Pūtahi Hauora
Defence Health HubNZDF Investment Insights Q2 2022 - from Mercer
NZDF Investment Insights Q2 2022 - from Mercer
0:02
[Music]
0:06
welcome to this edition of investment
0:08
insights today we have hayden tyrell
0:10
with us welcome hayden thanks laura
0:13
the russia ukraine crisis has been
0:15
ongoing for a while now with sanctions
0:17
being put on russia from countries
0:18
across the world how has this impacted
0:21
markets both worldwide and in new
0:22
zealand two key themes are driving
0:24
markets at the moment these are
0:26
inflation and a conflict between ukraine
0:28
and russia the conflict came at a time
0:31
when global share markets were already
0:32
showing increased levels of volatility
0:35
this was off the back of signals from
0:36
central banks around the world that they
0:39
would start to wrap up their support of
0:40
monetary policy regimes in response to
0:43
soaring inflation
0:45
this shook global share markets as a key
0:47
asset in the tool belt of a central bank
0:49
is to raise interest rates we've seen
0:51
this happen in new zealand recently with
0:53
the reserve bank in new zealand raising
0:54
interest rates and these increases
0:56
feeding through to the likes of mortgage
0:58
rates
0:58
this hits businesses the same way that
1:00
it hits households resulting in
1:02
increased loan expenses lower profits
1:04
and a lower share price the conflict
1:06
only added to the volatility as
1:08
investors questioned the severity and
1:10
also the ripple effect it would have on
1:11
many industries and regions
1:14
as a result we saw global share markets
1:16
continue to sell off and investors move
1:18
their money to traditional safe haven
1:19
assets such as treasury bonds and gold
1:22
we also saw commodity assets such as oil
1:25
and wheat have large price fluctuations
1:27
as the conflict's impact on supply of
1:29
these assets was questioned
1:31
war on conflict creates instability
1:33
which we have seen with the migrant
1:35
crisis and financial markets with the
1:37
duration of the conflict unknown do we
1:39
think there will be continual market
1:40
instability going forward
1:42
whilst the war continues and questions
1:44
remain around how it can impact markets
1:47
we will see increased levels of market
1:48
volatility
1:50
in saying that we saw a board-based
1:52
recovery in equity markets across march
1:54
and the vix index which is a measure of
1:56
volatility in the s p 500 has retreated
1:59
indicating less expected volatility in
2:01
the markets the shock of the conflict
2:03
has at this time being priced into
2:05
markets however it will not take much to
2:07
change this if a further escalation
2:08
occurs or the war spills over into a
2:11
neighboring nato country flash flooding
2:13
recently seen across the pacific is
2:15
becoming more frequent with climate
2:16
change cities are learning to adapt how
2:18
are the portfolios adapting to climate
2:20
change
2:22
sustainability is one of mercer's core
2:24
investment beliefs
2:26
last year most new zealand committed
2:27
ourselves to achieving net zero carbon
2:29
emissions from all of our investments by
2:31
2050 with a 45 reduction by 2030. this
2:35
means that we're actively working
2:36
towards a lower carbon future through
2:38
collaborating closely with our
2:40
investment managers to reduce portfolio
2:42
carbon emissions and avoid companies
2:44
that will be adversely affected by
2:46
climate change instead investing in
2:48
solutions that aid the transition like
2:50
renewable energy and digital technology
2:53
inflation numbers in new zealand and
2:55
around the world are at historical highs
2:57
this tends to provide headwinds for
3:00
financial assets how are the portfolios
3:02
set up to deal with inflation that's
3:04
right laura inflation in new zealand was
3:06
5.9 over the past year we've seen
3:08
similar levels globally
3:10
we expect it to remain elevated over the
3:12
short term and then trend back down to
3:14
more normal levels in the medium to long
3:16
term
3:17
our portfolios are stress tested
3:18
regularly for a range of different
3:20
scenarios including higher inflation
3:22
this helps us understand how they would
3:24
behave in that environment a diversified
3:26
approach means we have allocations to
3:28
inflation-sensitive assets such as
3:30
listed and unlisted infrastructure and
3:32
property that should help smooth returns
