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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3
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5
6
7

Target Asset Allocation

Cash 100.00%

Commentary

As of 31 March 2022

Market Highlights

  • ANZ bank’s chief economist issued a revised OCR call arguing for back-to-back 50bp hikes in April and May.
  • In sympathy with ANZ arguments the market revised its pricing of the OCR path, increasing both the rate of increases and terminal value of the current tightening cycle.
  • At month end ~2% of OCR rises were priced for 2022, an increase of 0.41% from where pricing sat at the beginning of the month. Short term interest rates moved up accordingly increasing at a pace not seen since 2004.





The  strategy returned 0.26% over the quarter outperforming its 90-day bank bill index which returned 0.24%. The fund has been implementing a barbel investment strategy, with short positions concentrated around the upcoming Reserve Bank meeting dates complemented with some longer positions to take advantage of the higher rates offered for tenor. In general, this strategy has performed with the Reserve Bank thus far implementing 0.25% OCR increases rather than more aggressive moves. March has seen higher pricing of near-term OCR increases along with a higher terminal OCR level. This has resulted in somewhat weaker performance of our strategy in March relative to January and February. We nonetheless remain comfortable with this strategy and see the potential for outperformance over time. The level of slope available in the term curve out to 1-year is meaningful as is slope in some sectors of the credit curve. In addition, there are signs of growing headwinds to growth which may see a slower than priced OCR path eventuate.

Performance

Nikko AM Investment Scheme
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Performance

at 31 March 2022
One month Three months One year Three years (p.a) Five years (p.a)
Fund performance1 0.05% 0.20% 0.66% 1.27% 1.77%
Appropriate Market Index (AMI)2 0.09% 0.24% 0.58% 0.79% 1.26%
  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
HSBC Bank New Zealand 111124 Frn 5.92%
Rabobk Nfix3fra + 38 28/06/2024 5.42%
Bank Of New Zealand 180324 Frn 4.76%
New Zealand Inland Revenue 060522 Rcd 4.14%
ICBC NZ 27/06/2022 FRN 3.81%
Bank Of China 3.09%
Inland Revenue Deposit 210622 Rcd 2.89%
Mufg Bank Ltd Auckland Branch 051124 Frn 2.84%
New Zealand Tax Trading Co 220622 Rcd 2.73%
Bank Of New Zealand Cash at Call 2.38%

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