 isn't it? 0:19:36.840 --> 0:19:39.120 Just thinking about more modern asset classes. 0:19:39.119 --> 0:19:42.040 If you like crypto, do you see a time when 0:19:42.280 --> 0:19:43.920 people be able to put their key we save it 0:19:44.000 --> 0:19:46.000 into crypto in the same way that we're offering the 0:19:46.040 --> 0:19:46.880 share options. 0:19:47.480 --> 0:19:49.640 Yeah, I mean right at the moment, we're looking at 0:19:50.520 --> 0:19:53.919 us self select, which is the next chapter after the 0:19:54.000 --> 0:19:58.240 US five hundred fund for us with our product, and 0:19:58.720 --> 0:20:01.200 you know, we're trying to work out what to include. 0:20:01.960 --> 0:20:04.159 We start with a principle that we want to provide 0:20:04.160 --> 0:20:07.679 as much access as we can and let our members 0:20:07.720 --> 0:20:10.879 decide on where to put their own money. And so 0:20:11.000 --> 0:20:14.480 the crypto ETFs that have launched, they are widely held, 0:20:15.640 --> 0:20:19.040 there is a lot of liquidity. Some of them have 0:20:19.600 --> 0:20:24.240 actually considerably lower volatility than some of the big name companies, 0:20:25.200 --> 0:20:26.600 say at the top of the S and P five 0:20:26.680 --> 0:20:29.760 hundred list. So I think it's a really good argument 0:20:29.880 --> 0:20:34.160 to say, maybe via an ETF, that crypto should be 0:20:34.200 --> 0:20:38.400 something that people can allocate. Again, with our guardrails kind 0:20:38.440 --> 0:20:41.440 of process built into our product, that may be up 0:20:41.440 --> 0:20:45.040 to five percent of your portfolio with exposure to crypto 0:20:45.800 --> 0:20:47.880 is something that someone can make a choice about rather 0:20:47.920 --> 0:20:49.240 than us making that choice. 0:20:49.520 --> 0:20:54.480 For Matt, what's interesting with cryptocurrency is the trends that 0:20:54.520 --> 0:20:57.399 we're seeing come out of the US with regards to this. 0:20:57.680 --> 0:21:02.080 So you mention ETFs, well, what that has enabled is 0:21:02.119 --> 0:21:04.480 for people to have a really safe way to get 0:21:04.520 --> 0:21:12.040 exposure to cryptocurrency. That's actually helped enable better institutional participation 0:21:12.800 --> 0:21:16.560 in the cryptocurrency market. So it's interesting in the US, 0:21:16.640 --> 0:21:19.400 You've got the likes of Yale Harvard who have said 0:21:19.400 --> 0:21:23.560 that they have exposure to cryptocurrencies. You're also starting to 0:21:23.600 --> 0:21:27.080 see kind of state pension funds and even some sovereign 0:21:27.119 --> 0:21:34.080 wealth funds participate. To be honest, i'm surprised, you know, 0:21:34.200 --> 0:21:36.360 back in many years ago, I kind of looked at 0:21:36.359 --> 0:21:39.800 it and didn't quite get it. But it really has 0:21:39.920 --> 0:21:45.760 come a long way in terms of just who can participate, accessibility, 0:21:46.240 --> 0:21:49.680 but also institutional support for the sector as well. 0:21:50.359 --> 0:21:53.159 Matt, So how long before we might see self select 0:21:53.200 --> 0:21:56.240 stocks individual stocks in the US being available for people 0:21:56.240 --> 0:21:57.359 in their key we say a scheme. 0:21:57.560 --> 0:22:00.040 Well, the good thing is, in order to launch the 0:22:00.160 --> 0:22:03.320 US five hundred fund, a lot of the hard work, 0:22:03.359 --> 0:22:06.719 I suppose the infrastructure is in place for us. So 0:22:07.359 --> 0:22:10.359 that is our next priority that we've started actively working 0:22:10.359 --> 0:22:14.920 on now, as you self select won't put absolute time 0:22:14.960 --> 0:22:18.960 on it because it's really important that we go through 0:22:19.000 --> 0:22:22.520 our testing and validation steps and get this right before 0:22:22.560 --> 0:22:27.720 we release it. Current best estimate is I think middle 0:22:27.720 --> 0:22:28.080 of the year. 0:22:28.200 --> 0:22:31.920 What about things like private equity, because it's pretty popular infrastructure, 0:22:31.960 --> 0:22:32.720 that kind of thing. 0:22:33.040 --> 0:22:36.480 Yeah, private equity has been really topical in twenty twenty five, 0:22:37.320 --> 0:22:40.640 and for good reason. If we look at Ossie, which 0:22:40.680 --> 0:22:42.560 we always do because they had a fifteen year head 0:22:42.560 --> 0:22:46.960 start on us with superannuation, their super funds have a 0:22:47.040 --> 0:22:52.640 much higher exposure to private assets. They're super funds are 0:22:52.640 --> 0:22:58.040 investing in anything from large infrastructure projects to small startup companies. 0:23:00.119 --> 0:23:02.960 We tend to be a little bit less adventurous in 0:23:03.000 --> 0:23:06.320 New Zealand at this stage, but there's a lot of 0:23:06.320 --> 0:23:07.960 talk about it, and I think there's actually a lot 0:23:07.960 --> 0:23:12.440 of will we need to overcome some of the challenges 0:23:12.520 --> 0:23:16.040 with regard to valuations and liquidity because that's tough for 0:23:16.160 --> 0:23:20.920 private companies. But yeah, I'm confident. I think as kwisaver 0:23:21.400 --> 0:23:26.080 continues to mature, that'll happen. We're at that kind of 0:23:26.080 --> 0:23:28.440 tipping point at the moment where these things start becoming 0:23:28.560 --> 0:23:30.040 really viable for super funds. 0:23:30.160 --> 0:23:33.080 We've got the budget coming up. There is if you like, 0:23:33.240 --> 0:23:36.960 rumors that the government might cut its contribution, which is 0:23:37.160 --> 0:23:41.000