Performance

Income Strategy - British Pounds

Review

For the month of February 2021

Regular readers will clearly know our view that interest rates are too low, and they need to move higher, as we have talked at length on this subject. Here in New Zealand we have had the luxury of seeing first-hand how quickly life can return to normal and how strong the resulting demand has been across many different industries. This experience has helped to form our high conviction view for higher interest rates.

This view was rewarded in February as the bell-weather 10-year US government bond increased significantly from 1.06% to 1.40%. Bond prices fall when interest rates rise so this sharp increase meant that many fixed income indices recorded negative returns for the month.

Given our high-conviction view, the Portfolios were well positioned for this move and significantly outperformed the market benchmarks as they increased by between 7% and 8% in February. Looking forward, while we do not expect the moves to be as sharp, the trend remains for higher interest rates as we are only now getting back to levels seen prior to the onset of the pandemic in March last year.

Details

Strategy objective Strategy summary Risk category Minimum suggested investment timeframe
To provide exposure to income assets and to the British Pound. Anticipated to mainly hold New Zealand, Australian and international bonds. The Strategy is exposed to the British Pound. 2 years+

Performance

Performance since inception (11 August 2017) to 28 February 2021
Managed Superannuation Service Income Strategy Chart Managed Superannuation Service Income Strategy Performance Table

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 December 2020. 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.

Portfolios

NZ Funds Managed Superannuation Service Income Strategy - British Pounds

Complete Strategy as at 22 February 2021
Managed Superannuation Service Income Strategy Portfolio Table


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. Swaptions notional value is currently $12,787,239.
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.

Overview

Risk & volatility Please see the NZ Funds Managed Superannuation Service Product Disclosure Statement (PDS) or the latest Fund Update for information on risk.
Further information The NZ Funds Managed Superannuation Service, which incorporates the Income Strategy - British Pounds, is issued by New Zealand Funds Management Limited. Further information is contained in the NZ Funds Managed Superannuation Service Product Disclosure Statement

Growth Strategy - British Pounds

Review

For the month of February 2021

The major share market indices reached record highs in February; however, they pulled back sharply at the end of the month, leaving most with modest gains. Despite this, the NZ Funds Growth Category was positioned to take advantage of a change in market expectations for growth, inflation and interest rates, leading to significant outperformance.

We saw economic growth coming through stronger than the market was expecting. This led us to believe the market was underestimating the trajectory of interest rates. Taking a short position in 5-year and 10-year government bonds in December 2020 meant the Category would benefit from any rise in interest rates and hedge out the risk of a share market sell-off should interest rates increase.

This generated strong performance for the month as 5-year and 10-year interest rates increased 33 bps and 35 bps respectively. We believe there is more to come with expectations that the United States 10-year interest rate will reach 2.0% by year end.

At the same time, commodities also performed well following expectations that the reopening of the global economy will be followed by strong demand across both hard and soft commodities. This leads to commodity price increases as the increase in demand was not able to be met by lacklustre supply.

Economic signals, as well as the accelerated vaccine rollout in the United States and better than expected fourth-quarter corporate earnings, improved as the month wore on. However, as long-term interest rates increased, placing a greater discount on future earnings, investors heavily favoured value shares over growth shares. We have an overweight position in value across the Category including in Australian banks.

Details

Strategy objective Strategy summary Risk category Minimum suggested investment timeframe
To grow your investment over the long term and to provide exposure to the British Pound. Anticipated to mainly hold New Zealand, Australian and international shares, and/or hedge funds. The Strategy is exposed to the British Pound. 10 years+

Performance

Performance since inception (3 December 2019) to 28 February 2021
Managed Superannuation Service Income Strategy Chart Managed Superannuation Service Income Strategy Performance Table

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 December 2020. 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.

Portfolios

NZ Funds Managed Superannuation Service Growth Strategy - British Pounds

Complete Strategy as at 22 February 2021
Managed Superannuation Service Income Strategy Portfolio Table


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.

Overview

Risk & volatility Please see the NZ Funds Managed Superannuation Service Product Disclosure Statement (PDS) or the latest Fund Update for information on risk.
Further information The NZ Funds Managed Superannuation Service, which incorporates the Income Strategy - British Pounds, is issued by New Zealand Funds Management Limited. Further information is contained in the NZ Funds Managed Superannuation Service Product Disclosure Statement

Income Strategy

Review

For the month of February 2021

Regular readers will clearly know our view that interest rates are too low, and they need to move higher, as we have talked at length on this subject. Here in New Zealand we have had the luxury of seeing first-hand how quickly life can return to normal and how strong the resulting demand has been across many different industries. This experience has helped to form our high conviction view for higher interest rates.

This view was rewarded in February as the bell-weather 10-year US government bond increased significantly from 1.06% to 1.40%. Bond prices fall when interest rates rise so this sharp increase meant that many fixed income indices recorded negative returns for the month.

Given our high-conviction view, the Portfolios were well positioned for this move and significantly outperformed the market benchmarks as they increased by between 7% and 8% in February. Looking forward, while we do not expect the moves to be as sharp, the trend remains for higher interest rates as we are only now getting back to levels seen prior to the onset of the pandemic in March last year.

Details

Strategy objective Strategy summary Risk category Minimum suggested investment timeframe
To provide exposure to income assets. Anticipated to mainly hold New Zealand, Australian and international bonds. 2 years+

Performance

Performance since inception (25 January 2017) to 28 February 2021
Managed Superannuation Service Income Strategy Chart Managed Superannuation Service Income Strategy Performance Table

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 December 2020. 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.

