Portfolios & Performance

Core Cash Portfolio

Insights

Managed Portfolios Core Cash Insights Graph

The song remains the same

The Reserve Bank of New Zealand on 23 March left the Official Cash Rate (OCR) unchanged at 1.75% as expected1, reiterating recent themes.

The Bank noted that December quarter gross domestic product (GDP) was weaker than expected and that house price inflation had moderated. But it said New Zealand’s growth outlook remained positive, supported by accommodative monetary policy, strong population growth, and high levels of household spending and construction activity.

The Bank’s statement indicated heightened concern regarding the international outlook, citing “extensive geopolitical uncertainty,” along with “ongoing surplus capacity.”

Monetary policy would remain accommodative “for a considerable period.”

We are revisiting our expectations for an OCR rise this year, due partly to dynamics around the 23 September election and the interim governorship arrangements. The current Governor, Graeme Wheeler, is due to retire on 26 September.

We think the Bank under interim Governor Grant Spencer will be reluctant to signal a change of policy direction until the next government is in office, particularly as there is no consensus among the contending political parties regarding changes to the Policy Targets Agreement between the Bank and government.

A new Governor is not expected to be appointed until March 2018, and we now think the earliest the Bank will raise the OCR is February 2018.

This Portfolio continues to invest mainly in short-dated securities such as 90-day Bank Bills. This gives us flexibility as economic and political events unfold.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
1. RBNZ Official Cash Rate statement, 23 March 2017.
* Source: Bloomberg.

Performance

Performance since inception (28 February 2008) to 31 March 2017
Managed Portfolios Core Cash Performance Graph Managed Portfolios Core Cash Performance Table

Core Cash Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is based on the 'S&P/NZX Call Deposit Total Return Index'.

    The after tax comparative index has been calculated by applying the highest PIR rate (currently 28%) to the comparative index.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Core Cash Portfolio

Complete Portfolio as at 31 March 2017
Managed Portoflios Core Cash Portfolio Table

1. The yield is not the actual return of the portfolio, nor is it a projection or forecast. Details of the yield calculation are available on request from NZ Funds.
2. Net receivables include unrealised profit and loss and net receivables/payables.
3. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to provide a source of capital by primarily investing in income-orientated assets using an active investment management approach.
Investment category Cash
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 1 month +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Foreign currency
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a significant exposure to cash and cash equivalents. From time to time the Portfolio may invest in New Zealand fixed interest and/or international fixed interest.
Redemption restriction The Portfolio has no redemption restrictions.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Core Income Portfolio

Insights

Managed Portfolio Core Income Graph

A following wind

Meridian Energy is the ‘crown jewel’ of the electricity generation and retailing sector. The company is in a strong position and a number of factors are providing tailwinds.

Meridian has low debt levels and is considered to be ‘underleveraged.’ The ratio of Debt to EBITDA (earnings before interest, tax, depreciation and amortisation) is 1.8 times, the lowest among its peers – Mercury Energy, Contact Energy, TrustPower, and Genesis Energy.

Forecast net debt is $1.2 billion, against a market capitalisation of $7.2 billion (at a share price of $2.82) and an enterprise value of $8.4 billion.

This means the company has dry powder should it make sense to build more generation capacity, or against the ever-present possibility Rio Tinto will close the Tiwai Point aluminium smelter at some point in the future.

In New Zealand, Meridian will consider building additional wind generation only if currently flat electricity demand shows evidence of trending upwards. In Australia, the company has long-dated wind options, but has no plans to add capacity at present.

Meridian believes the eventual outcome of the slow-moving transmission pricing review will be net positive for its business. Lack of demand growth has extinguished any political appetite for electricity sector restructuring. And Meridian has the opportunity to grow market share in retail, where it is somewhat under-represented.

For this Portfolio, we subscribed to the recent issue of 7-year bonds, with a coupon rate of 4.88%. These add to our holdings of Mercury and TrustPower bonds, and provide an attractive yield backed by a very strong and stable company.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
* Source: Bloomberg.

Performance

Performance since inception (23 July 2008) to 31 March 2017
Core Income Performance Graph Core Income Performance Table

Core Income Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is the 'S&P/NZX 90 Day Bank Bills Total Return Index'.

    The after tax comparative index has been calculated by applying the highest PIR rate (currently 28%) to the comparative index.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Core Income Portfolio

Complete Portfolio as at 31 March 2017
Core Income Portfolio Table

1. The yield is not the actual return of the portfolio, nor is it a projection or forecast. Details of the yield calculation are available on request from NZ Funds.
2. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
3. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to provide exposure to income-orientated assets using an active investment management approach.
Investment category Income
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 2 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Foreign currency
• Alternative securities *

* 'Alternative securities' means asset classes not usually accessed by retail investors, for example, private equity, venture capital and hedge funds. These tend to be asset classes where valuation and liquidity may be uncertain and returns may be volatile.
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a significant exposure to cash and cash equivalents, New Zealand fixed interest, and/or international fixed interest.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Global Income Portfolio

Insights

Global Income Insights Graph

Growing pains

We have sold our holding of the April 2025 bonds of Valeant Pharmaceuticals, a Canadian drug company.

