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)

1
2
3
4 Medium to High
5
6
7

Target Asset Allocation

Income 100.00%

Commentary

As of 30 April 2024

Market Highlights

  • Resilience in the economy, corporate earnings, and labour markets has coincided with upside surprises in US inflation.
  • The European Central Bank (ECB) solidified anticipations for a rate reduction this summer. Similarly, disinflationary advancements in Sweden and Canada suggest potential monetary easing this year, given the current restrictive policy stance.
  • Despite initial spread widening due to the US CPI inflation surprise, fixed income sector spreads generally reverted to their historically tight levels by the end of April.

The portfolio underperformed its benchmark over the month. This was driven by our cross-sector and emerging market debt (EMD) selection strategies. By contrast, our securitized selection strategy contributed to excess returns. 


Detraction of our cross-sector strategy was driven by our sector exposure to agency mortgage-backed securities (MBS). We transitioned from neutral to overweight over the month considering a constructive demand environment and stable prepayment rates. Our position detracted amid heightened rate volatility. Following a reduction in our credit hedge with US rates over March, our position underperformed over April given the selloff in US rates on evidence of sticky inflation and continued strength in the US labour market.
Our EMD strategy also underperformed. This was driven by our local China exposure where we prefer to hold our position via interest rate swaps versus cash bonds. Lastly, our securitized selection strategy underperformed given our specific selection among non-agency MBS.

Performance

Nikko AM Investment Scheme
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Performance

at 31 May 2024
One month Three months One year Three years (p.a) Five years (p.a)
Fund performance1 0.53% 0.18% 3.70% -2.56% 0.23%
Appropriate Market Index (AMI)2 0.87% 0.12% 2.89% -2.02% 0.04%
  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 190824 0.00 Gb 2.83%
Fnma Conventional Loan 150634 Tba Pool 35895 2.81%
Fnma 30Yr Conventional Loan 5.00 150635 Tba 2.75%
Japan Government Of 050824 0.00 Gb 2.74%
Future Margins-USD 1.89%
Japan Government 200630 0.10 Gb 1.77%
Japan Government 010125 0.005 Gb 1.65%
Export Development Canada 180129 2.625 Gb 1.53%
Japan Government 200931 0.10 Gb 1.49%
Gnma Ii 3O Year Single Family 201052 4.50 Mbs Pool Ma8347 1.48%
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