Portfolios

NZ Funds Managed Superannuation Service Income Strategy

Complete Strategy as at 22 February 2021
Managed Superannuation Service Income Strategy Portfolio Table


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. Swaptions notional value is currently $7,501,366.
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.

Overview

Risk & volatility Please see the NZ Funds Managed Superannuation Service Product Disclosure Statement (PDS) or the latest Fund Update for information on risk.
LifeCycle allocation LifeCycle allocates 5% of a member’s funds to this Strategy until the member reaches age 58, from when their allocation will gradually increase.
Further information The NZ Funds Managed Superannuation Service, which incorporates the Income Strategy, is issued by New Zealand Funds Management Limited. Further information is contained in the NZ Funds Managed Superannuation Service Product Disclosure Statement

Inflation Strategy

Review

For the month of February 2021

The Absolute Return Strategy, which comprises a significant portion of the Inflation Category, had a strong month in February returning 6.49%. The portfolio made strong returns across shares, credit and commodities.

The short United States government bond position that performed well in January continued to generate strong returns in the Absolute Return Strategy as US interest rates pushed higher. This move in interest rates also had a flow-on effect in share markets.

High-growth companies including technology shares sold off, while value and cyclical companies performed well. When interest rates increase, share investors tend to favour businesses with strong near-term cash flows that benefit from economic growth, such as energy companies, commodities businesses and banks. To create room to buy these companies they tend to sell growth businesses where the cash flows are expected many years into the future. These tend to be technology, healthcare or other businesses that display strong long-term growth trends.

The Absolute Return Strategy positioned its share portfolio to benefit from this rotation out of growth businesses and into value/cyclical businesses, which contributed significantly to returns in February. The Strategy short-sold (profits when the share price falls) several non-profitable technology businesses and bought long Australian and United States banks, as well as some commodity businesses like Rio Tinto. This trade paid off by generating positive returns on both the short side and the long side.

Details

Strategy objective Strategy summary Risk category Minimum suggested investment timeframe
To mitigate the impact of inflation on your investment over the medium and/or long term. Anticipated to mainly hold New Zealand, Australian and international bonds and shares. 5 years+

Performance

Performance since inception (25 January 2017) to 28 February 2021
Managed Superannuation Service Inflation Strategy Chart Managed Superannuation Service Inflation Strategy Performance Table

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 December 2020. 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.

Portfolios

NZ Funds Managed Superannuation Service Inflation Strategy

Complete Strategy as at 22 February 2021
Managed Superannuation Service Inflation Strategy Portfolios Table


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 $5,962,026.
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.

Overview

Risk & volatility Please see the NZ Funds Managed Superannuation Service Product Disclosure Statement (PDS) or the latest Fund Update for information on risk.
LifeCycle allocation LifeCycle allocates 10% of a member's funds to this Strategy until the member reaches age 55, from when their allocation will gradually increase to 34% by age 65.
Further information The NZ Funds Managed Superannuation Service, which incorporates the Inflation Strategy, is issued by New Zealand Funds Management Limited. Further information is contained in the NZ Funds Managed Superannuation Service Product Disclosure Statement

Growth Strategy

Review

For the month of February 2021

The major share market indices reached record highs in February; however, they pulled back sharply at the end of the month, leaving most with modest gains. Despite this, the NZ Funds Growth Category was positioned to take advantage of a change in market expectations for growth, inflation and interest rates, leading to significant outperformance.

We saw economic growth coming through stronger than the market was expecting. This led us to believe the market was underestimating the trajectory of interest rates. Taking a short position in 5-year and 10-year government bonds in December 2020 meant the Category would benefit from any rise in interest rates and hedge out the risk of a share market sell-off should interest rates increase.

This generated strong performance for the month as 5-year and 10-year interest rates increased 33 bps and 35 bps respectively. We believe there is more to come with expectations that the United States 10-year interest rate will reach 2.0% by year end.

At the same time, commodities also performed well following expectations that the reopening of the global economy will be followed by strong demand across both hard and soft commodities. This leads to commodity price increases as the increase in demand was not able to be met by lacklustre supply.

Economic signals, as well as the accelerated vaccine rollout in the United States and better than expected fourth-quarter corporate earnings, improved as the month wore on. However, as long-term interest rates increased, placing a greater discount on future earnings, investors heavily favoured value shares over growth shares. We have an overweight position in value across the Category including in Australian banks.

Details

Strategy objective Strategy summary Risk category Minimum suggested investment timeframe
To grow your investment over the long term. Anticipated to mainly hold New Zealand, Australian and international shares, and/or hedge funds. 10 years+

Performance

Performance since inception (25 January 2017) to 28 February 2021
Managed Superannuation Service Growth Strategy Chart Managed Superannuation Service Inflation Strategy Performance Table

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 December 2020. 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.

Portfolios

NZ Funds Managed Superannuation Service Growth Strategy

Complete Strategy as at 22 February 2021
Managed Superannuation Service Growth Strategy Portfolio Table


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.

Overview

Risk & volatility Please see the NZ Funds Managed Superannuation Service Product Disclosure Statement (PDS) or the latest Fund Update for information on risk.
LifeCycle allocation LifeCycle allocates 85% of a member’s funds to this Strategy until the member reaches age 55, from when their allocation will gradually decrease.
Further information The NZ Funds Managed Superannuation Service, which incorporates the Growth Strategy, is issued by New Zealand Funds Management Limited. Further information is contained in the NZ Funds Managed Superannuation Service Product Disclosure Statement