The volatility has been caused by the fund’s lowest monthly return for the month of October, since the Global Financial Crisis in 2008.
CINSF chief executive Damien Beddoes says the large negative return comes after a long period of positive returns over nine years.
Beddoes expects investment returns to remain low and possibly negative in the remaining months of the year as well as in 2019.
He said the lower return in certain investments was faced globally, including in New Zealand, adding it have been triggered by the United States Federal Reserve tightening, trade wars, the uncertainty in relations between the US and China, Italy’s budget stand-off with the European Commission and Brexit.
“We have had one of the longest positive return runs in the fund’s history that mirrors global markets, and as we've been advising our members, there was a forecastdown turn expected at some point,” Beddoes said.
“On the back of falls in global markets, the Cook Islands National Superannuation Fund (investment) results for this year will be a lot lower. Returns are forecast to remain low and possibly negative in the coming months, with more volatility in 2019.”
After recording 14.1 per cent loss on investment in 2008 due to the Global Financial Crisis, the superannuation fund recorded consecutive years of growth until October this year.
In 2009, the net return on investment was 18.1 per cent followed by 9.03 per cent in 2010, 2.6 (2011), 14.13 (2012), 8.86 (2013), 10.9 (2014), 5.58 (2015), 4.8 (2016) and 8.55 per cent last year. These results are for the Conservative Fund and exclude the Balanced and Growth Funds created in 2015.
“We had positive returns in the first half of this year but those have been given up in the wake of recent results,” Beddoes said.
“The CINSF is a long term investor. Our investment strategies are constructed for that purpose, and they have continued to deliver above the fund’s required benchmarks.”
Beddoes says the latest results reflect what their investment managers, Russell Investment of New Zealand, call “geo-political volatility in a late market cycle”.
“When the markets produce negative monthly and even annual returns we encourage members to remain resolved in their risk appetite and not make any hasty decisions on changing between options within the CINSF funds.”
As of June 30, 2018, the fund had 10,860 members and was worth about $150 million.