From CNBC · Chloe Taylor · · 1m 10s
Top wealth fund warns U.S. stocks may cool off
New Zealand's best-performing sovereign fund sees a correction ahead after years of exceptional returns.
In brief
New Zealand's best-performing sovereign fund sees a correction ahead after years of exceptional returns. After years of double the historical average, U.S. stock returns are likely to slow and revert to normal levels. Originally reported by CNBC.
World's best fund sees trouble
New Zealand's $54 billion sovereign wealth fund, ranked the world's top performer, warns a U.S. stock market pullback may be coming.
Stellar year, but caution ahead
The fund returned 14.2% in the year to June. CEO Jo Townsend says this exceptional performance likely won't continue.
Returns are double the norm
U.S. equities have returned nearly twice their 20-year average over the past couple of years. Townsend expects reversion to the mean.
“Returns for U.S. equities over the past couple of years are close to double annualized returns for the past 20 years, so we would expect there to be some reversion to the mean at some point.”
Lowering long-term expectations
The fund cut its expected annual return from 7.8% to 7.2% and reduced its risk budget, reflecting lower equity return forecasts.
Tech giants dominate holdings
Nvidia is the fund's largest position at $3 billion. Apple, Microsoft, Alphabet and Amazon round out the top five.
Norway's giant fund agrees
The world's largest sovereign fund, Norway's $2.3 trillion oil fund, echoed the warning that future returns won't match recent gains.
“We should not be expecting the same kind of returns going forward as we've seen over the last six months.”
The essence
After years of double the historical average, U.S. stock returns are likely to slow and revert to normal levels.
