The Aon Investment Update

The Aon Investment UpdateAon Hewitt Investment ConsultingJuly 2014

Contents

2

In this issue

Commentary 3-7

Discretionary Assets - Risk and Return 8

Discretionary Assets - Asset Allocation 9

Conservative, Balanced, Growth Risk Profiles 10

Overseas Equities (unhedged) 11

New Zealand Equities 12

Australasian Equities 13

New Zealand Bonds 14

Overseas Bonds 15

Cash 16

Alternatives 17

Property 18

Global Property 19

Income Funds 19

Explanatory notes 20

About Aon Hewitt 21

Investment Forecasts 22

Economists’ Survey 23

The ManagersAMPCI AMP Capital Investors (NZ)ANZ ANZ Investments (NZ) CFSGAM Colonial First State Global Asset ManagementDEVON Devon Funds Mgt EC Elevation Capital Mgt FISHER FUNDS Fisher Funds Management HARBOUR Harbour Asset ManagementMAGELLAN Magellan Asset Management MILFORD Milford Asset ManagementMINT Mint Asset ManagementNZAM NZ Assets MgtRUSSELL Russell Investment GroupSALT Salt Funds ManagementTYN Tyndall Investment Mgt

The IndicesNZ Equities NZX 50 (Gross)* NZX 50 Portfolio*Australasian NZX 50 (Gross)*Equities NZX 50 Portfolio* ASX 200 in $NZOverseas MSCI Gross in $NZ 0% & 100%Equities MSCI All World in $NZNZ Bonds ANZ Govt StockOverseas Citigroup Govt. World 100%Bonds Barclays Capital 100% Aggregate Cash ANZ 90 Day Bank Bill

*Includes imputation credits

Hedge

July 2014

3

The good times continue Investment Commentary - June 2014

A solid performance in the June quarter means that half way through 2014 investors have enjoyed

reasonable returns from most sectors. The strength of the New Zealand Dollar (up more than 6% versus

the USD and more than 7% against the Euro to the end of June), has been the only real negative –

wiping out returns from overseas equities for investors who were not hedged.

Domestic equities edge higher

The domestic equity market was flat over the June quarter amid a flurry of IPO activity; however the first

quarter performance was strong so the NZX 50 index is still up 8.5% so far this year. Many New Zealand

stocks look fully priced but at least we are seeing some strong growth in the local economy. New

Zealand’s Gross Domestic Product grew 3.8% in the first quarter of 2014 – compare that with a fall of

2.9% for the US.

Most of the domestic equity funds in our survey provided decent returns over the June quarter. Devon’s

Australian Only fund led the way with a 4.2% return and Salt’s NZ Plus fund returned 2.7%. Milford

struggled over the quarter with their New Zealand Wholesale Equity fund returning -3.9%, their Active

Growth Fund returning -1.1% and their Trans-Tasman Fund returning -0.3%. However all of the Milford

domestic equity portfolios have delivered strong long term returns.

Listed property was very strong over the quarter – with the index up 8.2% and all the listed property

funds returning more than 8%. The average manager in this sector (excluding direct property funds)

has returned 16% p.a. over the last 5 years.

1

Asset Sector Q2 2014 1 year 3 years p.a. 5 years p.a.

Australasian Equities - Manager average - NZX50 gross/ ASX200

1.2% 0.7%

19.9% 14.6%

15.3% 12.8%

14.8%12.8%

75% NZX50 Gross with imputation credits/25% ASX 200 with currency unhedged

1

4

The Aon Investment Update


New Zealand Property (Listed) - Manager average - NZX Property Index

8.3% 8.2%

12.3% 7.8%

14.7% 11.6%

16.0%13.4%

Global shares continued to rise, with the US market up nearly 5% over the quarter. Despite the

disappointing GDP number, other economic data releases showed signs of improvement in the US

economy. Investors have also been encouraged by the actions of the Central Banks. US Federal Reserve

Chair Janet Yellen continues to reassure investors that monetary policy will remain accommodative, and

in Europe the European Central Bank reduced the benchmark interest rate to 0.15% and cut its deposit

rate for banks from zero to -0.10%.

Despite all achieving positive returns, global equity managers struggled to beat the benchmark over

the quarter. Only Fisher Funds (4.2%) was ahead of the MSCI World index which rose 3.9% on an

unhedged basis. Over the last 12 months the index has returned 9.4% and the average manager just

8.1%.


Global Equities (unhedged) - Manager average - MSCI World (unhedged)- # beating index

3.2% 3.9%1/9

8.1% 9.4%3/9

10.1% 9.6%4/9

9.5%8.3%6/8

Global bonds continue to surprise

Global bonds provided good returns over the quarter as interest rates in the US were little changed.

