Single Sector Fund

Nikko AM NZ Corporate Bond Fund

About the fund

The fund invests in a  selection of NZ dollar denominated bonds issued by banks and companies, providing investors with a regular income. The fund may experience modest ups and downs in value. 

Risk Indicator (volatility)

1
2
3 Medium
4
5
6
7

Target Asset Allocation

Income 100.00%

Find out more about the Corporate Bond Fund from Fergus McDonald

Fergus is the head of Bonds and Currency 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 see's as a good investment. Fergus also talks us through the investment process and outlines the main reasons why you should consider the Corporate Bond Fund for your next investment.

Commentary

As of 29 February 2024

Market Highlights

  • NZ bonds had flat to negative returns for the month as interest rates finished higher.
  • Looking forward, for 2024 we expect bond returns will be supported by cash rate cuts later this year and longer rates moving lower.
  • There has been plenty of NZ government bond supply, but little new credit issuance so far this year.

 

The fund had a modest negative return and performed in line with its benchmark. The move higher in yields over the month was the main driver of absolute and relative returns. We did add some longer maturity bonds when yields spiked higher mid-February which benefited returns by month end. The fund has a moderate long duration with a view that the ultimate direction of rates is lower over the next 12-18 months. 

Credit holdings have helped in terms of providing a higher yield while margins have been relatively stable. We prefer quality credit which is higher yielding than governments and currently has more supportive demand /supply dynamics too. We don’t necessarily expect rate cuts as early as the market is pricing but given the balance of risk, we are happy to lock in higher rates for longer when this makes sense.

Performance

Nikko AM Investment Scheme
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Performance

at 29 February 2024
One month Three months One year Three years (p.a) Five years (p.a)
Fund performance1 -0.19% 2.07% 6.39% -0.03% 1.63%
Appropriate Market Index (AMI)2 -0.05% 1.80% 6.48% 0.47% 1.80%
  1. Returns are before tax and after the deduction of fees and expenses and including tax credits (if any).
  2. AMI: Bloomberg NZBond Credit 0+ year Index.

5 year cumulative performance $10,000 invested

Top 10 Holdings

Security Name Percentage
NZ Government 2.75% 15/04/2037 5.45%
Housing NZ 1.534% 10/09/2035 3.75%
Chorus Ltd 4.35% 06/12/2028 3.12%
Insurance Australia Group Ltd 150628 5.32 Cb 3.10%
NZLGFA 3% 15/05/2035 2.96%
Housing NZ 3.42% 18/10/2028 2.79%
NZ Local Govt Funding Agency 150437 2.00 GB 2.71%
Westpac New Zealand Ltd 160932 6.19 Cb 2.56%
ASB Bank Ltd 040526 1.646 Cb 2.52%
Air New Zealand Ltd Sydney Branch 250529 6.50 Cb 2.25%
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