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Investment Insights

What it’s like to make billion-dollar investment decisions during Covid-19

Contributor

Written by Contributor

Friday 27 March, 2020

Article written by Jihee Junn, first published by the Spinoff.

With Covid-19 causing major downturns and worried investors wondering what to do next, Kiwi Wealth’s head of fixed interest shares her thoughts and experience on how to get through these challenging times.

From the City of London to New York’s Wall Street, Diana Gordon has worked at the frontlines of global investing for more than 25 years. During that time, she’s seen the market go through all sorts of ups and downs, witnessing the Asian and Russian financial crises in the 90s followed by the bursting of the dot-com bubble not long after. Then, in 2008, came the GFC. Stocks plunged, institutions collapsed, and trading floors worldwide were filled with panic and fear.

In recent weeks, that same panic and fear has resurfaced in the wake of Covid-19. With entire industries struggling, global supply chains in disarray, and no clear signs of when the virus will be contained, confidence among investors are at worrying lows. Many are wondering if they should be pulling out from their investments (perhaps even running off and buying a lifetime supply of toilet paper for the shutdown instead). But just as health officials have reiterated over and over that now is not the time to panic, financial experts have been preaching that same message to spooked-out investors. Gordon, who now runs more than $2.5 billion worth of assets at Kiwi Wealth, says preparing for and weathering through situations like these are all part of the process of investing.

“An investment portfolio doesn’t just happen all by itself… You do all the work upfront so that when these things hit you don’t get worried [and] you’re not behind the eight ball rushing to find out information. You know what you own and you know why you own it. That’s what keeps you sane in this environment. You’ve stress-tested it to make sure that everything’s going to be OK,” she says.

“People that aren’t particularly understanding of markets are concerned, of course they are! But the reality is a lot of our investors are pragmatic… We spend a lot of time making sure our message gets out because sometimes it’s just a matter of explaining to them what’s going on.”

Gordon recognises the uncertainty investors feel may seem different compared to other crises. After all, this isn’t an inherently financial or political issue solvable by governments or central banks – it’s a public health issue driven by a virus that has no regard for how economies work. And unlike the GFC which started bubbling away the year prior, the outbreak of Covid-19 was sudden; its speed wholly unprecedented. Investors are rightfully worried, but Gordon insists portfolios and those that manage them are built to stand up to challenging times like these.

“It’s a dynamic situation – things are changing everyday – so we’re being opportunistic and we’re being active, but always with the potential downsides quantified and understood as much as possible,” she says. “There are a lot of unknowns, a lot of fear, and it’s not that we don’t share [that feeling], it’s just that we’re trying to do everything we possibly can for our investors which includes those with our KiwiSaver .”

“Like when we walked in on Monday [9 March], it was like a nuclear bomb had gone off in the oil markets because of the tension between the Russians and Saudis. We had no idea that was going to happen until over the weekend so we had to adjust our thinking and think about what was going to happen to the stock market next.”

Since then, things have once again been drastically upended with New Zealand officially in lockdown for the next four weeks in an effort to contain the spread of the virus early on. It’s a strange and worrying time for everyone right now: we’re being asked to stay calm, stay at home, and stay away from other people, something that has never before happened in our lifetimes. But as previous unexpected crises have shown, New Zealanders know how to stick together. The important things in life will still go on as normal, and as an ‘essential service’ (banks, insurers and other financial institutions), so will Gordon.

“My duty as a portfolio manager is entirely to our investors. No matter how I think or what I worry about personally, that’s beside the point when I come into work. We have a lot of people for whom this is their future. Yes, things are going to get tough, but we’re not set and forget. We’re thinking every day about what we can do to get the best returns and protect our investors from this environment. This isn’t just pushing bits of paper around the stockmarket. This is real.”

No one knows how long this will go on for, but eventually, things will go back to normal. It might take months (followed by several more months of aftershocks and recurring infections) but humans have always somehow found a way. The message from our leaders fighting to contain Covid-19 is clear – that we must keep calm, rally together, and look after one another. Only then can we return to some form of normalcy with not just our lives, but our markets and economies as well.

“We need to work together as a society to support and take care of each other [and that includes] the government, the central bank, and portfolio managers as well.

“We’re doing our part to stand the test of what’s happening right now. We’re all in this together. Remember that you’re not alone.”

Kiwi Invest is the investment team behind Kiwi Wealth's funds.

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