3:34
in a higher inflationary environment
3:38
[Music]
[Music]
0:06
welcome to this edition of investment
0:08
insights today we have hayden tyrell
0:10
with us welcome hayden thanks laura
0:13
the russia ukraine crisis has been
0:15
ongoing for a while now with sanctions
0:17
being put on russia from countries
0:18
across the world how has this impacted
0:21
markets both worldwide and in new
0:22
zealand two key themes are driving
0:24
markets at the moment these are
0:26
inflation and a conflict between ukraine
0:28
and russia the conflict came at a time
0:31
when global share markets were already
0:32
showing increased levels of volatility
0:35
this was off the back of signals from
0:36
central banks around the world that they
0:39
would start to wrap up their support of
0:40
monetary policy regimes in response to
0:43
soaring inflation
0:45
this shook global share markets as a key
0:47
asset in the tool belt of a central bank
0:49
is to raise interest rates we've seen
0:51
this happen in new zealand recently with
0:53
the reserve bank in new zealand raising
0:54
interest rates and these increases
0:56
feeding through to the likes of mortgage
0:58
rates
0:58
this hits businesses the same way that
1:00
it hits households resulting in
1:02
increased loan expenses lower profits
1:04
and a lower share price the conflict
1:06
only added to the volatility as
1:08
investors questioned the severity and
1:10
also the ripple effect it would have on
1:11
many industries and regions
1:14
as a result we saw global share markets
1:16
continue to sell off and investors move
1:18
their money to traditional safe haven
1:19
assets such as treasury bonds and gold
1:22
we also saw commodity assets such as oil
1:25
and wheat have large price fluctuations
1:27
as the conflict's impact on supply of
1:29
these assets was questioned
1:31
war on conflict creates instability
1:33
which we have seen with the migrant
1:35
crisis and financial markets with the
1:37
duration of the conflict unknown do we
1:39
think there will be continual market
1:40
instability going forward
1:42
whilst the war continues and questions
1:44
remain around how it can impact markets
1:47
we will see increased levels of market
1:48
volatility
1:50
in saying that we saw a board-based
1:52
recovery in equity markets across march
1:54
and the vix index which is a measure of
1:56
volatility in the s p 500 has retreated
1:59
indicating less expected volatility in
2:01
the markets the shock of the conflict
2:03
has at this time being priced into
2:05
markets however it will not take much to
2:07
change this if a further escalation
2:08
occurs or the war spills over into a
2:11
neighboring nato country flash flooding
2:13
recently seen across the pacific is
2:15
becoming more frequent with climate
2:16
change cities are learning to adapt how
2:18
are the portfolios adapting to climate
2:20
change
2:22
sustainability is one of mercer's core
2:24
investment beliefs
2:26
last year most new zealand committed
2:27
ourselves to achieving net zero carbon
2:29
emissions from all of our investments by
2:31
2050 with a 45 reduction by 2030. this
2:35
means that we're actively working
2:36
towards a lower carbon future through
2:38
collaborating closely with our
2:40
investment managers to reduce portfolio
2:42
carbon emissions and avoid companies
2:44
that will be adversely affected by
2:46
climate change instead investing in
2:48
solutions that aid the transition like
2:50
renewable energy and digital technology
2:53
inflation numbers in new zealand and
2:55
around the world are at historical highs
2:57
this tends to provide headwinds for
3:00
financial assets how are the portfolios
3:02
set up to deal with inflation that's
3:04
right laura inflation in new zealand was
3:06
5.9 over the past year we've seen
3:08
similar levels globally
3:10
we expect it to remain elevated over the
3:12
short term and then trend back down to
3:14
more normal levels in the medium to long
3:16
term
3:17
our portfolios are stress tested
3:18
regularly for a range of different
3:20
scenarios including higher inflation
3:22
this helps us understand how they would
3:24
behave in that environment a diversified
3:26
approach means we have allocations to
3:28
inflation-sensitive assets such as
3:30
listed and unlisted infrastructure and
3:32
property that should help smooth returns
3:34
in a higher inflationary environment
3:38
[Music]