We bought the holding last year at an excellent yield of around 11%. Valeant was initially an aggressive acquirer of other pharmaceutical companies but this strategy ran into problems when the United States government focused on health care costs. The share price fell and a number of the company’s senior executives were replaced. It was around this period that we decided to buy the bond, given its attractive yield and the company’s portfolio of pharma companies. In purchasing the bond, we recognised the company had challenges but felt the yield more than compensated.

The company’s key challenge is that, as a consequence of its buying spree, it has over $US28 billion of debt. To reduce this debt the company has decided to sell some of its assets and has identified some $US8 billion worth of non-core assets that can be sold, in addition to the $US4 billion it has already sold.

The sale process is taking longer than expected, and recently key shareholders sold their shares in the company.

Valeant still has a number of positive attributes, including some promising new drugs. However, the transition now looks likely to take longer than expected, and will leave Valeant with a relatively small equity buffer – around $US3 billion – against its debt.

Our view is that these factors have tilted Valeant’s risk/return proposition away from the unsecured bonds we were holding. However Valeant have issued new secured bonds, which we believe are more than two times covered in a worst case scenario. We have therefore sold the unsecured bonds and will continue our research into the secured bonds with a view to purchasing them.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
* Source: Bloomberg.

Performance

Performance since inception (31 October 2008) to 31 March 2017
Global Income Performance Graph Global Income Performance Table

Global Income Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is the 'S&P/NZX 90 Day Bank Bills Total Return Index'.

    The after tax comparative index has been calculated by applying the highest PIR rate (currently 28%) to the comparative index.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Global Income Portfolio

Indicative Portfolio as at 31 March 2017
Global Income Insights Table

1. The yield is not the actual return of the portfolio, nor is it a projection or forecast. Details of the yield calculation are available on request from NZ Funds.
2. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
3. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to provide exposure to income-orientated assets using an active investment management approach.
Investment category Income
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 2 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Foreign currency
• Alternative securities *

* 'Alternative securities' means asset classes not usually accessed by retail investors, for example, private equity, venture capital and hedge funds. These tend to be asset classes where valuation and liquidity may be uncertain and returns may be volatile.
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a significant exposure to cash and cash equivalents, international fixed interest, and/or New Zealand fixed interest.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Core Inflation Portfolio

Insights

Core Inflation Insights Graph

Village life

Last month we met with retirement village company Metlifecare’s newish CEO, Glen Sowry, to catch up on his strategy refresh outlined in a previous presentation to investors.

An accelerated village development pipeline forms part of this strategy. In the last year Metlifecare has bought and announced development plans for a three hectare site at Albany in Auckland and a site at Red Beach on the Hibiscus Coast north of Auckland.

The company aims to double the delivery of new units during the 2017 financial year, building up to 300 new units a year by 2019.

However, we were pleased to hear Metlifecare is taking a circumspect approach to land acquisition. While management have investigated various land purchase opportunities, few have ‘stacked up’ as investment cases.

Relatively high land prices are only part of the problem. The company also conducts research on the demographics of a potential site and its ‘catchment area.’ This must contain a critical mass of retirees, or those approaching retirement, who own their own homes.

Metlifecare’s shares, held in this Portfolio within the Dividend & Growth Strategy, are currently trading at a substantial discount to those of its peers, at around 1x net tangible asset value, compared with more than 2x for Ryman Healthcare and Summerset. They therefore offer the prospect of material capital appreciation if management can successfully execute their growth strategy.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
* Source: Metlifecare.

Performance

Performance since inception (31 October 2008) to 31 March 2017
Core Inflation Performance Graph Core Inflation Performance Table

Core Inflation Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is made up of 50% of the ‘S&P/NZX 90 Day Bank Bills Total Return Index’ and 50% of the ‘MSCI All Countries World Index with net dividends in local currency’.

    A fee of 1.0% pa is deducted which is an estimate of the cost of obtaining a passive exposure through a Portfolio Investment Entity (PIE).

    The after tax comparative index is calculated by applying the appropriate tax calculation for the asset class and the highest PIR tax rate (currently 28%).

Different calculation methodology

  • The performance graph for the Core Inflation Portfolio and the comparative index is calculated and displayed on a pre tax, post Portfolio fees basis.