Whilst there is evidence of economic conditions in the US improving and inflation picking up, the Federal

Reserve appears to be in no hurry to raise interest rates. In Europe too, the European Central bank is

focused on adding stimulus, not withdrawing it; and the Bank of Japan appears determined to

July 2014

5

keep printing money for many years. Only the UK saw a meaningful increase in interest rates over the

quarter as the Bank of England Chairman stated that UK interest rates “may start rising sooner than

expected” in reponse to a strengthening economy and buoyant housing market.

Fisher Institutional continues to lead the way in Global Bonds, with their fund returning 3.5% over the

quarter – well ahead of the index return of 2.8%. Fisher is now ranked 1st in this sector over 1, 3 and 5

years.

In New Zealand, the Reserve Bank Chairman delivered two further 0.25% increases to the Official

Cash Rate in April and June, taking the rate to 3.25%. These were widely anticipated and the impact

on longer term interest rates was minor. Yields rose slightly in June but were more or less unchanged

over the quarter, allowing Domestic Bond funds to deliver positive returns to investors. However

New Zealand bonds continue to trail global bonds as the RBNZ remains the only Central Bank in

the Western world actively tightening monetary policy. The chart below shows the impact of that

tightening on bond returns. For four years New Zealand bonds performed more or less in line with

global bonds, but over the last twelve months or so performance has deviated sharply.

100

105

110

115

120

125

130

135

140

145

Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 Jun 14

Benchmark Bond Performance

New Zealand Bonds Global Bonds

6


Amongst domestic bond managers Tyndall fared best over the quarter with their NZ Fixed Interest

Fund returning 1.9%. Harbour’s Corporate Bond Fund was the worst performer as NZ Government

bonds outperformed slightly versus corporates, but the range of returns was narrow. Over the last three

years all managers have outperformed the Government Stock benchmark, with the average manager

returning 5.6% p.a.


New Zealand Bonds - Manager average - NZ Govt Bond Index

1.7% 1.6%

3.8% 2.1%

5.6% 4.3%

6.9%5.5%

Overseas Bonds (100% hedged) - Manager average - Barclays Global Aggregate

2.8% 2.8%

8.3% 8.0%

8.3% 7.2%

9.0% 7.4%

While global growth has picked up, for many economies it is still well below pre-GFC levels, and global

inflation remains subdued, with deflation more of a threat in some areas. The search for yield by investors

has driven equity (and bond) markets to record levels and we will need to see strong corporate earnings

growth over the next year or so to justify current stock market valuations.

Even if earnings do disappoint, the US Federal Reserve (and the European Central Bank, the Bank of

England and the Bank of Japan) all seem to be prepared to do whatever they can to continue to reassure

investors. So for now at least it’s hard to argue with the golden rule of investing - ‘don’t fight the Fed’.

But looking longer term, it might be worth considering the comments from the Bank of International

Settlements (the central bank for central banks) in their most recent annual report:

‘Overall, it is hard to avoid the sense of a puzzling disconnect between the markets’ buoyancy and

underlying economic developments globally.’

July 2014

7

New Zealand Fund Management Changes

• During the quarter it was announced that the London Stock Exchange Group (LSE) has agreed to

purchase Russell Investments. The deal is expected to complete in early 2015. The LSE is thought to

be primarily interested in Russell’s index business. At this stage it is unclear whether they will choose

to keep the Asset Management and Consultancy business or sell it.

• Tyndall Investments has announced that Stuart Williams has been appointed Head of Equities, replacing

Rickey Ward who left in March. Stuart was previously an Investment Manager with ANZ Investments.

• Craigs Investment Partners has hired an investment team to join their funds management business

Andrew South, Roy Cross and Stefan Stevanovic were all formerly at Brook Asset Management which

closed down in April this year. James Ring, who will co-lead the team with Andrew South, was formerly

an investment manager at Rank Group.

• AMP has added Jonathan Davies to their equity team following the departure of John Phipps earlier

this year.

• Morningstar have announced that Chris Douglas has been appointed to a new role as director of the

American regional data team. He will relocate to Chicago in September. Chris is currently Co-Head of

Australasian Fund research. Morningstar’s New Zealand fund manager research will now be managed

out of Sydney.

If you need any help reviewing your fund’s strategic long term asset allocations, or require any assistance with

manager selection, please call your Aon Hewitt consultant.

