Investment market perspective on the conflict in Iran

We want to provide an update on how the recent conflict in Iran is being monitored and managed across the MAS Investment Funds, MAS KiwiSaver Scheme and MAS Retirement Savings Scheme.

Across all three MAS Schemes, your investment holdings are actively managed by our lead investment manager JBWere (NZ) Limited (JBWere). The team is watching global developments extremely closely, including events unfolding in the Middle East. Here's a summary of what is happening, what actions JBWere is taking and what this means for you as an investor in the MAS Schemes.

What is happening and how could it affect investments?

Geopolitical events such as the current conflict in Iran can create uncertainty in global financial markets. Historically, the most immediate way Middle Eastern conflict affects the world economy is through the energy market, particularly oil supply and pricing.

JBWere’s assessment is that while recent events have contributed to volatility, several factors are helping to support the global economy:

• Energy markets remain the primary transmission mechanism. Movements in oil prices influence inflation, economic growth and investor sentiment. The ultimate impact depends on the length and severity of any disruptions.
• The global economy entered this period with reasonable momentum. Economic conditions are currently sitting on relatively solid footing, supported by accommodative financial settings.
• There is still some spare production capacity in the global oil market. While moving supply around the world may pose logistical challenges, the presence of spare capacity helps soften the impact of any potential supply disruptions.

Based on these factors, JBWere’s current view is that it would require a severe and prolonged oil supply shock to meaningfully derail the global economic cycle or significantly weaken long term investment performance. At this stage, that is not their expectation.

That said, conditions remain fluid and geopolitical shocks can move markets sharply in the short term. While each event is unique, history shows that such shocks rarely cause lasting shifts in overall market direction unless they fundamentally change global supply and demand dynamics. JBWere does not believe this threshold has been reached.

The team remains alert and is monitoring developments closely, but they are not adopting a pessimistic position. Their approach is to acknowledge the risks, analyse the implications and respond in a measured and disciplined way rather than reacting emotionally.

What we are doing

JBWere has already made several considered adjustments across MAS’s investment portfolios. These actions align with their views on global markets, currency movements and relative risk levels across different asset classes.

• Reduced currency hedging on international equities. JBWere has lowered the hedge on international equity holdings. This is intended to capture potential benefits from a strengthening US dollar, which often appreciates during periods of global uncertainty. A stronger US dollar can increase the value of unhedged overseas investments when converted back into New Zealand dollars.

• Rebalancing global equities back to target. Recent market movements have caused global equity weights to drift slightly below target levels. JBWere is rebalancing back to target, ensuring portfolios remain aligned with their long-term strategic structure. Rebalancing helps portfolios maintain appropriate levels of growth exposure during periods of volatility.

What you need to do: stay the course

Market uncertainty can be unsettling, but reacting emotionally to short term events often leads to poorer long-term outcomes.

There is always something happening in the world

Over recent decades, investors have experienced pandemics, major conflicts, political upheavals, financial crises and rapid changes in interest rates. Despite these challenges, markets have consistently demonstrated resilience and the ability to recover. Temporary events, even significant ones, are a normal part of long-term investing.

MAS Investment Schemes are diversified across countries and industries

Diversification is one of the most effective tools for managing market risk. Your investments are spread across:

• multiple global regions
• a wide range of industries
• different types of assets such as equities, fixed interest and cash. The Cash Fund is diversified across multiple issuers. This ensures that no single event, region or company dominates your investment outcomes. Diversification helps smooth volatility and protect long term returns.

Staying disciplined is key to long-term success

Periods of global tension often bring short bursts of market volatility. Long term investors who remain patient and avoid reacting to temporary noise tend to achieve better results than those who attempt to time markets.

For most investors, the best action right now is no action. Your investment strategy has been designed to cushion events like this, and JBWere is actively managing your funds with a close focus on both risks and opportunities.

Want to talk it through? Your MAS Adviser is here to help

If you would like to discuss your investment settings or revisit your long-term goals, our MAS Advisers are available to support you. Reviews are at no additional cost and our advisers can help ensure your investment strategy remains aligned with your personal situation, risk level and future plans. You do not need to navigate this uncertainty alone. We are here to help.

Medical Funds Management Limited is the issuer and manager of the MAS KiwiSaver Scheme, MAS Retirement Savings Scheme, and MAS Investment Funds. The Product Disclosure Statements are available at MAS KiwiSaver Scheme PDS, MAS Retirement Savings Scheme PDS, and MAS Investment Funds PDS. 

MAS is a licensed financial advice provider. Our financial advice disclosure statement is available online or by calling 0800 800 627.