Single Sector Fund

Nikko AM NZ Cash Fund

About the fund

This fund invests in a  selection of NZ dollar denominated cash investments and short-term  bonds that aim to protect value while at the same time providing a higher return than bank deposits.

Risk Indicator (volatility)

Target Asset Allocation

Cash 100.00%

Commentary

As of 31 December 2021

Market Highlights

  • 90-day bank bill rates increased from 0.85% to 0.96%, this increase reflects the investment horizon of the bills falling within the next likely Reserve Bank rate increase.
  • Market pricing suggest consensus views remain for a 0.25% OCR increase at the Reserve Bank’s February 2022 meeting, with a 0.25% rise slightly more than fully priced in.
  • Third quarter GDP came in better than expected at -3.7% vs -4.1%. The decrease reflecting lockdown impacts.



The strategy performed well in quarter four returning 0.26% outperforming the 90-day bank bill index which returned 0.16%. The OCR increased from 0.25% to 0.75% over the quarter increasing in 0.25% steps at each of the October and November meetings. These rate rises were widely expected however there was a divergence in expectations around the Reserve Bank’s November meeting with bets finely balanced between two camps, those expecting a 0.25% OCR rise and those that viewed a 0.50% rise as more appropriate (given the strength of inflation and employment). From a portfolio positioning perspective Nikko has consistently been in the 0.25% camp implementing a barbel strategy to exploit pricing above 0.25% increments at each meeting date. This turned out to be a solid decision as the Reserve Bank’s November MPS provided clarity around their expected OCR path factoring in the impacts of COVID effectively raising the hurdle for 0.50% OCR rises to occur, damping more aggressive OCR paths priced in prior to this meeting. This reduction of OCR paths notwithstanding a 0.25% OCR increase remains more than fully priced in for the Reserve Bank’s next meeting in February. The fund continues to pursue a barbel strategy to exploit this pricing as an OCR increase of more than 0.25% at the next meeting requires increased economic impetus along with less COVID driven uncertainty to eventuate. At the same time as taking these short positions around the Reserve Bank’s upcoming meetings we continue to see merit in opportunistically adding longer positions reflecting a view that risks are the OCR will peak at a lower level than many assume and possibly take longer than expected to get there.

Performance

Nikko AM Investment Scheme
Open Close

Performance

at 31 December 2021
One month Three months One year Three years (p.a) Five years (p.a)
Fund performance1 0.07% 0.20% 0.60% 1.40% 1.87%
Appropriate Market Index (AMI)2 0.06% 0.16% 0.41% 0.88% 1.31%
  1. Returns are before tax and after the deduction of fees and expenses and including tax credits (if any).
  2. AMI: Bloomberg NZBond Bank Bill Index.

5 year cumulative performance $10,000 invested

Top 10 Holdings

Security Name Percentage
ASB Bank Ltd 22/02/2022 FRN 6.38%
ICBC NZ 27/06/2022 FRN 4.68%
MUFG Bank Ltd 04/04/2022 FRN 3.49%
Inland Revenue Deposit 210622 Rcd 2.82%
Westpac NZ 14/02/2022 FRN 2.76%
New Zealand Tax Trading Co 220622 Rcd 2.67%
Rabobk Nfix3fra + 38 28/06/2024 2.53%
Mufg Bank Ltd Auckland Branch 051124 Frn 2.50%
Bank Of New Zealand Cash at Call 2.44%
New Zealand Inland Revenue 060522 Rcd 2.44%

Our Managed Funds

Find out about all the Nikko AM funds you can invest in using GoalsGetter.

Learn more

Our KiwiSaver funds

For many of us, KiwiSaver will provide a significant portion of our retirement income. But it's only one part of the equation.

Learn more

Our fees

Find out about the types of fees that apply for our Nikko AM retail and KiwiSaver funds.

Learn more