News & Opinion

It's not the end of the world

26 June 2018

It's not the end of the world

 

Read this article and other stories from the country's leading investment and commercial minds in our free 24-page 2018 Commercial Property Thinkbook.

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Ever since the world economy narrowly avoided collapse amidst the Global Financial Crisis of 2008, the question on every investor’s mind has been, “Could this happen again?” 


Doomsayers point to the 10-year cycles of boom and bust that have occurred over the last century. Others point to Brexit or Trump and wring their hands, convinced the next major market correction is just around the corner. 
While there’s no doubt that we live in interesting times, for James Paterson – Head of Wealth for Kiwi investment management firm PIE Funds – these are also times of great opportunity. 


“Over the past five years, investors have become accustomed to a genuine lack of volatility in the market. Investment experiences have been largely positive, and returns have been consistently strong,” says James.
“And yet, in more recent times we have seen the return of volatility – for a wide variety of reasons – and with that, an emerging trepidation about the future.”


In such moments, James says, it’s important to remember that volatility is simply part and parcel of the business of investing, and that staying focused – and educated – is the key to seeing through difficult times. 
“At PIE Funds, risk management has been a top priority over the past 12 months, along with a focus on investments with longer-term returns,” he says.


“We have been encouraging customers to think more about their investment portfolios, and looking for companies with good performance and low debt. 

“Through it all, our key message to clients in the face of uncertainty and unsettled markets has been to revisit their portfolios and ensure they are diversified.” 

James acknowledges that a small, boutique firm like PIE Funds has the advantage of being agile, so can ride out waves of volatility with confidence. 
 “Fundamentally, we are comfortable with the economic outlook of the next six to 12 months. While we are not expecting a cataclysmic market correction, we are anticipating that returns will be more modest, as some markets continue to bounce around,” he says.
And yet, the nagging ‘What if?’ question persists. What if there is another global downturn? 


“It’s fair to say that if there was a pull-back on the international economy, New Zealand would not be immune from the flow-on effects of that,” says James. 


“Like it or not, we are part of the global market, so there generally wouldn’t be places to hide from such a crash, no matter how well we coped with it last time.” 


However, James reiterates the fact that New Zealand markets have shown resilience, and in many cases demonstrated consistent outstanding performance, in spite of the woes of a decade ago. 


“I think people are being realistic, understanding that things will be somewhat subdued going forward; but that’s not something to fear, or shy away from.”


He emphasises once again the simple lessons to be learned from past experiences: review and rebalance your portfolio to ensure it balances with your individual stage of life. Also, don’t focus too much on one sector – such as property or technology – but keep in mind the all-important strategy of diversification. 


Finally, James says, don’t be afraid to ask for advice, as there is inherent value in a trusted relationship with someone who can travel with you on your investment journey.


“Remember, it’s OK to ask for help! Talking to someone with expertise and educating yourself about how your portfolio works will assist the decisions you make about where your investments go.” 

“We are not afraid of volatility. We see it as an opportunity,” says James. No matter what the future might bring, that’s advice worth heeding. 


James Paterson, Head of Sales & Investment, PIE Funds

 

Read this article and other stories from the country's leading investment and commercial minds in our free 24-page 2018 Commercial Property Thinkbook.

Read More in our Commercial Property ThinkBook