Performance

April was a challenging month for the Income Category. After moving significantly higher during the first quarter, longer-term interest rates eased back from their highs during the month and this dragged down performance.

We believe that we are now in a transition period where markets have priced the initial economic rebound and the pickup in inflation off the lows, but remain uncertain as to how long lasting both will be. Despite this, we continue to see numerous signals that inflation pressures continue to build.

The prices of many commodities are hitting record highs, while the recent round of company earnings reports saw frequent discussion on the difficultly of sourcing staff and raw materials which in turn are leading to pricing pressures across the board. As a result, we have continued to adopt a defensive short interest rate stance to position the Category for a move higher in interest rates.

NZ Funds Managed Superannuation Service Income Strategy - British Pounds
Previously known as the ROPS GBP Income Strategy

• Returns are stated after Strategy fees and expenses, but before any advisory fees or investor tax. Past performance is not necessarily an indication of future returns.

Maximum Decline and Risk

• 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 in the previous 12 months or since inception of the Portfolio if it has not existed for 12 months.

• This is the annualised standard deviation calculated using weekly returns of the Strategy and market index data over the 5 years ending 31 March 2021. Market index data is used for calculating the volatility prior to the inception date. For more details on the market index data, see the SIPO for the NZ Funds Managed Superannuation Service. For more details on the Strategy’s Maximum Decline and Volatility please contact NZ Funds.

Note: Rounding may affect some numbers.

1. The yield calculation represents an estimate of the yield on the Strategy, calculated using the most recent information provided by the external investment managers involved in managing the Strategy, 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 Strategy summary. The yield is not the actual return on the Strategy, nor is it a projection or forecast. The Strategy’s return could be less than the Strategy’s yield. Details of the yield calculation are available on request from NZ Funds.
2. Credit default swaps notional value is currently $15,662,938.
3. Total economic exposure represents the total economic value of a Strategy, which is the net asset value of the Strategy adjusted for the effect of direct derivative positions taken by the Strategy and indirect derivative positions taken other than via a fund including hedge funds. For more details of the total economic exposure calculations, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

The Growth Category participated in the continued strong share market rally following a strong corporate earnings season in April. However, the Category underperformed over the month as the sharp sell-off in United States government bonds came to a halt as interest rates decreased, helped by comments from the Federal Reserve (the ‘Fed’).

The United States 10-year Treasury yield declined by 11 basis points to 1.63% for the month. The Fed acknowledged improvements in the economy and a better outlook, but clearly downplayed any prospect of removing policy support. The Category remains positioned to benefit from higher interest rates as the threat of inflation increases as the economy recovers. Our views on inflation mean performance of the Category will sometimes differ from the performance of our underlying share markets.

We remain confident that interest rates will grind higher throughout the rest of 2021. The United States economy grew at an annualised 6.4% in Q1, beating expectations. At the same time, commodity prices continue to increase further pressuring inflation expectations. China’s surging imports of metals, grain and other commodities are providing a boost to commodity prices as well as transportation costs. The Baltic Dry Index, which tracks the cost of moving commodities by sea, pushed to a 10-year high in April.

NZ Funds Managed Superannuation Service Growth Strategy - British Pounds

• Returns are stated after Strategy fees and expenses, but before any advisory fees or investor tax. Past performance is not necessarily an indication of future returns.

Maximum Decline and Risk

• 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 in the previous 12 months or since inception of the Portfolio if it has not existed for 12 months.

• This is the annualised standard deviation calculated using weekly returns of the Strategy and market index data over the 5 years ending 31 March 2021. Market index data is used for calculating the volatility prior to the inception date. For more details on the market index data, see the SIPO for the NZ Funds Managed Superannuation Service. For more details on the Strategy’s Maximum Decline and Volatility please contact NZ Funds.

Note: Rounding may affect some numbers.

1. Where a strategy is shown, the asset class reflects the predominant assets in the strategy. The strategy may include other assets including cash.
2. The yield calculation represents an estimate of the yield on the Strategy, calculated using the most recent information provided by the external investment managers involved in managing the Strategy, 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 Strategy summary. The yield is not the actual return on the Strategy, nor is it a projection or forecast. The Strategy's return could be less than the Strategy's yield. Details of the yield calculation are available on request from NZ Funds.
3. Total economic exposure represents the total economic value of a Strategy, which is the net asset value of the Strategy adjusted for the effect of direct derivative positions taken by the Strategy and indirect derivative positions taken other than via a fund including hedge funds. For more details of the total economic exposure calculations, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

April was a challenging month for the Income Category. After moving significantly higher during the first quarter, longer-term interest rates eased back from their highs during the month and this dragged down performance.

We believe that we are now in a transition period where markets have priced the initial economic rebound and the pickup in inflation off the lows, but remain uncertain as to how long lasting both will be. Despite this, we continue to see numerous signals that inflation pressures continue to build.

The prices of many commodities are hitting record highs, while the recent round of company earnings reports saw frequent discussion on the difficultly of sourcing staff and raw materials which in turn are leading to pricing pressures across the board. As a result, we have continued to adopt a defensive short interest rate stance to position the Category for a move higher in interest rates.

NZ Funds Managed Superannuation Service Income Strategy

• Returns are stated after Strategy fees and expenses, but before any advisory fees or investor tax. Past performance is not necessarily an indication of future returns.

Maximum Decline and Risk

• 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 in the previous 12 months or since inception of the Portfolio if it has not existed for 12 months.

• This is the annualised standard deviation calculated using weekly returns of the Strategy and market index data over the 5 years ending 31 March 2021. Market index data is used for calculating the volatility prior to the inception date. For more details on the market index data, see the SIPO for the NZ Funds Managed Superannuation Service. For more details on the Strategy’s Maximum Decline and Volatility please contact NZ Funds.