AMPCI

NZAMFISHER FUNDS

ANZ

MILFORD

TYN

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

14.0

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0

Retu

rn (%

pa)

Risk8


Discretionary Assets – Risk and Return

Returns (%) gross of tax and fees for

Funds the last the year ended 30 JuneManager ($m) 1 qtr Rk 1 yr Rk 3 yrs Rk 5 yrs Rk 2014 2013 2012 2011 2010

AMPCI 22 3.4 2 12.9 3 9.7 5 9.8 4 12.9 13.3 3.1 13.0 7.2

ANZ 446 3.6 1 14.2 1 12.2 2 13.1 1 14.2 18.4 4.3 15.4 13.5

FISHER FUNDS 838 2.8 4 13.3 2 9.7 4 10.2 3 13.3 13.4 2.8 9.9 11.7

MILFORD 132 2.0 5 12.4 4 13.4 1 12.4 21.7 6.5 9.8

NZAM 84 0.7 6 6.9 6 8.0 6 8.1 5 6.9 11.6 5.5 6.7 10.0

TYN 204 2.8 3 12.2 5 10.0 3 10.8 2 12.2 15.6 2.7 11.6 12.4

Average 2.9 13.0 10.1 10.5 13.0 14.6 3.1 12.2 10.0

Average

Price inflation

2.6

0.3

12.0

1.6

10.7

1.1

11.1

2.0

12.0

1.6

15.6

0.7

4.6

1.0

13.1

5.3

10.3

1.7

Wage inflation 1.2 3.2 3.0 3.1 3.2 2.5 3.4 3.9 2.8

3 Year Risk/Return

(asset-weighted)

July 2014

9

Returns (%) gross of tax and fees for

Funds the last the year ended 30 JuneManager ($m) 1 qtr Rk 1 yr Rk 3 yrs Rk 5 yrs Rk 2014 2013 2012 2011 2010

AMPCI 22 3.4 2 12.9 3 9.7 5 9.8 4 12.9 13.3 3.1 13.0 7.2

ANZ 446 3.6 1 14.2 1 12.2 2 13.1 1 14.2 18.4 4.3 15.4 13.5

FISHER FUNDS 838 2.8 4 13.3 2 9.7 4 10.2 3 13.3 13.4 2.8 9.9 11.7

MILFORD 132 2.0 5 12.4 4 13.4 1 12.4 21.7 6.5 9.8

NZAM 84 0.7 6 6.9 6 8.0 6 8.1 5 6.9 11.6 5.5 6.7 10.0

TYN 204 2.8 3 12.2 5 10.0 3 10.8 2 12.2 15.6 2.7 11.6 12.4

Average 2.9 13.0 10.1 10.5 13.0 14.6 3.1 12.2 10.0

Average

Price inflation

2.6

0.3

12.0

1.6

10.7

1.1

11.1

2.0

12.0

1.6

15.6

0.7

4.6

1.0

13.1

5.3

10.3

1.7

Wage inflation 1.2 3.2 3.0 3.1 3.2 2.5 3.4 3.9 2.8

Discretionary Assets – Asset Allocation

NZ OS Cash Aust OS Abs PropBonds Bonds Eq Eq Ret

0 0 -1 0 1 0

-2 0 3 0 -1 0 0

0 0 -1 0 0 1

0 3 3 -5 -1

0 0 0 0 0 0

0 -1 0 -1 1 0 0

Allocation at end of quarter Changes since last quarter (%)

AMPCI

ANZ

FISHER FUNDS

MILFORD

NZAM

TYN

0% 20% 40% 60% 80% 100%

NZ Bonds

Overseas Bonds

Cash

Australasian Equities

Overseas Equities

Absolute Return

Property

13 13 14 15 38 8

7 20 8 16 38 10

14 22 8 20 23 14

30 10 20 40

17 11 16 32 19 5

7 20 13 36 23

10


Conservative, Balanced And Growth Risk Profiles

3 Year Risk/Return

Returns (%) gross of tax and fees forFunds the last the year ended 30 June

Manager ($m) 1 qtr Rk 1 yr Rk 3 yrs Rk 5 yrs Rk 2014 2013 2012 2011 2010

ConservativeAMPCI 11 2.3 7.9 6.8 7.2 7.9 6.8 5.5 8.7 7.1

BalancedAMPCI 22 3.4 2 12.9 4 9.7 6 9.8 4 12.9 13.3 3.1 13.0 7.2AMPCI RIL 19 3.4 3 14.3 1 11.0 3 14.3 16.0 3.1 13.8ANZ 446 3.6 1 14.2 2 12.2 2 13.1 1 14.2 18.4 4.3 15.4 13.5FISHER FUNDS 838 2.8 5 13.3 3 9.7 5 10.2 3 13.3 13.4 2.8 9.9 11.7MILFORD 132 2.0 6 12.4 5 13.4 1 12.4 21.7 6.5 9.8NZAM 84 0.7 7 6.9 7 8.0 7 8.1 5 6.9 11.6 5.5 6.7 10.0TYN 204 2.8 4 12.2 6 10.0 4 10.8 2 12.2 15.6 2.7 11.6 12.4

