Single Sector Fund

Nikko AM Global Bond Fund

About the fund

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

Bonds 100.00%

Commentary

As of 31 December 2021

Market Highlights

  • There were several notable central banks actions during the month: the US Federal Reserve (Fed) announced an acceleration in the pace of its asset purchase taper (expected), the Bank of England (BoE) raised its bank rate by 15 basis points (bps) to 0.25% and the Norges Bank raised rates by 25 bps.
  • The rise in US nominal yields has been driven by higher real rates rather than breakeven inflation rates, suggesting the market expects Fed actions to curb inflation.




The portfolio outperformed its benchmark over the month of December, driven by our Cross Sector and Corporate Selection strategies. On the other hand, our Securitized Selection strategy was the main detractor over the month. Our Cross Sector strategy was the main contributing strategy, driven mainly by our overweight in IG corporates and emerging market debt. While the spread of the Omicron variant continued to dominate headlines in December, concerns eased into the back-end of the month and markets adjusted focus to the expected path for central bank policy. Investment grade credit spreads tightened over December by 7bps to 97bps over sovereigns (as measured by the Bloomberg Barclays Global Aggregate Corporate Index). At the same time, Emerging Markets spreads also tightened over the month (as measured by the J.P. Morgan EMBI Global Diversified Index), which contributed to our excess returns. Within our Corporate Selection strategy, excess returns came most notably from our overweight in short- and intermediate-maturity versus longer-dated corporates. We continue to hold this positioning due to attractive carry and roll. Our overweight in euro-denominated corporate bonds and our bias to down-in-quality issuers also contributed. Our Securitized Selection strategy was the largest detractor over the month, owing to our agency MBS selection in derivatives and passthroughs. The fund underperformed over the quarter – attributable to October month, namely our Country (-34bps) and Duration strategies (-31bps). The underperformance of our Country strategy was driven by our relative value overweight positions in Australian and Canadian rates. Australian rates sold off as the market accelerated the pricing of rates (particularly after better-than-expected CPI release), driving the underperformance of our relative value positions (e.g. overweight Australian versus Norwegian rates). Additionally, our overweight Canadian versus US rates exposure detracted following a hawkish surprise from the Bank of Canada.   Our Duration strategy also detracted owing to our overweight in Canadian and Australian front-end rates as well as our UK curve steepener position. Front-end rates sold off amid hawkish central bank communication and continued rising inflationary pressures. Our UK curve steepener also detracted as we were underweight the mid part of the curve which outperformed amid the market moves.

(source: GSAM)

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 0.04% -0.27% -2.52% 4.79% 3.67%
Appropriate Market Index (AMI)2 -0.37% 0.19% -1.23% 3.82% 3.46%
  1. Returns are before tax and after the deduction of fees and expenses and including tax credits (if any).
  2. AMI: Bloomberg Barclays Global Aggregate Index hedged into NZD.

5 year cumulative performance $10,000 invested

Top 10 Holdings

Security Name Percentage
Japan Government 110422 0.0 Gb 11.62%
Japan Government 011223 0.005 Gb 2.53%
Japan Government 200931 0.10 Gb 2.01%
Japan Government Of 200324 0.60 Gb 1.36%
Trinitas Clo Ltd Sr 21 16A Class A1 150734 Abs 1.36%
Trysail Clo Ltd Series 21 1A Class A1 200732 Abs 1.36%
Japan Government 070322 0.00 Gb 1.31%
Italy Republic Of Government 300124 0.00 Gb 1.31%
Federal National Mortgage Association 150146 0.0 Tba 1.23%
Japan Government 200941 0.50 Gb 1.10%

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