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)

1 Very low
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Target Asset Allocation

Income 100.00%

Find out more about the Cash Fund from Matthew Johnson

Matt is a Fixed Income Manager at Nikko AM. In this video, he explains what an average day in his job looks like, what he's trying to achieve with this portfolio, and what he sees as a good investment. Matt also talks us through the investment process and outlines the main reasons why you should consider the Cash Fund for your next investment.

Commentary

As of 31 December 2023

Market Highlights

  • New Zealand’s economy shrunk by 0.3% in the September quarter - a result well below market expectations of +0.2% growth.
  • With weak GDP and dovish comments from global central banks markets rapidly shifted from pricing a higher for longer OCR to over 100bps of cuts in 2024.
  • The bank bill curve inverted, at month end 90-day bills were 5.635%, whilst 1-year swap was 5.24%.

 

The fund performed well in December quarter returning 1.64% outperforming its benchmark the 90-day Bank Bill Index which returned 1.43%. Over the quarter 1-year swap fell from a high of 5.92% to 5.24%, 6-month bills fell from 5.81% to 5.56% and 90-day bills from 5.74% to 5.635%. With rates falling the fund’s long duration position (which ranged between +63 to +77 days long over the quarter) supported performance. We expect to continue to hold a long duration position as we enter 2024, however with the curve inverted adding duration is more nuanced than previously. Market pricing is now clearly in conflict with the Reserve Bank’s November statement as such we need key domestic data to soften to allow the RBNZ to shift its stance and support both the pace (as soon as April 2024) and level (119bps over 2024) of rate cuts priced – most key will be fourth quarter CPI out on January 24. To mitigate risk of resilient data the fund currently holds 38% in floating rate notes, which price at a margin to 90-day bills and provide exposure to the highest yield point of the curve given the inversion profile. At the same time, we remain ever watchful for data that suggest weakness and will be increasingly willing to take on positions that lock in today’s rates should a trend of softness continue.

Performance

Nikko AM Investment Scheme
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Performance 

at 31 December 2023
One month Three months One year Three years (p.a) Five years (p.a)
Fund performance1 0.49% 1.55% 5.76% 2.88% 2.45%
Appropriate Market Index (AMI)2 0.47% 1.43% 5.45% 2.71% 2.07%
  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
Rabobank Nederla 160326 Frn 5.89%
Westpac New Zealand 060726 Frn 5.66%
Mufg Bank Ltd Auckland Branch 241126 Frn 4.77%
Industrial And Commercial Bank Of China Nzd 260525 Frn 4.18%
Bank Of New Zealand 231126 Frn 3.37%
ASB Bank Ltd 200924 Rcd 2.89%
Rabobank Nederla 160625 Frn 2.79%
China Construction Bank Nz Ltd 090226 Frn 2.78%
Inland Revenue Deposit 210624 Rcd 2.35%
Toyota Finance New Zealand Ltd 230525 Frn 2.33%
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