GrowthAMPCI 5 4.3 17.2 11.0 11.4 17.2 17.5 -0.6 17.2 7.1

AMPCI

MILFORD

ANZ

NZAMFISHER FUNDS

TYN

0.01.02.03.04.05.06.07.08.09.0

10.011.012.013.014.0

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0

Retu

rn (%

pa)

Risk

AMPCIBALANCED

July 2014

11

Overseas Equities (unhedged)

AMPCI

MAGELLAN Global

ANZ

EC Value Fund

FISHER FUNDS RUSSELL

TYN Multi-Manager

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

22.0

8.0 8.5 9.0 9.5 10.0 10.5 11.0 11.5

Ret

urn

(% p

a)

Risk

3 Year Risk/Return



AMPCI 1,048 3.5 5 11.0 1 10.6 3 9.1 4 11.0 25.4 -3.0 9.4 4.7

ANZ 2,219 3.5 3 9.6 3 11.1 2 10.7 2 9.6 27.4 -1.8 10.7 9.3

EC Global Value Fund of Funds

8 0.4 9 1.8 9 7.8 8 1.8 23.9 -0.8

EC Value Fund 12 3.8 2 11.0 2 9.4 5 9.6 3 11.0 22.4 -3.6 11.6 8.3

FISHER FUNDS 615 4.2 1 8.4 5 6.7 9 7.0 7 8.4 20.5 -7.1 7.1 8.1

MAGELLAN Global 5,991 1.2 8 3.0 8 17.3 1 15.0 1 3.0 32.2 18.7 9.7 13.6

RUSSELL 133 3.5 4 7.0 6 7.8 7 8.3 6 7.0 26.7 -7.6 10.1 8.1

TYN Multi-Manager 424 3.4 6 8.9 4 9.9 4 8.9 5 8.9 21.0 0.8 8.4 6.2

TYN SRI 10 2.0 7 3.9 7 8.3 6 6.9 8 3.9 26.6 -3.6 5.0 4.8

Average (asset-weighted) 3.6 9.3 9.5 8.7 9.3 25.2 -3.9 8.7 6.0Average 3.2 8.1 10.1 9.5 8.1 28.5 -3.9 9.4 7.7

Index (MSCI Gross Unhedged) 3.9 9.4 9.6 8.3 9.4 23.4 -2.4 8.7 3.8Index (MSCI Gross 100% Hedged) 5.2 24.3 14.7 16.2 24.3 23.7 -1.9 24.3 13.0Index (MSCI All World) 4.1 8.5 8.1 7.6 21.3 -3.9 8.4 5.38.5

ANZ

MILFORD

DEVON NZ Core

TYN CoreSALT

10.0

11.0

12.0

13.0

14.0

15.0

16.0

17.0

18.0

19.0

20.0

21.0

22.0

23.0

24.0

8.0 8.1 8.2 8.3 8.4 8.5 8.6 8.7 8.8 8.9 9.0

Retu

rn (%

pa)

Risk12


New Zealand Equities

3 Year Risk/Return



ANZ 158 2.1 3 22.8 2 18.8 2 17.0 2 22.8 33.8 2.2 18.5 10.3DEVON NZ Core

129 3.2 2 22.3 4 16.7 3 16.0 4 22.3 30.9 -0.9 16.0 14.0

MILFORD 441 -3.9 5 22.6 3 22.6 1 19.6 1 22.6 38.8 8.1 19.4 11.1SALT 81 5.2 1 22.8 1 16.2 4 16.9 3 22.8 30.5 -2.2 19.6 16.3TYN Core 209 0.5 4 18.7 5 15.6 5 14.2 5 18.7 31.3 -0.8 14.5 9.5