    With regard to the comparative index, this is calculated on a different basis from that used in the Quarterly Fund Updates published for the Portfolio. The calculation for the Quarterly Fund Update requires that the comparative index be calculated and displayed on a gross (before tax and Portfolio fees and expenses) basis.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Core Inflation Portfolio

Complete Portfolio as at 31 March 2017
Core Inflation Portfolio Table

1. The yield calculation represents an estimate of the yield on the Portfolio, calculated using the most recent information provided by the external investment managers involved in managing the Portfolio, hedged back to New Zealand dollars where appropriate. It is not calculated ‘as at’ any particular date as different external investment managers provide data at varying dates. As a result, in some instances the yields may lag the date of this Portfolio summary. The yield is not the actual return on the Portfolio, nor is it a projection or forecast. The Portfolio’s return could be less than the Portfolio’s yield. Details of the yield calculation are available on request from NZ Funds.
2. Price/Earnings is based on next year’s forecast earnings (NPAT) Source: Bloomberg.
3. Where a strategy is shown, the asset class reflects the predominant assets in the strategy. The strategy may include other assets including cash.
4. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
5. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to mitigate the impact of inflation on your investment over the medium and/or long-term by investing in income-orientated assets and growth-orientated assets using an active investment management approach.
Investment category Inflation
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 5 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Australasian equities
• International equities
• Listed property
• Foreign currency
• Commodities
• Alternative securities *

* 'Alternative securities' means asset classes not usually accessed by retail investors, for example, private equity, venture capital and hedge funds. These tend to be asset classes where valuation and liquidity may be uncertain and returns may be volatile.
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a diversified range of assets expected to include cash and cash equivalents, New Zealand fixed interest, international fixed interest, Australasian equities, international equities, commodities, foreign currency, and/or alternative securities.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Property Inflation Portfolio

Insights

Property Inflation Insights Graph

Recovery in Spain

During the 1980s Texas banks were so overexposed to property loans that the onset of recession caused some of them to fail. This led to the minting of the term ‘Texas ratio’, a measure by which to assess a bank’s vulnerability to its real estate exposure.

Post-GFC the term has been bandied about when analysing Spain’s banks. In 2016 after eight consecutive years of contraction, Spanish property prices and transaction volumes rose across the board for residential, commercial, and land across all regions.

The recovery is driven by Spain’s improving macroeconomic picture. According to Goldman Sachs, these factors constitute a ‘regime shift’ for Spanish banks as higher real estate prices will reduce their loan loss provisions disproportionately. It says prices are expected to rise by between 4% and 6% over the next few years1.

Goldman Sachs’ analysis highlights CaixaBank as the best-positioned among the listed Spanish banks to benefit from the recovery.

CaixaBank is a ‘pure play’ on Spanish real estate recovery in that, unlike some rival banks, it has low exposure to other economies such as Brazil and Mexico. It is Spain’s largest domestic bank, holding 28% of individual accounts and 35% of corporate accounts.

In its presentations for the fourth quarter of 2016 the bank said it expected provisions associated with its real estate assets to fall to zero (net of capital gains and disposals) from 2017.

In this Portfolio we have taken a position in CaixaBank shares.

In a rising interest rate environment we are looking for assets with ‘property exposure plus’ rather than pure property plays. Banking and financial stocks are likely to benefit, via improved margins, from higher interest rates, and CaixaBank is positioned to benefit both from Spain’s stronger economic growth and its property market recovery.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
1. Time to go local: investing in the Spanish recovery, Goldman Sachs, February 2016.
* Source: Bloomberg.

Performance

Performance since inception (31 October 2008) to 31 March 2017
Property Inflation Performance Graph Property Inflation Performance Table

Property Inflation Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is made up of 50% of the ‘S&P/NZX 90 Day Bank Bills Total Return Index’ and 50% of the ‘MSCI All Countries World Index with net dividends in local currency’.

    A fee of 1.0% pa is deducted which is an estimate of the cost of obtaining a passive exposure through a Portfolio Investment Entity (PIE).

    The after tax comparative index is calculated by applying the appropriate tax calculation for the asset class and the highest PIR tax rate (currently 28%).

Different calculation methodology

  • The performance graph for the Property Inflation Portfolio and the comparative index is calculated and displayed on a pre tax, post Portfolio fees basis.

    With regard to the comparative index, this is calculated on a different basis from that used in the Quarterly Fund Updates published for the Portfolio. The calculation for the Quarterly Fund Update requires that the comparative index be calculated and displayed on a gross (before tax and Portfolio fees and expenses) basis.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Property Inflation Portfolio

Complete Portfolio as at 31 March 2017
Property Inflation Portfolio Table

1. The yield calculation represents an estimate of the yield on the Portfolio, calculated using the most recent information provided by the external investment managers involved in managing the Portfolio, hedged back to New Zealand dollars where appropriate. It is not calculated 'as at' any particular date as different external investment managers provide data at varying dates. As a result, in some instances the yields may lag the date of this Portfolio summary. The yield is not the actual return on the Portfolio, nor is it a projection or forecast. The Portfolio's return could be less than the Portfolio's yield. Details of the yield calculation are available on request from NZ Funds.
2. Price/Earnings is based on next year’s forecast earnings (NPAT) Source: Bloomberg.
3. Where a strategy is shown, the asset class reflects the predominant assets in the strategy. The strategy may include other assets including cash.
4. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
5. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to mitigate the impact of inflation on your investment over the medium and/or long-term by investing in income-orientated assets and growth-orientated assets using an active investment management approach.
Investment category Inflation
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 5 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Australasian equities
• International equities
• Listed property
• Foreign currency
• Alternative securities *

* 'Alternative securities' means asset classes not usually accessed by retail investors, for example, private equity, venture capital and hedge funds. These tend to be asset classes where valuation and liquidity may be uncertain and returns may be volatile.
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a significant exposure to property and/or property related securities including infrastructure assets.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Equity Inflation Portfolio

Insights

Equity Inflation Insights Graph

Sticky technology

Legendary investor Warren Buffett doesn’t own an iPhone, but his investment vehicle Berkshire Hathaway recently became one of Apple Inc’s largest shareholders1.

