8/15/2023 12:00:00 AM

Prepared for a rainy day

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It’s always important to be prepared, and that holds especially true when it comes to investing. You need to be positioned to make hay while the sun shines but also have cover to protect yourself when the rain sweeps through.

Our five key principles have served us well here at Pie Funds, helping us generate wealth for our clients over the course of 15-plus years. Previously, we spoke about Principle Four and how we look for tailwinds. It’s important for market and global sentiment to align with a business’s proposition, creating a smoother path to long-term growth. But when the winds shift and the market crests or troughs, it’s essential to be agile and responsive.

Principle five is to set something aside for a rainy day. As we’ve all seen over the last few years, markets can dip, sometimes quite considerably. That's why we hold cash in our funds and use a seasoned approach to increase it – up to 100% if we think it’s necessary (though that is very unlikely) – to preserve investor capital.

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Having available cash reserves also lets us act quickly when we see opportunities, such as when stocks fall in a market shock or recession and investors have mispriced assets. During the 2008-2009 financial crisis, this discipline saw our Australasian Growth Fund only drop half as far as its market index and then rebound to about 105% as we invested the cash reserves in underpriced companies the following year.

We believe that creating long-term wealth comes from long-term thinking, and by being ready to act decisively during potential market turns – both up and down – we’re able to generate this for our clients.

Information is current as at 15 August 2023. Pie Funds Management Limited is the manager of the funds in the Pie Funds Management Scheme. Any advice is given by Pie Funds Management Limited and is general only. Our advice relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees, like brokerage, if you act on any advice. As manager of the Pie Funds Management Scheme investment funds, we receive fees determined by your balance and we benefit financially if you invest in our products. We manage this conflict of interest via an internal compliance framework designed to help us meet our duties to you. For information about how we can help you, our duties and complaint process and how disputes can be resolved, or to see our product disclosure statement, please visit www.piefunds.co.nz. Please let us know if you would like a hard copy of this disclosure information. Past performance is not a reliable indicator of future returns. Returns can be negative as well as positive and returns over different periods may vary.