Spicers clients not affected by AXA mortgage fund suspensions
28 October 2008
Recent turmoil in financial markets has caused concern to many investors. Share markets worldwide have fallen heavily, significantly impacting portfolios, and confidence in the US financial system is weak. It is not every day that major investment banks go broke.
Not being immune to international events, Spicers shareholder, AXA New Zealand, today announced the suspension of three mortgage funds, the Mortgage Distribution Fund, the Mortgage Investment Fund and the AXA Investment Portfolio Mortgage Fund.
AXA has taken these steps in order to act in the best interests of investors in light of the uncertainty in the investment markets caused by the global credit crunch and more recently.
No impact to Spicers clients
This decision by AXA has no impact to Spicers clients. These funds are not offered to Spicers clients, they are not held as part of any Spicers managed fund portfolio and are not recommended by Spicers advisers to any of our clients.
It should also be noted these suspended funds are not related to Spicers Premium Plus in any way. To provide clients with additional reassurance, we have submitted applications to the Reserve Bank for Spicers Premium Plus to be covered by the Deposit Guarantee Scheme.
We believe Premium Plus meets the criteria (currently issued by the Reserve Bank and Treasury) to be eligible for the guarantee. Approvals will start to be announced from 28 October.
What is Spicers doing to manage the volatility?
Over the past 20 years, we’ve guided investors through six downturns, each one different. The truth is we know only one sensible way to get through such a difficult period: stay well diversified, ignore “noise” as much as possible and get good advice.
Here’s some of what we’re doing to manage portfolios:
Staying diversified. While diversified portfolios have lost ground, because we maintain a wide range of investments the effects of the current volatility is minimised.
Managing to long-term asset allocations. The evidence of history is that knee-jerk reactions like major switches to cash when share markets fall heavily are very costly. Moving to cash will mean losses are locked in. Any potential to re-coup these losses has gone.
Rebalancing. We continue to rebalance between different investment types so we routinely buy asset classes that have fallen in value, and sell those that have risen. This effectively means that over time we consistently buy cheaper assets and lock in the profit of more expensive ones.
Uncovering opportunities. Good investments usually emerge from periods like this. Banks that make it through will be better regulated and may end up with fewer competitors. One of the world’s best known “value” investors, Warren Buffett, recently pumped around $5 billion into US investment bank Goldman Sachs, suggesting he thinks it is undervalued. Compelling opportunities are likely to emerge but risks will also need to be closely managed.
What can you do?
Keep perspective. While the last year has been tough, even including this poor recent performance, the past five years have still been good in many markets.
Try not to be affected by daily news. We don’t attempt to downplay the very real challenges facing markets in the period ahead, but reacting to daily news may be a bigger threat to long-term success than a fall in the market.
Remember why you did, what you did. At some point in the past with the help of a financial adviser you established a portfolio to assist in supporting the life you want to live. Unless you’ve changed your goals, think very carefully – and consult your adviser – before changing your portfolio.
Be careful how you use cash. Cash is fine for the short-term. But as a long-term investment, it’s likely it will not support the lifestyle you’d otherwise enjoy. Switching to cash in a downturn may simply close the door to an eventual recovery.
Get good advice. If advice is important in good markets, in tough times it’s essential. Work with your adviser so you make the right choices.
If you have any queries or concerns, please do not hesitate to contact your adviser.
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