Risks · International Equities
What can go wrong with NZ international equities funds
International equity funds invest in shares listed outside Australasia. The dominant risks are concentration in the US technology sector and currency exposure when funds are held unhedged.
This page is information about asset-class risk dynamics, not personal financial advice. For guidance specific to your situation, consult an authorised financial adviser.
FMA standardised risk indicator across the 85 funds in our coverage
Every NZ managed fund on the FMA Disclose register publishes a standardised risk indicator on a 1 (lowest) to 7 (highest) scale, computed from recent return volatility. The table below shows how the international equities funds in our coverage distribute across the scale.
- Median risk band
- 5
- Range
- 4–7
- Funds with risk band published
- 85
NZ international-equity funds in our coverage cluster tightly at FMA risk indicator 5, with thematic and emerging-market variants reaching band 6 or 7. Index trackers (Smartshares US 500, Foundation Series) at band 5 reflect the underlying equity-only volatility plus currency.
5-year return range across the class
Realised 5-year annualised returns across the 43 funds in this category for which Sorted Smart Investor reports a 5-year history. Past returns do not predict future returns; this range shows what funds in this asset class have actually delivered over the most recent 5-year window.
- Lowest realised 5y
- 0.2%
- Median realised 5y
- 8.7%
- Highest realised 5y
- 14.1%
What specifically can go wrong with international equities funds
Asset-class-specific risks not captured by the single FMA risk-indicator number. These apply across the category — each individual fund\'s PDS discloses fund-specific risks on top.
- 1
US technology concentration in market-cap-weighted global indices. A standard global index fund (MSCI World, S&P 500-weighted exposure) is typically 25–35% in just six US technology and growth names — Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta. A correction in those names disproportionately affects the fund.
- 2
Currency direction matters more than people expect. A 10% NZD strengthening against the USD wipes roughly 10% off the NZD-value of an unhedged US-equity holding even if the US index itself was flat. Hedged variants remove this exposure but cost more in management fees and incur hedging cost drag.
- 3
Emerging-market funds have additional risks. Beyond price volatility, EM equity funds face country-political risk, currency convertibility restrictions, settlement and custody risk, and shallower liquidity. The FMA-defined risk indicator quantifies recent volatility but doesn't separately surface these structural risks.
- 4
Thematic funds (clean energy, AI, healthcare, water) are concentrated by design. Single-theme funds typically hold 20–50 stocks vs the 1,500+ in a broad global tracker, meaning much higher single-stock and single-sub-sector risk. They also lose the diversification benefit if the theme falls out of favour.
- 5
Index-tracking error. Where a fund tracks an index synthetically or via swap contracts (less common in NZ), counterparty risk and tracking error become additional considerations beyond what the PDS describes as "passive".
Questions people ask about international equities funds
Questions that recur in search results for this asset class, answered with reference to FMA Disclose register definitions and asset-class structural dynamics. Not personal financial advice.
Is a global equity fund a good investment?
Whether any fund "is a good investment" depends on the investor's time horizon, other holdings, currency views and risk tolerance — factors that vary by individual. Globally diversified equity funds reduce single-country risk relative to NZ-only or US-only funds, but introduce currency exposure and exposure to whatever drives global markets (typically US technology in recent years). The fund's PDS and Fund Update on FMA Disclose disclose recent returns, the risk indicator, top holdings and fees.
Are global equities a good investment?
Global equities have delivered positive long-run returns over multi-decade periods but with material drawdowns along the way — the MSCI World fell ~50% in the 2008 financial crisis and ~30% in March 2020 before recovering. Whether they suit your portfolio is a question of horizon and risk tolerance, not of the asset class being "good" or "bad".
Are global funds risky?
Yes — equity funds carry market risk, currency risk (when unhedged), and concentration risk in whatever drives the underlying index. The FMA standardised risk indicator on each fund's PDS quantifies recent return volatility on a 7-point scale; most global equity funds sit at band 5 or 6.
85 international equities funds, ordered by FMA risk indicator
Highest-risk funds in the class first; ties broken by annual fund charge ascending. Each fund\'s page surfaces its full PDS, holdings and risk-indicator history.
Related
Source: FMA Disclose register (risk indicator + 5-year return). Methodology: /methodology.