Buffett looks for companies with a ‘moat’ which will protect them from erosion of their markets by competitors. In Apple’s case, he sees this partly as the ‘stickiness’ of its products – aficionados tend to own multiple Apple products, and upgrade to the new products when they become available.

According to Brand Finance, Apple recently yielded the top spot to Google, but is still the world’s second most valuable brand2. In addition to this strong brand, Apple’s attraction to investors include a low valuation relative to Google and Amazon, predictable dividends, and regular share buybacks.

Technology is now embedded in business and consumer life as an essential requirement, lending successful technology companies a degree of price-insensitivity. As inflation reawakens, this will allow them to increase prices at least at the rate of inflation.

Microsoft’s products, such as Word and Excel, are particularly deeply embedded in business use. Switching to another’s company’s products, for example, would involve customers in legacy issues and the costs of retraining staff.

Like Apple, Microsoft has created an ‘echo-system’ for business by combining the software - Office, One Note, Dynamics, CRM (customer relationship management), Skype - with the flexibility of the Cloud and, importantly, the ability for users to connect with any device - Apple, Android, Windows.

Microsoft is the second largest Cloud computing services provider behind Amazon Web Services. The move to subscriptions will boost revenues over time.

Within our Global Technology Index Strategy, Apple and Microsoft stand out as companies with very strong franchises, and pricing power relative to competitors that will allow them to match or exceed inflation.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
1. Warren Buffett’s reason for investing in Apple should be music to Tim Cook’s ears, www.businessinsider.com, 2 March 2017.
2. Global 500 2017, Brand Finance, February 2017.
* Source: Bloomberg.

Performance

Performance since inception (31 October 2008) to 31 March 2017
Equity Inflation Performance Graph Equity Inflation Performance Table

Equity Inflation Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is made up of 50% of the ‘S&P/NZX 90 Day Bank Bills Total Return Index’ and 50% of the ‘MSCI All Countries World Index with net dividends in local currency’.

    A fee of 1.0% pa is deducted which is an estimate of the cost of obtaining a passive exposure through a Portfolio Investment Entity (PIE).

    The after tax comparative index is calculated by applying the appropriate tax calculation for the asset class and the highest PIR tax rate (currently 28%).

Different calculation methodology

  • The performance graph for the Equity Inflation Portfolio and the comparative index is calculated and displayed on a pre tax, post Portfolio fees basis.

    With regard to the comparative index, this is calculated on a different basis from that used in the Quarterly Fund Updates published for the Portfolio. The calculation for the Quarterly Fund Update requires that the comparative index be calculated and displayed on a gross (before tax and Portfolio fees and expenses) basis.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Equity Inflation Portfolio

Complete Portfolio as at 31 March 2017
Equity Inflation Portfolio Table

1. The yield calculation represents an estimate of the yield on the Portfolio, calculated using the most recent information provided by the external investment managers involved in managing the Portfolio, hedged back to New Zealand dollars where appropriate. It is not calculated ‘as at’ any particular date as different external investment managers provide data at varying dates. As a result, in some instances the yields may lag the date of this Portfolio summary. The yield is not the actual return on the Portfolio, nor is it a projection or forecast. The Portfolio’s return could be less than the Portfolio’s yield. Details of the yield calculation are available on request from NZ Funds.
2. Price/Earnings is based on next year’s forecast earnings (NPAT) Source: Bloomberg.
3. Where a strategy is shown, the asset class reflects the predominant assets in the strategy. The strategy may include other assets including cash.
4. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
5. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to mitigate the impact of inflation on your investment over the medium and/or long-term by investing in income-orientated assets and growth-orientated assets using an active investment management approach.
Investment category Inflation
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 5 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Australasian equities
• International equities
• Listed property
• Foreign currency
• Commodities
• Alternative securities *

* 'Alternative securities' means asset classes not usually accessed by retail investors, for example, private equity, venture capital and hedge funds. These tend to be asset classes where valuation and liquidity may be uncertain and returns may be volatile.
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a significant exposure to Australasian equities, international equities, and/or alternative securities.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Core Growth Portfolio

Insights

Core Growth Insights Graph

Banking on outperformance

A recurrent question following years of positive performance is: are share markets overvalued? The answer is that share market indices are made up of a variety of sectors with different drivers. While some sectors may arguably be overvalued, we focus here on one that is not; Financials.

Following the ‘tech-wreck’ of late 1999, the Financials sector outperformed the eight other sectors making up the US stock market until late 2007. Relative performance has declined since. By June last year, Financials shared the second-to-bottom spot, underperformed only by Materials.

