The Product Disclosure Statement sets out the risks of the Scheme. Some of these are listed below.
The funds invest in different classes of assets, each with different risks attached to them. Funds that invest in shares will generally have higher levels of risk attached to them. For all assets there is the risk that the asset will not perform to the target rate of return and your returns will be lower than anticipated (or even negative for a period of time).
Tax and regulatory risk
Changes in the tax rates and tax rules of New Zealand and in countries in which investments are made by the funds could adversely affect your investment. In addition, changes to the KiwiSaver regime and government incentives could adversely affect your investment.
Investment markets are affected by a range of social, political and economic factors, in both New Zealand and internationally that may impact share prices, property values and interest rates, which could adversely affect your investments.
If the assets of a fund become illiquid then the fund may be unable to sell those assets which would affect that fund’s ability to make payments on time.
Derivatives may be used as a risk management tool by the funds and IEMs and as an alternative to investing in a physical asset by the IEMs. Derivatives may not perform as expected and may result in increased volatility and unexpected gains or losses.
Other specific risks
Underlying fund risk
The Growth Fund and Focused Growth Fund both invest in IEMs. Some of the IEMs that these funds invest into may also use commodities, derivatives, currencies, fixed interest and other securities to help them achieve their investment strategies. Most of these managers are able to suspend withdrawals from their funds in limited circumstances. This could result in the funds being unable to make payments on time.
Foreign exchange risk
When the funds invest in international investments foreign currency movements could affect the investment performance of the funds. We actively manage the Foreign Exchange Risk and typically enter into foreign exchange transactions, a practice known as ‘hedging’.