21 April 2021

Advertising phenomenal investment returns for the last year could mislead investors, FMA says

Media Release
MR No. 2021 – 17

The Financial Markets Authority (FMA) is warning the funds management industry to avoid advertising large investment returns for the 12-month period to March 31, 2021, as this could mislead investors.

The period includes none of the severe February and March 2020 COVID-19 sell-off in the market, but all the following recovery. The result is some phenomenal returns for many funds, particularly those with large exposures to equities.

The FMA is concerned investors being marketed returns for the 12-month period through social media, websites and other channels, without context, may be misled into thinking they are typical market performance or that particular managers have significant, repeatable skill.

The FMA notes shifting the performance period back just one month makes a significant difference to the result, as shown in the table below. Market index performance for 1 April 2020 to 31 March 2021 (the 12-month period in question) compared with performance for 1 March 2020 to 28 February 2021 (including the March 2020 sell-down) shows the importance of the time-period involved when promoting returns:


1 April 2020 –

31 March 2021

1 March 2020 –

28 February 2021

NZX 50 (NZD)



MSCI World (USD)



S&P 500 (USD)



The FMA has engaged with industry bodies on this issue.

Paul Gregory, FMA Director of Investment Management said: “Encouragingly, some fund managers with growth products share our concerns and have already told us they will not be promoting performance focused exclusively over this 12-month period.”

The FMA has asked KiwiSaver providers, other fund managers and financial advisers to:

  • avoid advertising performance for the 12-month period to 31 March 2021 (or, where promotion has already happened, withdrawing advertisements and promotions) through any channels, including period-specific promotion on websites; and
  • ensure the content and tone of required or otherwise regular investor and customer communications, does not place undue emphasis on, or commentary equating to promotion of, performance over the 12-month period. This includes written or verbal communications.

“Where a provider decides to, or continues to, promote the strong returns seen over the 12 months to March 31, we will be closely monitoring whether doing so potentially breaches the fair dealing provisions contained in the Financial Markets Conduct Act 2013¹,” Mr Gregory said. “We will also be concerned for the interests of any members who joined the provider’s scheme or switched into higher-risk funds during the promotion period.

“For investors, the strong performance over the past year is not a reason to chase performance. Rather, it shows the value to investors of staying the course through market ups and downs with the manager and product you have, provided you’ve chosen the right fund for your risk needs and tolerance,” Mr Gregory said.

The FMA has published draft consultation on advertising – soon to be finalised – which expects fund managers not to overemphasise performance at the expense of other material information and says past performance information cannot be “cherry picked” to create a more favourable impression.


¹ The ‘fair dealing’ provisions in the FMC Act relate to financial products and financial services and prohibit:

  • misleading or deceptive conduct, including conduct which is likely to mislead or deceive; and
  • the making of false, misleading or unsubstantiated representations.

Media contacts:
Andrew Park
FMA Media Relations Manager
[email protected]
021 220 6770

Campbell Gibson
FMA Senior Adviser, Media Relations
[email protected]
021 945 323