Average (asset weighted) -0.5 23.2 19.7 16.8 23.2 35.4 2.8 16.3 9.0

Average 1.4 21.5 18.0 15.9 21.5 33.7 1.2 16.0 9.7

Index (NZX 50 Gross) incl I/C 0.3 17.2 15.8 14.4 17.2 32.4 0.1 17.5 7.5

Index (NZX 50 Portfolio) incl I/C 1.2 17.6 16.2 15.0 17.4 34.0 -0.4 16.1 10.4

July 2014

13

Australasian EquitiesReturns (%) gross of tax and fees for

Funds the last the year ended 30 June


Index Aware

AMPCI 486 2.0 8 20.3 8 15.8 9 14.4 8 20.3 28.1 0.7 18.3 6.8

AMPCI SEGF 283 2.6 3 21.0 7 15.8 8 14.2 9 21.0 28.6 -0.2 15.2 8.7

ANZ 556 2.3 6 23.0 3 17.7 2 16.4 4 23.0 32.4 0.3 18.9 10.0

ANZ Australian Only 433 1.5 10 8.2 15 6.7 13 10.1 11 8.2 22.8 -8.6 18.2 12.7

CFSGAM Core 1,078 -0.1 12 16.2 11 16.2 23.7

DEVON Australian 27 4.2 1 15.3 12 8.6 12 15.3 19.9 -7.3

DEVON Trans-Tasman 88 2.5 4 26.8 2 16.0 7 15.1 6 26.8 28.9 -4.4 13.3 13.9

FISHER FUNDS 448 2.2 7 18.9 10 17.2 4 16.0 5 18.9 33.3 1.6 14.7 13.7

HARBOUR 486 -0.5 15 22.3 5 16.8 5 22.3 36.7 -4.6 18.9

MILFORD Dynamic 87 -2.3 16

MILFORD Trans-Tasman 240 -0.3 14 15.0 13 17.5 3 16.4 3 15.0 30.3 8.1 17.2 12.6

MINT 47 2.3 5 22.3 6 21.3 1 20.3 1 22.3 37.1 6.4 22.7 14.9

RUSSELL 62 0.3 11 19.6 9 19.6

SALT NZ Focus Share 57 1.7 9 27.2 1 16.7 6 16.8 2 27.2 30.7 -4.4 23.0 11.3

SALT NZ Plus Share 359 2.7 2 22.4 4 15.0 10 15.0 7 22.4 29.2 -3.9 21.3 9.2

TYN Small Companies 15 -0.3 13 11.6 14 9.9 11 13.0 10 11.6 27.8 -6.8 16.0 19.4

Absolute Return

ANZ ESF 38 3.2 1 23.3 2 17.1 3 16.1 2 23.3 26.8 2.8 17.5 11.6

DEVON Alpha 67 1.4 2 26.4 1 18.3 2 26.4 33.3 -1.7 4.0

MILFORD Active Growth 838 -1.1 4 18.1 3 19.7 1 16.5 1 18.1 29.7 11.8 10.4 13.3

TYN Aggressive 85 0.5 3 16.3 4 12.0 4 12.4 3 16.3 28.3 -5.9 10.0 16.3

Average (asset weighted) 0.8 18.5 15.2 14.5 18.5 29.6 -0.6 16.2 10.7

Average 1.2 19.9 15.3 14.8 19.9 29.4 -1.3 15.3 13.1

Index (NZX 50 Gross) incl I/C 0.3 17.2 15.8 14.4 17.2 32.4 0.1 17.5 7.5

Index (NZX 50 Portfolio) incl I/C 1.2 17.6 16.2 15.0 17.6 34.0 -0.4 16.1 10.4

Index (ASX 200) 1.9 6.8 3.8 8.0 6.8 14.1 -8.2 17.9 11.4

AMPCI

ANZDEVON T-T

HARBOURMILFORD T-T

MINT

SALT P-S

TYN S-C

MINTANZ ESF

TYN Agg

FISHER FUNDS

DEVON AlphaMILFORD A-G

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

22.0

24.0

4.0 5.0 6.0 7.0 8.0 9.0 10.0 11.0 12.0 13.0 14.0 15.0 16.0

Retu

rn (%

pa)

Risk

MAM Trans-Tasman

TYN Aggressive

Index Aware

Absolute Return

3 Year Risk/Return

AMPCI

ANZ

FISHER FUNDS

HARBOUR Corporate Bond

TYN

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4

Retu

rn (%

pa)

Risk14


New Zealand Bonds



AMPCI 1,623 1.8 4 3.1 6 5.5 3 6.6 4 3.1 2.2 11.3 7.2 9.4ANZ 1,085 1.6 6 3.0 8 5.2 5 7.0 2 3.0 1.8 11.3 8.5 11.0FISHER FUNDS 901 1.6 5 3.1 7 4.8 6 6.3 5 3.1 2.2 9.3 7.9 9.3HARBOUR NZ Core 84 1.6 8 3.8 4 3.8 4.0HARBOUR Corporate Bond

122 1.4 9 4.2 2 5.3 4 6.6 3 4.2 5.5 6.0 7.3 10.2

MILFORD 55 2.2 1RUSSELL 52 1.6 7 3.2 5 3.2TYN 224 1.9 3 4.0 3 6.2 2 7.5 1 4.0 4.7 10.1 7.9 10.7TYN Corporate Bond 89 2.0 2 4.7 1 6.6 1 4.7 6.6 8.3 8.8

Average (asset-weighted) 1.7 3.3 5.3 6.8 3.3 2.5 10.3 7.6 10.3

Average 1.7 3.8 5.6 6.9 3.8 3.8 9.3 7.6 10.3

Index (ANZ Govt Stock) 1.6 2.1 4.3 5.5 2.1 0.0 11.0 6.8 8.2

3 Year Risk/Return

July 2014

15

Overseas Bonds



AMPCI 174 2.7 3 6.8 5 6.4 5 9.1 3 6.8 5.7 6.5 6.8 20.3ANZ 1,664 2.6 5 6.5 6 6.5 4 6.5 5 6.5 3.3 9.7 4.2 8.8CFSGAM 2,081 1.8 6 8.8 3 8.8 9.5