The Global Financial Crisis of 2008 precipitated not only heavy loan losses, but also fines from governments and additional regulatory burdens. In addition, stimulatory monetary policy and fiscal austerity shrank net interest margins via declining interest rates.

However, some of those headwinds are now abating. We see five reasons banks should fare much better in the coming years:

• United States banks’ deposit inflows have exceeded loan growth, meaning banks have cash on hand to make new loans. We think it is likely loan books will catch up with deposits before long.

• Rising rates in the United States will boost net interest margins.

• High-margin non-interest income, from trading in equities, currencies, fixed interest, and commodities, is likely to rise as a percentage of overall income.

• Cost control measures, relaxation of regulations, and operating leverage will see costs fall as a percentage of net revenue.

• And tax expense will fall if the Trump administration makes good on promises to cut corporate tax rates.

We believe the Financials sector will outperform the US stock market, and we have taken additional exposure to this sector in the Portfolio.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
* Source: Bloomberg, NZ Funds calculations.

Performance

Performance since inception (31 October 2008) to 31 March 2017
Core Growth Performance Graph Core Growth Performance Table

Core Growth Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is the ‘MSCI All Country World Index with net dividends in local currency’.

    Since October 2015, a fee of 1.00% pa has been deducted to reflect the cost of obtaining a passive global share market exposure through a Portfolio Investment Entity (PIE). Prior to October 2015, a fee of 1.75% was used.

    The after tax comparative index is calculated by applying the appropriate tax calculations for the asset class and the highest PIR tax rate (currently 28%).

Different calculation methodology

  • The performance graphs for the Core Growth Portfolio and the comparative index are calculated and displayed on a pre tax, post Portfolio fees basis.

    With regard to the comparative index, this is calculated on a different basis from that used in the Quarterly Fund Updates published for the Portfolio. The calculation for the Quarterly Fund Update requires that the comparative index be calculated and displayed on a gross (before tax and Portfolio fees and expenses) basis.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Core Growth Portfolio

Complete Portfolio as at 31 March 2017
Core Growth Portfolio Table

1. The yield calculation represents an estimate of the yield on the Portfolio, calculated using the most recent information provided by the external investment managers involved in managing the Portfolio, hedged back to New Zealand dollars where appropriate. It is not calculated ‘as at’ any particular date as different external investment managers provide data at varying dates. As a result, in some instances the yields may lag the date of this Portfolio summary. The yield is not the actual return on the Portfolio, nor is it a projection or forecast. The Portfolio’s return could be less than the Portfolio’s yield. Details of the yield calculation are available on request from NZ Funds.
2. Price/Earnings is based on next year’s forecast earnings (NPAT) Source: Bloomberg.
3. Where a strategy is shown, the asset class reflects the predominant assets in the strategy. The strategy may include other assets including cash.
4. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
5. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to grow your investment over the long-term by investing in income-orientated assets and growth-orientated assets using an active investment management approach.
Investment category Growth
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 10 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Australasian equities
• International equities
• Listed property
• Foreign currency
• Commodities
• Alternative securities *

* 'Alternative securities' means asset classes not usually accessed by retail investors, for example, private equity, venture capital and hedge funds. These tend to be asset classes where valuation and liquidity may be uncertain and returns may be volatile.
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a diversified range of assets with a significant exposure to growth-orientated assets.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Global Multi-Asset Growth Portfolio

Insights

Global Multi Asset Growth Insights Graph

Cleaning up China

Returning from a recent visit to China, one analyst for wealth manager Impala reported he had seen blue skies above Beijing – for the first time in the 20 years he has been visiting the country.

The anecdote illustrates the recognition China is receiving for its push to clean up and modernise its smokestack industries. Under President Xi Jinping, China has been shutting down older steel and aluminium producers and coal-burning power plants. Small and dirty is out, big and efficient is in.

We caught up with Impala’s Bob Bishop and his analysts last month for an update on the resources sector rally. Bishop remains bullish on commodities, citing as his principal reason China’s ongoing economic development push.

The internal drive for capacity efficiency accompanies the move from blueprint to building for ‘One Belt, One Road’, the network of land and sea links that will connect China across Asia to Europe.

Physical construction of ports, roads, rail networks, power plants and gas pipelines has now begun, stimulating demand not only for Chinese surpluses of steel, cement and glass, but for products such as iron ore from suppliers outside China.

Bishop says a newfound optimism for China’s growth trajectory and environmental policing has already helped fuel a global resource price recovery. However, while the share prices of resources companies have rallied strongly, they have yet to catch up with accelerating spot commodity prices.

We remain of the view that commodity prices will continue to rise for some time yet, and that the shares of selected commodity and commodity-related producers will offer considerable capital appreciation.

In this Portfolio we have a holding in the Impala Resources Fund, which focuses specifically on the shares of companies likely to benefit from this increased infrastructure spending.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
* Source: http://www.boredpanda.com/blue-skies-military-parade-no-cars-beijing.

Performance

Performance since inception (7 November 2011) to 31 March 2017
Global Multi Asset Growth Performance Graph Global Multi Asset Growth Performance Table

Global Multi-Asset Growth Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is the ‘Bloomberg Commodity Total Return Index’.

