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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
This number indicates the relative 'risk' level of this fund based on the types of assets it is invested in, ranging from level 1 (least risky) to 7 (most risky).
| Risk category | Description of volatility |
| 1 | Very low |
| 2 | Low |
| 3 | Medium |
| 4 | Medium to High |
| 5 | High |
| 6 | Very high |
| 7 | Extremely high |
The risk indicators are calculated using returns of the funds, the returns of the fund’s market index or a combination of both, for the previous five years. Index returns or a mix are used if the fund has existed for less than five years. All Managers are required to use the same methodology so you can compare the risk of different funds if you are researching more than one manager.
| One month | Three months | One year | Three years (p.a) | Five years (p.a) | |
|---|---|---|---|---|---|
| Fund performance1 | 0.43% | 1.51% | 6.15% | 3.79% | 2.80% |
| Appropriate Market Index (AMI)2 | 0.46% | 1.40% | 5.79% | 3.62% | 2.45% |
AMI (appropriate market index) is a theoretical portfolio with similar underlying assets as the fund. This allows investors to see a comparison of how the value of those assets have changed in the market relative to the fund.
| One month | Three months | One year | Three years (p.a) | Five years (p.a) | |
|---|---|---|---|---|---|
| Fund performance1 | 0.43% | 1.50% | 6.13% | 3.68% | 2.70% |
| Appropriate Market Index (AMI)2 | 0.46% | 1.40% | 5.79% | 3.62% | 2.45% |
AMI (appropriate market index) is a theoretical portfolio with similar underlying assets as the fund. This allows investors to see a comparison of how the value of those assets have changed in the market relative to the fund.
| Security Name | Percentage |
|---|---|
| Rabobank Nederla 160326 Frn | 5.04% |
| Westpac New Zealand 060726 Frn | 4.84% |
| Mufg Bank Ltd Auckland Branch 241126 Frn | 4.42% |
| Industrial And Commercial Bank Of China Nzd 260525 Frn | 3.57% |
| Inland Revenue Deposit 010724 Rcd | 3.55% |
| Westpac NZ 2.22% 29/07/24 | 3.39% |
| New Zealand Tax Trading Co 040724 Rcd | 3.35% |
| Bank Of New Zealand 231126 Frn | 3.04% |
| China Construction Bank Nz Ltd 090226 Frn | 2.87% |
| Kiwibank Ltd 2.155% 20/09/2024 | 2.83% |
Commentary
As of 30 June 2024
Market Highlights
The fund outperformed its benchmark over the June quarter (1.58% vs 1.40%). Over the quarter 90-day bills have been reasonably range bound, trading in a 5-basis point range, ending the quarter at 5.63% little changed from where they started. This was much as expected as the RBNZ’s stance of cuts not occurring until the second half of 2025 was consistent over the quarter. Similarly, the probability of the RBNZ pivoting to an easing bias in their July MPR looks low. Conversely, longer dated yields presented more volatility over the quarter trading in a 25-basis point range with lows of 5.30% and highs at 5.55%. This volatility was driven by the ebb and flows of weak economic data and the RBNZ’s hawkish higher for longer rhetoric. In general, when markets have seen weak economic data, bets around OCR cuts have been brought forward, yet these have then been tempered by the RBNZ’s very consistent rhetoric of cuts not occurring in 2024 and inflation being too high. The fund has used this volatility to add duration when rates have been elevated, equally we have been willing to roll off duration in periods where markets have over exuberantly priced cuts.
This conflict of market expectations and RBNZ’s guidance shows as negative carry when we look at adding duration. As of the end of the quarter 1-year swap is some 25bps below 90-day bills – in other words we have negative carry of ~2 bps per month. Negative carry notwithstanding, our view remains the RBNZ will indeed need to cut earlier than its current guidance. As such we continue to look for opportunities to add duration, however, we are willing to be patient at this stage and may let duration positions fade should cuts be priced too aggressively.