FISHER FUNDS 1,219 3.5 1 9.8 1 9.6 1 11.3 1 9.8 5.3 13.9 7.5 20.4RUSSELL 1,098 3.3 2 8.5 4 9.4 2 10.4 2 8.5 7.5 12.3 6.6 17.3TYN 198 2.6 4 9.3 2 7.5 3 8.1 4 9.3 3.8 9.7 5.7 12.3

Average (asset-weighted) 2.6 8.3 9.0 9.8 8.3 6.9 11.8 6.4 15.9Average 2.8 8.3 8.3 9.0 8.3 5.8 10.8 5.7 14.7

Index (Citigroup) 2.6 7.6 7.1 6.6 7.6 4.0 9.8 3.5 8.1Index (Barclays) 2.8 8.0 7.2 7.4 8.0 4.1 9.5 5.0 10.4

3 Year Risk/Return

AMPCI ANZ

FISHER FUNDSRUSSELL

TYN

5.0

6.0

7.0

8.0

9.0

10.0

2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2

Retu

rn (%

pa)

Risk

AMPCI

ANZ

TYN

FISHER FUNDS

3.2

3.3

3.4

3.5

3.6

3.7

3.8

3.9

4.0

4.1

4.2

0.0 0.1 0.2 0.3 0.4 0.5

Retu

rn (%

pa)

Risk

16


Cash



AMPCI 3,811 0.9 4 3.5 4 3.5 3 3.8 2 3.5 3.6 3.5 4.3 4.0ANZ 1,663 0.9 5 3.3 5 3.4 4 3.6 4 3.3 3.5 3.5 4.0 4.0CFSGAM 905 0.8 6 3.1 6 3.1 3.9FISHER FUNDS 809 1.0 1 3.7 3 3.7 2 3.7 3 3.7 4.7 2.8 3.8 3.4HARBOUR 95 1.0 3 3.9 1 3.9 4.2TYN 361 1.0 2 3.9 2 4.0 1 4.1 1 3.9 4.1 4.0 4.4 4.2


Average 0.9 3.5 3.6 3.8 3.5 3.9 3.4 3.9 4.1

Index 0.8 2.8 2.8 2.8 2.8 2.7 2.8 3.1 2.8

3 Year Risk/Return

NZAM

TYN Alternative

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

3.5 5.5 7.5 9.5 11.5 13.5 15.5 17.5 19.5

Retu

rn (%

pa)

Risk

July 2014

17

Alternatives



MILFORD Global 124 0.8 3 7.8 3 7.8

NZAM 684 0.1 5 2.8 4 6.5 2 6.4 3 2.8 15.8 1.6 5.1 7.4

NZAM Alpha 9 0.4 4 1.9 5 1.9

TYN Alternative 102 2.3 2 14.4 2 10.0 1 12.1 1 14.4 13.1 2.9 15.1 15.2

TYN Bond Option 155 3.3 1 16.6 1 5.1 3 11.5 2 16.6 8.8 -8.4 22.6 20.9


Average 1.4 8.6 6.7 9.7 8.6 12.4 -0.6 14.2 14.4

3 Year Risk/Return

AMPCI

ANZ

FISHER FUNDSTYN

SALTMINT

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0

Retu

rn (%

pa)

Risk18


Property



AMPCI 240 1.6 6 7.9 7 9.1 7 0.3 6 7.9 10.6 8.9 -0.3 -21.5AMP Listed 24 8.1 5 11.7 4 14.9 2 15.2 3 11.7 18.9 14.2 20.5 11.0

ANZ 118 8.3 3 15.8 1 16.4 1 17.1 1 15.8 20.7 12.8 23.9 12.5FISHER FUNDS 308 0.6 7 13.5 2 10.0 6 8.2 5 13.5 13.0 3.9 6.7 4.2MINT 32 8.1 4 11.3 5 14.5 4 15.2 4 11.3 19.9 12.4 22.2 10.5SALT 236 8.5 1 12.0 3 14.5 3 16.5 2 12.0 18.2 13.4 25.9 13.4

TYN 33 8.5 2 10.7 6 13.2 5 10.7 15.9 13.0 23.4


Average 6.2 11.9 12.7 13.0 11.9 16.7 9.5 18.0 8.9

3 Year Risk/Return

July 2014

19

Global Property

Income Funds



AMPCI 169 8.7 2 24.8 1 15.1 1 24.7 1 24.8 16.0 5.3 39.1 42.5ANZ 318 8.3 3 17.5 2 12.5 2 21.5 2 17.5 15.7 4.6 35.0 37.6CSFGAM 74 9.5 1 11.0 3 11.0 25.2