    Since October 2015, a fee of 1.00% pa has been deducted to reflect the cost of obtaining a passive global commodity exposure through a Portfolio Investment Entity (PIE). Prior to October 2015, a fee of 1.75% was used.

    The after tax comparative index is calculated by applying the appropriate tax calculations for the asset class and the highest PIR tax rate (currently 28%).

Different calculation methodology

  • The performance graph for the Global Multi-Asset Growth Portfolio and the comparative index is calculated and displayed on a pre tax, post Portfolio fees basis.

    With regard to the comparative index, this is calculated on a different basis from that used in the Quarterly Fund Updates published for the Portfolio. The calculation for the Quarterly Fund Update requires that the comparative index be calculated and displayed on a gross (before tax and Portfolio fees and expenses) basis.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Global Multi-Asset Growth Portfolio

Complete Portfolio as at 31 March 2017
Global Multi Asset Growth Portfolio Table

1. The yield calculation represents an estimate of the yield on the Portfolio, calculated using the most recent information provided by the external investment managers involved in managing the Portfolio, hedged back to New Zealand dollars where appropriate. It is not calculated ‘as at’ any particular date as different external investment managers provide data at varying dates. As a result, in some instances the yields may lag the date of this Portfolio summary. The yield is not the actual return on the Portfolio, nor is it a projection or forecast. The Portfolio’s return could be less than the Portfolio’s yield. Details of the yield calculation are available on request from NZ Funds.
2. Where a strategy is shown, the asset class reflects the predominant assets in the strategy. The strategy may include other assets including cash.
3. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
4. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to grow your investment over the long-term by investing in income-orientated assets and growth-orientated assets using an active investment management approach.
Investment category Growth
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 10 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Australasian equities
• International equities
• Listed property
• Foreign currency
• Commodities
• Alternative securities *

* 'Alternative securities' means asset classes not usually accessed by retail investors, for example, private equity, venture capital and hedge funds. These tend to be asset classes where valuation and liquidity may be uncertain and returns may be volatile.
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a diversified range of assets with a significant exposure to commodities and/or alternative securities.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Global Equity Growth Portfolio

Insights

Global Equity Growth Insights Graph

Where is the grass greener?

There are some early indicators the tide may have turned for the New Zealand dollar – Australian dollar cross rate, and that the Kiwi will return over time towards its long-term historical average of $A0.85.

The Kiwi has long traded in a range of $A0.75 to $A0.95, driven by interest rate and growth differentials between the two countries.

Gross domestic product data has provided a historical indicator, but there are a number of ‘fuzzy’ indicators that provide a picture of where the two currencies are headed.

One is migration. A theme of the last few years, underpinned by the poor fortunes of Australia’s metals and commodity producers since 2011, has been a long tail of New Zealanders returning home to ‘greener grass’. With a new resource boom in its initial stages, there are early signs that the migration flows between Australia and New Zealand are starting to turn in Australia’s favour.

Another is house prices, again driven partly by migration. While New Zealand’s ascent appears to have flattened out somewhat, Australians continue to complain of diminishing affordability.

The interest rate differential is likely to widen too. Our view is that the Reserve Bank of Australia is likely to raise interest rates this year, while we have pushed out our expectation of a Reserve Bank of New Zealand rise until early next year, due to the dynamics around the appointment of a new Governor.

In this Portfolio, we have taken a position favouring the Australian dollar. This means the Portfolio will benefit if the cross rate moves back to its long-term average of A$0.85.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
* Source: NZ Funds calculations.

Performance

Performance since inception (31 October 2008) to 31 March 2017
Global Equity Growth Performance Graph Global Equity Growth Performance Table

Global Equity Growth Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is the ‘MSCI All Country World Index with net dividends in local currency’.

    Since October 2015, a fee of 1.00% pa has been deducted to reflect the cost of obtaining a passive global share market exposure through a Portfolio Investment Entity (PIE). Prior to October 2015, a fee of 1.75% was used.

    The after tax comparative index is calculated by applying the appropriate tax calculations for the asset class and the highest PIR tax rate (currently 28%).

Different calculation methodology

  • The performance graphs for the Global Equity Growth Portfolio and the comparative index are calculated and displayed on a pre tax, post Portfolio fees basis.

