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The fund invests in a selection of bonds and other fixed income instruments issued by companies and governments from around the world, covering a wide range of regions and sectors. This fund provides exposure to fixed income products outside of NZ and currency exposure is hedged to remove the impact of changes in value of the NZ dollar.
Risk Indicator (volatility)
Target Asset Allocation
This number indicates the relative 'risk' level of this fund based on the types of assets it is invested in, ranging from level 1 (least risky) to 7 (most risky).
| Risk category | Description of volatility |
| 1 | Very low |
| 2 | Low |
| 3 | Medium |
| 4 | Medium to High |
| 5 | High |
| 6 | Very high |
| 7 | Extremely high |
The risk indicators are calculated using returns of the funds, the returns of the fund’s market index or a combination of both, for the previous five years. Index returns or a mix are used if the fund has existed for less than five years. All Managers are required to use the same methodology so you can compare the risk of different funds if you are researching more than one manager.
| One month | Three months | One year | Three years (p.a) | Five years (p.a) | |
|---|---|---|---|---|---|
| Fund performance1 | -1.98 | -3.13 | -1.76 | 3.73 | -0.58 |
| Appropriate Market Index (AMI)2 | -1.81 | -2.86 | -2.09 | 3.28 | -0.35 |
AMI (appropriate market index) is a theoretical portfolio with similar underlying assets as the fund. This allows investors to see a comparison of how the value of those assets have changed in the market relative to the fund.
| Security Name | Percentage |
|---|---|
| French Discount T-Bill 231226 0.00 Gb | 5.64% |
| USD BNP Paribas A/C | 4.01% |
| French Discount T Bill 141026 0.00 Gb | 3.89% |
| Fnma 30Yr Conventional 151046 0.0 Tba | 2.18% |
| China Government Bond 150535 1.65 Gb | 1.86% |
| Federal National Mortgage Association 151043 0.00 Tba | 1.86% |
| Federal Home Mtg 477 Gy 250931 Abs | 1.83% |
| Japan 5 Year Issue 201229 1.10 Gb | 1.32% |
| Federal National Mortgage Association 151043 0.0 Tba | 1.32% |
| Government National Mortgage Association 011054 0.00 Tba | 1.23% |
Commentary
As of 30 September 2026
Global fixed income markets faced a challenging third quarter as government bond yields moved higher across most developed markets. Early in the quarter, renewed conflict in the Middle East pushed oil prices higher and reignited inflation concerns, while resilient economic activity and still-elevated inflation limited expectations for policy easing. Market attention increasingly shifted toward central bank's reaction functions, with investors reassessing the likelihood that policy rates would remain higher for longer. The repricing accelerated in September following stronger-than-expected macroeconomic data, culminating in a 25bp Fed hike and a more hawkish policy outlook than markets had anticipated at the start of the quarter. The updated SEP signaled a higher expected path for rates and a higher neutral policy rate, prompting a broad sell-off across global rates markets.
Beyond the shift in monetary policy expectations, fiscal concerns, an elevated term premium and duration supply dynamics became increasingly important drivers of market performance. Investor demand at several large Treasury auctions was weaker than expected, while persistent inflation concerns, stronger PMI data, and higher oil prices further pressured duration assets. Yield curve, in general, moved higher over the quarter, and bear flattened as longer-term interest rates and policy easing expectations were pushed further into the future.
The portfolio underperformed the benchmark modestly over the third quarter, driven largely by the Duration Strategy and to a lesser extent, the Issuer Selection Strategy. Conversely, the Country, Govt Swap, and Sector Allocation strategies pared some of the underperformance.
Duration Strategy: The Duration strategy detracted meaningfully from performance across the quarter as global bond markets experienced a broad-based selloff across both maturities and regions. Global yields moved sharply higher on renewed Middle East conflict which led to heighted uncertainty around inflation outlook. As a result, both UK and EUR outright longs weighed significantly on performance as the conflict in the Middle East kept oil prices elevated, which led to a selloff in yields.
Issuer Selection Strategy: The fund’s overweight positioning on the front-end of Euro investment grade (IG) curve helped add performance. Similarly, underweighting longer dated Euro IG bonds helped add value.
Country Strategy: The fund’s systematic country signal was a significant contributor to relative returns driven by positions in the 10Y sector of both the US and EUR curve. Govt Swap Strategy: The fund’s rates curve positioning added value to relative returns such as the Japan flattener, intra curve US butterfly trades, and US vol selling positions.
Sector Allocation Strategy: Allocation to securitized credits helped add to relative returns, driven by overweight positions in both CMBS and CLOs, supported by attractive carry, resilient underlying fundamentals and continued investor demand for income.