Average 8.8 17.7 18.4 24.2 17.7 26.6 11.3 31.9 35.0



DEVON 60 5.9 1 18.4 2 18.4 26.6HARBOUR 58 5.8 2 18.7 1 18.7 30.2MILFORD 725 4.6 3 14.1 3 14.9 1 14.1 20.4 10.4 12.4TYN 4 2.2 4 7.3 4 5.9 2 9.2 7.3 6.7 3.8 14.9 13.6


Average 4.6 13.8 13.6 13.7 13.8 18.8 8.4 13.7 14.2

Other investment consulting services include:

• Establishing investment objectives for both our clients and investment managers;

• Determining long-term investment strategies, in the form of benchmark portfolios and sector ranges, consistent with the investment objectives;

• Determining the efficient frontier and risk/return profiles;

• Asset/liability modelling;

• Reviewing contractual agreements and legal documentation;

1. Returns are before management fees and tax and are generally per annum, except for quarterly returns which are per quarter.

2. Discretionary Assets are those for which the manager considers they have full discretion over stock selection and asset allocation.

3. Australasian Equities

AMPCI’s returns are those of their actively managed portfolios only.

4. Overseas Sectors

The returns are in $NZ and exclude the effects of currency hedging on Equities and include the effects of currency hedging on Bonds, Global Property and Absolute Return Funds.

5. Overseas Equities

AMPCI’s returns are those of their actively managed portfolios only.

Aon Hewitt Investment Consulting Service

6. Property

The returns in this table are influenced by the allocation to direct investment and holdings in listed vehicles. In the case of direct investment, the valuation approach and timing adopted by the manager will influence the returns.

7. In the compilation of the risk/return plots, risk is measured by the standard deviations of monthly returns over the period. The 3 Year Risk/Return “snail trail” charts show the change in 3 Year Risk/Return from the previous year to the current one.

8. Rankings on returns are calculated using more than 1 decimal place. Where managers have the same return rounded to 1 decimal place but different rankings, the rankings reflect the returns to more than 1 decimal place.

9. Index data was provided by AMP Capital.

• Assisting in the appointment of investment managers, by:

- Establishing the selection criteria;

- Identifying suitable investment managers;

- Analysing investment managers’ capabilities against the criteria; and

- Carrying out qualitative reviews.

• Performance monitoring, against both investment objectives and competitors; and

• Communication of investment objectives and strategies to investors.

This quarterly survey is produced by Aon Hewitt New Zealand.

20

Explanatory Notes

About Aon Hewitt New Zealand July 2014

Part of Aon plc, Aon Hewitt is theworld’s leading HR consulting andoutsourcing firm. We empowerorganisations by advising anddelivering integrated HR solutionsthat help employers achieve businessresults and create better outcomesfor employees.

At Aon Hewitt, we know that everyorganisation is only as great as itspeople. That’s why we work withclients to make sure their people arepositive, productive and secure intheir future. Only then can theyachieve remarkable results fortheir organisation.

We also recognise the importanceof safeguarding individuals’ financialwellbeing as well as their physicalwellbeing. Our Wealth Managementbusiness helps individuals to meettheir wealth creation, protectionand retirement planning needs.

In New Zealand, Aon Hewittprovides consulting services andsolutions to clients in the areas of:

• Aon KiwiSaver Scheme• Aon Master Trust• KiwiSaver and superannuation administration• actuarial and investment consulting• engagement and leadership

About AonAon plc is the leading global providerof risk management, insurance andreinsurance brokerage, and humanresources solutions and outsourcingservices. Through its more than65,000 colleagues worldwide, Aonunites to empower results for clientsin over 120 countries via innovativeand effective risk and people solutionsand through industry-leading globalresources and technical expertise.Aon has been named repeatedlyas the world’s best broker, bestinsurance intermediary, reinsuranceintermediary, captives manager andbest employee benefits consultingfirm by multiple industry sources.Visit aon.com for more information onAon and aon.com/manchesterunitedto learn about Aon’s globalpartnership and shirt sponsorshipwith Manchester United

• remuneration surveys and analytics• performance and rewards consulting• health and benefits• global benefits.

With more than 30,000 professionalsin 120 countries, Aon Hewitt makesthe world a better place to work forclients and their employees.