    With regard to the comparative index, this is calculated on a different basis from that used in the Quarterly Fund Updates published for the Portfolio. The calculation for the Quarterly Fund Update requires that the comparative index be calculated and displayed on a gross (before tax and Portfolio fees and expenses) basis.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Global Equity Growth Portfolio

Complete Portfolio as at 31 March 2017
Global Equity Growth Portfolio Table

1. The yield calculation represents an estimate of the yield on the Portfolio, calculated using the most recent information provided by the external investment managers involved in managing the Portfolio, hedged back to New Zealand dollars where appropriate. It is not calculated ‘as at’ any particular date as different external investment managers provide data at varying dates. As a result, in some instances the yields may lag the date of this Portfolio summary. The yield is not the actual return on the Portfolio, nor is it a projection or forecast. The Portfolio’s return could be less than the Portfolio’s yield. Details of the yield calculation are available on request from NZ Funds.
2. Price/Earnings is based on next year’s forecast earnings (NPAT) Source: Bloomberg.
3. Where a strategy is shown, the asset class reflects the predominant assets in the strategy. The strategy may include other assets including cash.
4. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
5. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to grow your investment over the long-term by investing in income-orientated assets and growth-orientated assets using an active investment management approach.
Investment category Growth
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 10 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Australasian equities
• International equities
• Listed property
• Foreign currency
• Commodities
• Alternative securities *

* 'Alternative securities' means asset classes not usually accessed by retail investors, for example, private equity, venture capital and hedge funds. These tend to be asset classes where valuation and liquidity may be uncertain and returns may be volatile.
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a diversified range of assets with a significant exposure to Australasian equities, international equities, and/or alternative securities.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Dividend and Growth Portfolio

Insights

Dividend And Growth Insights Graph

Catching up with Chorus

Chorus has been one of the largest investments in this Portfolio for some time now. Last month we caught up with its new CEO, Kate McKenzie. She comes with a strong pedigree as the former Chief Operating Officer at Telstra in Australia. We were reassured to hear that, although very fresh to the role, she was comfortable with Chorus’ direction of travel in the roll out of its fibre network, and signalled no major changes other than a stronger focus on customer care.

In February the Government set out its final views on the regulatory regime that will apply to Chorus’ telecommunication networks from 2020, which she viewed as broadly positive.

Broadband access is now a must-have ‘utility’ for business and consumers, however, unlike other utilities, Chorus does face competition in the form of wireless broadband.

We have done considerable work in this area, and continue to believe data consumption growth will stay ahead of wireless capacity. While wireless has its merits in some applications, business and consumers will inevitably choose fibre as the superior solution for the bulk of their needs. Chorus management agree.

As the ultra-fast broadband fibre network roll out moves towards completion, the regulatory regime settles down, and fibre proves itself as the preferred broadband delivery platform, we expect Chorus will be valued on the same basis as other utilities. Although a direct comparison over simplifies things, Chorus currently trades on an earnings multiple (Enterprise Value / EBITDA) of 5x, while electricity lines company Vector trades on 10x. This broadly illustrates the potential for Chorus to be substantially revalued over time.

In the meantime, our forecast is for a near-term gross dividend yield of 7%, and as capital expenditure starts to tail off, Chorus’ free cash flows will grow substantially, providing scope for growth in these dividends.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
* Source: Bloomberg, NZ Funds calculations.

Performance

Performance since inception (31 October 2008) to 31 March 2017
Dividend And Growth Performance Graph Dividend And Growth Performance Table

Dividend and Growth Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is made up of 70% of the ‘NZX 50 Portfolio Index Gross with imputation credits’ (or its predecessor index) and 30% of the ‘S&P/ASX 200 Accumulation Index’.

    Since October 2015, a fee of 1.00% pa has been deducted to reflect the cost of obtaining a passive market exposure through a Portfolio Investment Entity (PIE). Prior to October 2015, a fee of 1.75% was used.

    The after tax comparative index is calculated by applying the tax rules and the highest PIR tax rate (currently 28%). It has been assumed that New Zealand dividends are fully imputed and Australian dividend yields are 5% pa.

Different calculation methodology

  • The performance graphs for the Dividend and Growth Portfolio and the comparative index are calculated and displayed on a pre tax, post Portfolio fees basis.

    With regard to the comparative index, this is calculated on a different basis from that used in the Quarterly Fund Updates published for the Portfolio. The calculation for the Quarterly Fund Update requires that the comparative index be calculated and displayed on a gross (before tax and Portfolio fees and expenses) basis.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Dividend and Growth Portfolio

Complete Portfolio as at 31 March 2017
Dividend And Growth Portfolio Table

1. The yield calculation represents an estimate of the yield on the Portfolio, calculated using the most recent information provided by the external investment managers involved in managing the Portfolio, hedged back to New Zealand dollars where appropriate. It is not calculated ‘as at’ any particular date as different external investment managers provide data at varying dates. As a result, in some instances the yields may lag the date of this Portfolio summary. The yield is not the actual return on the Portfolio, nor is it a projection or forecast. The Portfolio’s return could be less than the Portfolio’s yield. Details of the yield calculation are available on request from NZ Funds.
2. Price/Earnings is based on next year’s forecast earnings (NPAT) Source: Bloomberg.
3. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
4. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portoflio is to grow your investment over the long-term by investing in income-orientated assets and growth-orientated assets using an active investment management approach.
Investment category Growth
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 10 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Australasian equities
• International equities
• Listed property
• Foreign currency
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a diversified range of assets with a significant exposure to Australasian equities.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

TERMS & CONDITIONS

By accessing and/or using www.nzfunds.co.nz (the "NZ Funds Website") you agree to be bound by the Terms and Conditions set out below.

