--- title: Strategic Asset Allocation changes to the Nikko AM Diversified Funds description: With the latest political shake-ups in the US, including Trump’s potential return, new economic policies on the horizon, and Joe Biden stepping down, what does it all mean for New Zealand? image: https://www.goalsgetter.co.nz/hubfs/60-1.png --- [![Goals Getter Logo](https://www.goalsgetter.co.nz/hs-fs/hubfs/goals-getter-new.png?width=222&height=44&name=goals-getter-new.png "Goals Getter Logo")](https://www.goalsgetter.co.nz) [My account ](https://app.goalsgetter.co.nz/#/dashboard) [My account ](https://app.goalsgetter.co.nz/#/dashboard) [![002265 GoalsGetter Amovo Logo Stacked White](https://www.goalsgetter.co.nz/hubfs/002265%20GoalsGetter%20Amovo%20Logo%20Stacked%20White.svg "002265 GoalsGetter Amovo Logo Stacked White")](https://www.goalsgetter.co.nz) [ Info Centre ](https://www.goalsgetter.co.nz/info-centre) ![35](https://www.goalsgetter.co.nz/hs-fs/hubfs/35.png?width=2000&height=2000&name=35.png) [Amova NZ](https://www.goalsgetter.co.nz/info-centre/author/nikko-am-nz) 19 Dec 2024 [ Share ](http://www.linkedin.com/shareArticle?mini=true&url=https://www.goalsgetter.co.nz/info-centre/saachanges&utm_medium=social&utm_source=linkedin) # Strategic Asset Allocation changes to the Nikko AM Diversified Funds The Nikko AM diversified funds are designed to provide investors with a carefully constructed mix of asset classes in a manner that  aims to optimise returns for a given level of risk. We consider that conservative, balanced and growth funds should invest in a range  of sectors including domestic and international assets. We also consider utilising alternative assets where appropriate. That is where  we think they can meaningfully contribute to a better risk-adjusted return considering; the underlying investment approach, the  extent leverage or esoteric strategies are used, and overall fees paid by the end investor. We undertake a review of the Diversified Funds (Nikko AM Wholesale Conservative Fund, Nikko AM Wholesale Balanced Fund and  the Nikko AM Wholesale Growth Fund) at least annually, and more frequently if conditions change materially. This includes  considering the most appropriate investment strategies for each asset class, and reviewing the strategic asset allocations (SAA). The  SAA is driven both by qualitative and quantitative rationales. 2024 Review Following our 2024 review, the Investment Committee has agreed to adopt the following changes to the strategic asset allocation recommended by Alan Clarke, Portfolio Manager of Diversified Funds & External Managers. 1. The Funds used to gain exposure to global share markets will be changed Currently the Diversified Funds have an allocation to the Global Shares Fund (Nikko Europe) plus an allocation to the ARK  Disruptive Innovation Fund. We are replacing this combination with the Global Equity Multi-Manager Fund (WCM, Nikko Europe, Royal London and JP Morgan). We believe this combination of four underlying managers will give a better risk-adjusted return with less volatility in both absolute and relative terms. 2. The Multi-Manager Alternatives Fund will be removed We have made the decision to remove the MMAF Fund from our Diversified Fund allocations. This strategy was appropriate for investing in the era of ZIRP (Zero-Interest Rate Policy) that prevailed in the years following the global financial crisis. Now interest rates have normalised and the forecast real returns for cash and bonds are much higher, we believe this alternative strategy is no longer required when considered in terms of risk-adjusted returns after fees. We have retained an allowable range of 0-10% for ‘Alternative Assets’, but the neutral SAA weight for this will be set at zero for now. 3. Property will be added to the Growth Fund We consider property a ‘growth’ asset, and while it has many traits and characteristics in common with listed equities, it typically has a different return profile and provides diversification to listed equities. As our Growth Fund has a large allocation to ‘growth assets’, we believe this fund will benefit from an allocation to Property over the full market cycle. 4. We have introduced ranges around each asset class weighting in the SAA to allow for tactical tilting of the portfolios The strategic asset allocation will now include an allowable investment range, typically +/-10% around the ‘neutral’ SAA allocation for each asset class (or +/- the neutral SAA % if it is less than 10%). This will allow us to tilt the portfolio at different points in the market cycle to be underweight or overweight growth/defensive assets depending on our view of where we are in the market cycle. 5. The composite benchmarks for the Diversified Funds will now be the same as the Appropriate Market Index (AMI) All the asset class benchmarks that contribute to the composite benchmark for the Diversified Funds will be market indices reflecting the characteristics of that asset class. Previously there were some absolute return or ‘cash-plus’ components for the Diversified Funds benchmarks and a separate AMI. Going forward the benchmark will be the AMI. This does not change the underlying approach for any asset class, but it will make it easier for clients to assess our active performance. For the Balanced and Growth funds, proceeds from the reduction to Alternatives have been reallocated across the Income and Growth allocations in accordance with our forward-looking views described below. ![](https://www.goalsgetter.co.nz/hs-fs/hubfs/image-png-Sep-18-2024-10-50-29-7085-PM.png?width=718&height=602&name=image-png-Sep-18-2024-10-50-29-7085-PM.png) Rationale Our central view is that long term interest rates have likely peaked, and that the next move for most major central banks will be to  move short term interest rates lower. We believe the amount of duration we have in the Diversified Funds, most explicitly via the  fixed income funds, means they will be well positioned to benefit if this plays out. We are however cognisant that the final move lower in inflation back to within the central bank ‘target bands’ could take longer than what was expected at the start of 2024 which all else equal would push back the timing of the cuts. The changes to the funds will be implemented by mid-September 2024 ![The GoalsGetter Guide to Managed Funds](https://www.goalsgetter.co.nz/hubfs/Images/CTAs/Sprint%201%20CTA%20eBook/gg_sprint_1_ebook_2_bubble.png) ### The GoalsGetter Guide to Managed Funds Get our free guide to help you understand the basics of investing in Managed Funds. [![Get the guide now](https://no-cache.hubspot.com/cta/default/8746787/4f70c6cf-9706-416c-b7e8-7596f81aeeb6.png)](https://cta-redirect.hubspot.com/cta/redirect/8746787/4f70c6cf-9706-416c-b7e8-7596f81aeeb6) ## Get in the know with investing #### Read the latest articles from our Info Centre and stay in the know with our monthly updates. 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