21

2222


The Aon Hewitt Investment ForecastsConducted during July 2014

Investment SectorOver the current year

1 Jul 2014 - 30 Jun 2015Over the next five years 1 Jul 2014 - 30 Jun 2019

Average Dispersion Average Dispersion

NZ Cash3.9% (0.2%) 4.2% (0.7%)

3.8% (0.4%) 4.2% (1.0%)

NZ Fixed Interest3.3% (0.9%) 4.5% (0.9%)

3.3% (1.1%) 5.2% (0.4%)

NZ Property6.3% (2.0%) 7.0% (1.4%)

6.6% (2.5%) 6.9% (2.0%)

NZ Equities6.4% (2.5%) 7.7% (0.5%)

7.8% (1.7%) 9.1% (2.0%)

International Fixed Interest2.7% (1.0%) 4.1% (1.1%)

2.6% (1.0%) 4.4% (1.1%)

International Equities8.4% (1.5%) 8.2% (0.9%)

10.7% (4.6%) 8.8% (0.9%)

Inflation Rate2.0% (0.2%) 2.2% (0.4%)

2.1% (0.8%) 2.2% (0.5%)

1. Participants were asked for their estimate of the annual rate of investment return before tax and expenses for a New Zealand dollar investor. The figures shown are the average of all responses received. Figures in brackets give a mea-sure of the dispersion of responses, and are equal to the second highest response less the second lowest.

2. The figures in italics are the results of our April 2014 survey.

3. These results may be reprinted in whole or in part, but attribution to Aon Hewitt would be appreciated.

4. The information contained in this report is provided for general information purposes only. It is given without knowledge of your individual circumstances and should not be used as a substitute for you seeking your own inde-pendent professional advice. No liability will be accepted for loss resulting from reliance on information contained in this report which proves to be inaccurate and/or incomplete.

Notes:

Contributors to the survey were:

ANZ Investments (NZ) BT Funds Management (NZ) Devon Funds Management

First NZ Capital Fisher FundsHarbour Asset Management

23

July 2014

In 1 year’s time In 4 years’ time In 7 years’ time

Average Dispersion Average Dispersion Average Dispersion

Inflation rate as measured by CPI

2.1% (0.3%) 2.2% (0.1%) 2.2% (0.3%)

2.1% (0.2%) 2.3% (0.1%) 2.2% (0.3%)

Rate of increase of Average Weekly Wage

2.8% (1.2%) 3.0% (0.5%) 2.9% (0.8%)

2.8% (1.2%) 3.1% (0.4%) 2.9% (0.7%)

Real interest rate (i.e., yield on 10 year Govt stock, in excess of inflation)

3.0% (0.3%) 3.1% (0.4%) 3.2% (0.2%)

2.9% (0.2%) 3.0% (0.3%) 3.2% (0.3%)

Rate of growth of real GDP

3.3% (0.9%) 2.4% (0.3%) 2.4% (0.8%)

3.4% (0.7%) 2.3% (0.2%) 2.4% (0.8%)

Trade Weighted Exchange Rate (TWI)

76.3 (2.2) 67.9 (3.0) 67.2 (4.0)

76.8 (2.0) 68.2 (2.9) 67.4 (4.0)

The Aon Hewitt Economists’ SurveyConducted during July 2014

1. The figures shown are the average of all responses received. Figures in brackets give a measure of the dispersion of responses, and are equal to the second highest response less the second lowest.

2. The figures in italics are the results of our April 2014 survey.

3. These results may be reprinted in whole or in part, but attribution to Aon Hewitt would be appreciated.

4. The information contained in this report is provided for general information purposes only. It is given without knowledge of your individual circumstances and should not be used as a substitute for you seeking your own independent profes-sional advice. No liability will be accepted for loss resulting from reliance on information contained in this report which proves to be inaccurate and/or incomplete.

Notes:

Contributors to the survey were:

ANZ Bank (NZ) BNZDeutsche Bank (NZ)

First NZ Capital NZIERUBS NZ

Christchurch388 Blenheim Road, ChristchurchPO Box 2058, Christchurch 8140Tel: 64 3 367 2800Fax: 64 3 367 2899

Visit our website at www.aonhewitt.co.nzOr email [email protected]

AucklandLevel 2, AMP Centre, 29 Customs Street WestPO Box 3167, Shortland StreetAuckland 1140Tel: 64 9 362 9000Fax: 64 9 362 9821

WellingtonLevel 2, State Insurance Building,1 Willis St, WellingtonPO Box 2764, Wellington 6140 Tel: 64 4 819 4000Fax: 64 4 472 0100

Aon Hewitt New ZealandConsultants and Actuaries

The information used to compile this survey has been provided by the investment managers or is from publicly available sources.

The information contained in this report is provided for general information purposes only. It is given without knowledge of your individual circumstances and should not be used as a substitute for you seeking your own independent professional advice. No liability will be accepted for loss resulting from reliance on information contained in this report which proves to be inaccurate and/or incomplete.

Documents

The Aon Investment Update