Note: Rounding may affect some numbers.

1. The yield calculation represents an estimate of the yield on the Strategy, calculated using the most recent information provided by the external investment managers involved in managing the Strategy, 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 Strategy summary. The yield is not the actual return on the Strategy, nor is it a projection or forecast. The Strategy’s return could be less than the Strategy’s yield. Details of the yield calculation are available on request from NZ Funds.
2. Credit default swaps notional value is currently $12,139,348.
3. Total economic exposure represents the total economic value of a Strategy, which is the net asset value of the Strategy adjusted for the effect of direct derivative positions taken by the Strategy and indirect derivative positions taken other than via a fund including hedge funds. For more details of the total economic exposure calculations, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

The Inflation Category had a weak month in April which was due to a decrease in interest rates.

Our thesis of rising global inflation remains firmly intact. This will lead to continued increases in interest rates over coming years. In April we saw a reversal in interest rates. There was nothing fundamental supporting this move and we therefore see this as a healthy pullback in a trade that has been consistently making positive returns over the last six months.

Performance was also impacted by a pullback in the price of Bitcoin which started the month at US$59,000 and finished at US$55,000. While still retaining Bitcoin exposure, we have now moved investors’ cryptocurrency allocations slightly away from Bitcoin and into Ethereum where we see greater near-term upside.

Positive performance did come from the shares allocation which generally performed well in a market that continues to grind higher. Particularly strong returns came from Wells Fargo, the large United States bank which reported very positive results as the economy recovers. In addition, Suez, a large water management utility listed in France, finalised a takeover agreement and the share price increased by 10%.

Similar to the Growth Category, we remain defensively positioned in short interest rates as inflation pressures continue to build.

NZ Funds Managed Superannuation Service Inflation Strategy

• Returns are stated after Strategy fees and expenses, but before any advisory fees or investor tax. Past performance is not necessarily an indication of future returns.

Maximum Decline and Risk

• 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 in the previous 12 months or since inception of the Portfolio if it has not existed for 12 months.

• This is the annualised standard deviation calculated using weekly returns of the Strategy and market index data over the 5 years ending 31 March 2021. Market index data is used for calculating the volatility prior to the inception date. For more details on the market index data, see the SIPO for the NZ Funds Managed Superannuation Service. For more details on the Strategy’s Maximum Decline and Volatility please contact NZ Funds.

Note: Rounding may affect some numbers.

1. Where a strategy is shown, the asset class reflects the predominant assets in the strategy. The strategy may include other assets including cash.
2. The yield calculation represents an estimate of the yield on the Strategy, calculated using the most recent information provided by the external investment managers involved in managing the Strategy, 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 Strategy summary. The yield is not the actual return on the Strategy, nor is it a projection or forecast. The Strategy’s return could be less than the Strategy’s yield. Details of the yield calculation are available on request from NZ Funds.
3. Swaptions notional value is currently $4,802,983.
4. As at the date of the security listings, the majority of the assets of the Strategy were held in this asset class. This Strategy may also hold assets in other asset classes.
5. Total economic exposure represents the total economic value of a Strategy, which is the net asset value of the Strategy adjusted for the effect of direct derivative positions taken by the Strategy and indirect derivative positions taken other than via a fund including hedge funds. For more details of the total economic exposure calculations,, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

The Growth Category participated in the continued strong share market rally following a strong corporate earnings season in April. However, the Category underperformed over the month as the sharp sell-off in United States government bonds came to a halt as interest rates decreased, helped by comments from the Federal Reserve (the ‘Fed’).

The United States 10-year Treasury yield declined by 11 basis points to 1.63% for the month. The Fed acknowledged improvements in the economy and a better outlook, but clearly downplayed any prospect of removing policy support. The Category remains positioned to benefit from higher interest rates as the threat of inflation increases as the economy recovers. Our views on inflation mean performance of the Category will sometimes differ from the performance of our underlying share markets.

We remain confident that interest rates will grind higher throughout the rest of 2021. The United States economy grew at an annualised 6.4% in Q1, beating expectations. At the same time, commodity prices continue to increase further pressuring inflation expectations. China’s surging imports of metals, grain and other commodities are providing a boost to commodity prices as well as transportation costs. The Baltic Dry Index, which tracks the cost of moving commodities by sea, pushed to a 10-year high in April.

NZ Funds Managed Superannuation Service Growth Strategy

• Returns are stated after Strategy fees and expenses, but before any advisory fees or investor tax. Past performance is not necessarily an indication of future returns.

Maximum Decline and Risk

• 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 in the previous 12 months or since inception of the Portfolio if it has not existed for 12 months.

• This is the annualised standard deviation calculated using weekly returns of the Strategy and market index data over the 5 years ending 31 March 2021. Market index data is used for calculating the volatility prior to the inception date. For more details on the market index data, see the SIPO for the NZ Funds Managed Superannuation Service. For more details on the Strategy’s Maximum Decline and Volatility please contact NZ Funds.

Note: Rounding may affect some numbers.

1. Where a strategy is shown, the asset class reflects the predominant assets in the strategy. The strategy may include other assets including cash.
2. The yield calculation represents an estimate of the yield on the Strategy, calculated using the most recent information provided by the external investment managers involved in managing the Strategy, 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 Strategy summary. The yield is not the actual return on the Strategy, nor is it a projection or forecast. The Strategy’s return could be less than the Strategy’s yield. Details of the yield calculation are available on request from NZ Funds.
3. Total economic exposure represents the total economic value of a Strategy, which is the net asset value of the Strategy adjusted for the effect of direct derivative positions taken by the Strategy and indirect derivative positions taken other than via a fund including hedge funds. For more details of the total economic exposure calculations, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.