Single Sector Fund

Nikko AM Concentrated Equity Fund

About the fund

This fund provides investors with concentrated exposure to New Zealand and Australian share markets from an actively managed investment portfolio of high conviction companies. The manager selects companies for investment where they have a strong view on the medium-term outlook for positive returns.

In times of high uncertainty or low conviction the fund can hold more cash than typical Australasian shares funds.

Risk Indicator (volatility)

1
2
3
4
5 High
6
7

Target Asset Allocation

Equities 100.00%

Commentary

As of 31 May 2022

Market Highlights

  • Global equity markets were mixed in May with inflation, increasing interest rates, earnings results and the war in Ukraine having an impact.
  • The United States S&P 500 index was flat, the Japanese Nikkei 225 index rose 1.6%, the UK FTSE 100 index gained 0.8%, the Australian ASX 200 index declined 2.6% and the MSCI World index ended the month up 0.3%.
  • The S&P/NZX 50 index ended the month down 4.8%.









The strategy ended the month down by 4.7% following on from a weak start to the year generally and the first quarter being down 6.3%. The largest positive contributors to monthly performance were positions Pushpay Holdings (PPH) and Aristocrat Leisure (ALL). PPH rallying ~10% during the month after two investors announced they had secured a combined stake of 20.3% and they were developing a proposal to acquire PPH’s shares via a scheme of arrangement. ALL announced a strong first half result, beating market expectations and launching a $500m share buyback, all of which supported the share in an otherwise negative market. Z Energy delisted from the market last month, but the payment was made during May which resulted in outperformance relative to the market which fell.

 

The position in EROAD (ERD) detracted value with the stock falling ~25% over the month following last month’s surprise resignation of the founder / CEO and major shareholder, with disappointing FY23 guidance. The actual FY22 result was also weaker than the market braced for last month and despite the Coretex acquisition going as expected. Contact Energy (CEN) and Ingenia Communities (INA) detracted value. CEN sold off with reduced operational performance statistics and in response to the rising interest rate outlook globally and domestically which suppresses long term valuations. Australian property securities generally were underperformers relative to the New Zealand market with INA down 12.4% (in AUD) despite no specific news announcements. Despite providing a positive market update early in May, Fletcher Building (FBU) fell 12.4% on negative sentiment around the housing market.

 

Key portfolio changes during the month included adding Mainfreight (MFT) and Ramsay Healthcare (RHC) to the portfolio and adding to existing positions in Aristocrat Leisure (ALL) and SkyCity Entertainment (SKC). Reductions were made in Fisher & Paykel Healthcare (FPH) and Summerset Group (SUM) while Westpac (WBC) and ZEL were removed from the fund.

 (Bold denotes stocks held in the portfolio)

 

Performance

Nikko AM Investment Scheme
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Performance

at 31 May 2022
One month Three months One year Three years (p.a) Five years (p.a)
Fund performance1 -4.77% -4.45% -7.12% 4.73% 8.21%
Appropriate Market Index (AMI)2 -4.81% -5.31% -7.55% 4.50% 9.73%
  1. Returns are before tax and after the deduction of fees and expenses and including tax credits (if any).
  2. AMI: SS&P/NZX 50 Index Gross with Imputation Credits.

5 year cumulative performance $10,000 invested

Top 10 Holdings

Security Name Percentage
Infratil Limited 9.85%
Fisher & Paykel Healthcare 9.43%
Spark New Zealand Ltd 9.32%
Contact Energy Limited 8.25%
EBOS Group Limited 7.76%
Aristocrat Leisure Ltd 6.77%
Ingenia Communities Group 6.21%
Pushpay Holdings Ltd 6.17%
Waypoint REIT Fully Paid Ord Units Stapled Securities 5.66%
NEXTDEC Ltd 5.42%

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