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)

Target Asset Allocation

Equities 100.00%

Commentary

As of 31 December 2021

Market Highlights

  • Global equity markets mostly posted strong returns for the quarter while Inflation continues to be relatively high in a number of economies. There is a focus on what response Central Banks will take given the high inflation numbers.
  • The United States S&P 500 index rose 10.7%, the Japanese Nikkei 225 index lost 2.2%, the UK FTSE 100 index increased 4.2%, the Australian ASX 200 index added 2.1% and the MSCI World index ended the quarter up 7.0%.
  • The S&P/NZX 50 index ended the quarter down 1.7%.




The strategy ended the quarter down in aggregate by 1.7%, in line with the broader NZ market that also fell 1.7%. The largest positive contributors to return were positions in EBOS Group (EBO), Z Energy (ZEL) and NEXTDC (NXT). EBO raised $779m to fund the acquisition of a medical device distribution business and also announced a strong trading update. EBO ended the quarter up 16.7%. ZEL rose 6.7% on the back of their Board endorsing a revised bid from Ampol. After falling in September, NXT added 6.3% over the quarter following confirmation of earnings guidance.

The largest negative contributors to return were positions in Pushpay (PPH), Westpac Bank (WBC) and Summerset (SUM). PPH dropped 28.7% after a disappointing result and downgrading its earnings guidance. In addition, concerns about unique customer additions and transaction volumes together with cost escalations remain to the forefront of investors’ minds. WBC fell 14.8% (in AUD) with their second half earnings announcement. The challenges include margin declines, cost increases and momentum into the new year, hence the sizeable fall in price. A number of retirement businesses reported earnings during the quarter which highlighted increasing costs, in particular for staff. This, along with some negative sentiment around the housing market outlook saw SUM fall 9.9%.

During the quarter we added to positions in Ingenia Communities (INA), Aristocrat Leisure (ALL) and EBO through their respective capital raisings. The fund’s position in Spark (SPK) was added to while reductions were made in ZEL and EROAD (ERD). The holding of Sydney Airport (SYD) was divested.

 

Performance

Nikko AM Investment Scheme
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Performance

at 31 December 2021
One month Three months One year Three years (p.a) Five years (p.a)
Fund performance1 3.35% -2.16% 5.03% 15.01% 13.23%
Appropriate Market Index (AMI)2 2.55% -1.73% 0.20% 14.77% 14.66%
  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
Fisher & Paykel Healthcare 11.38%
Infratil Limited 9.46%
Spark New Zealand Ltd 8.51%
Contact Energy Limited 8.15%
Ingenia Communities Group 7.43%
Summerset Group Holdings Ltd 7.15%
Z Energy Ltd 6.64%
Aristocrat Leisure Ltd 6.38%
EBOS Group Limited 6.29%
NEXTDEC Ltd 5.35%

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