These Terms and Conditions are in addition to and do not replace, any specific terms and conditions applicable to any New Zealand Funds Management product or service. To the extent that there is any conflict between these Terms and Conditions and those of any specific products or services, the terms applicable to those products or services will prevail.

Any reference to "NZ Funds", "we", "us" and "our" is a reference to New Zealand Funds Management Limited, its directors, employees and related parties.

Disclaimer

The content of the NZ Funds Website is general in nature, and for information purposes only. While care has been taken to supply information on the NZ Funds Website that is correct, accurate and up to date, we do not guarantee that this is the case, or that the information is relevant or suitable for your intended use. NZ Funds is not liable for any loss, liability or damage suffered by any person that may result from any errors, omissions, recommendations or opinions expressed on the NZ Funds Website. Accordingly, before making any investment or taking or refraining from taking any action based upon this information, we recommend that you first consult with an Authorised Financial Adviser.

Further, we do not guarantee the relevance or accuracy of any information in any other websites accessed through the NZ Funds Website or any information, opinions or projections included in articles sourced from third parties.

Neither NZ Funds nor any other party guarantees the performance of any product included on the NZ Funds Website. Any predictions or projections (including those made in any article that appears on the NZ Funds Website) are an expression of opinion only. Any information about past performance is not necessarily an indication as to future performance.

While care has been taken to prevent the introduction of viruses on this website, we do not guarantee that it is free of viruses and we accept no responsibility or liability for any harm attributable to such destructive features.

For further information on any of the Portfolios included on the NZ Funds Website or to request a copy of either the NZ Funds Managed Portfolio Service Product Disclosure Statement or the NZ Funds KiwiSaver Scheme Product Disclosure Statement, you should contact NZ Funds on
0508 733 337 or by email to info@nzfunds.co.nz.

Copyright

Unless otherwise specified, the copyright in information, images, texts and screens on the NZ Funds Website is owned by NZ Funds or its suppliers and may not be altered, copied, published, reposted or reused without our prior consent. This includes, but is not limited to, the NZ Funds Website's content, text, graphics, logos, images, audio clips and software. You may not create a hyperlink to the NZ Funds Website without our consent.

Privacy

We may collect information provided by you when using the NZ Funds Website, including where we authenticate you as part of a log on process and through the use of cookies. Cookies are a small file stored on your computer that enables us to identify your computer. Cookies do not read your hard drive and cannot be used to personally identify you. They are designed to facilitate easier website use by registering information about your preferences.

Any personal information that you may provide to us on the NZ Funds Website will be held at our offices at Level 16, Zurich House, 21 Queen Street, Auckland and may be used by us to provide or communicate information about our products and services to you. Personal information may also be shared with relevant authorities, including the IRD. You have the right to access and correct any personal information that NZ Funds holds by contacting us on 0508 733 337.

Jurisdiction

These terms and conditions are governed by the laws of New Zealand and are subject to the non-exclusive jurisdiction of the Courts of New Zealand.



OUR OFFICES

Auckland

Level 16
Zurich House
21 Queen Street
Auckland 1010

Private Bag 92163
Auckland 1142

09 377 2277
0508 693 8637

Wellington

Level 3
Central on Midland Park
40 Johnston Street
Wellington 6011

PO Box 2697
Wellington 6140

04 473 7701
0800 850 000

Christchurch

Unit 7A
9 Sir Gil Simpson Drive
Burnside
Christchurch 8053

PO Box 1686
Christchurch Mail Centre
Christchurch 8140

03 366 9088
0800 697 526

Timaru

Level 1
2 Sefton Street East
Timaru 7940

PO Box 85
Timaru 7940

03 683 1989

Wanaka

Level 2
Brownston House
21 Brownston Street Wanaka 9305
PO Box 769
Wanaka 9343

03 443 2300
0800 697 526

Dunedin

Level 2
Bracken Court
480 Moray Place
Dunedin 9016

PO Box 5215
Dunedin 9058

03 477 4647
0800 697 526

Invercargill

98C Yarrow Street
Invercargill 9810

PO Box 364
Invercargill 9840

03 218 2895
0800 697 526

Complaints


Client complaints

Our business philosophy is to establish and enhance long-term, positive relationships with all of our clients. We recognise though that from time to time, despite our very best efforts, clients may wish to make a complaint. It is important in such instances that clients have an efficient mechanism through which they can receive a fair consideration of their concerns.

If you have a complaint contact us:


Complaints Handling Officer
New Zealand Funds Management Limited
Private Bag 92163
Auckland 1142

0508 733 337
info@nzfunds.co.nz

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How we deal with complaints

Upon receipt of your complaint we will immediately log it into our complaints register and it will be forwarded to the appropriate staff member for consideration.

Within five working days of receipt, we will provide you with a letter of acknowledgement that your complaint has been received. We will endeavour to keep you notified and updated on the progress of our consideration.

If your complaint cannot be resolved to your satisfaction through our internal complaints process you can elect to take it up with NZ Funds' independent dispute resolutions scheme.


Financial Services Complaints Limited
PO Box 5967
Wellington 6011

0800 347 257
info@fscl.org.nz