Superannuation Income Strategy

Potential for greater than term deposit returns

The Strategy is primarily invested in New Zealand, Australia and United States-issued corporate bonds with a time to maturity of around three years. Over the business cycle, the Strategy offers investors the potential for greater than term deposit returns. Global corporate bonds also typically offer higher yields than government bonds of similar duration.

The returns from corporate bonds do not typically rise and fall at the same time as the share market, so owning both shares and bonds can even out some of the volatility in an investor’s portfolio or provide a more stable source of funds for short to medium-term purposes.

Professionally managed portfolio with currency hedging

The Strategy offers investors a professionally managed selection of corporate bonds. By accessing these bonds through a PIE portfolio, NZ Funds can ensure clients’ foreign currency exposure is hedged back into New Zealand dollars, as and when is needed throughout the business cycle. NZ Funds’ research and management team has been building and managing diversified portfolios of local and international bonds for New Zealand clients for over 20 years.

The Strategy may also use professional investment tools and techniques which are not normally available to private investors. These include interest rate swap contracts with major trading banks to increase or reduce the Strategy’s exposure to interest rates at different points in time during the business cycle. The Strategy may also own futures contracts and credit derivative swaps on highly diversified indices of corporate bonds to spread the risk of bond defaults over a larger number of corporate issues.

Highly liquid & convenient

Building an easily accessible but highly diversified portfolio of local and international bonds is virtually impossible for retail investors as the minimum dollar amount for large global bond issues can be considerable. It is also difficult to withdraw or deposit small amounts regularly when bonds are held in an individual’s name. In addition to being a portfolio stabiliser for long-term investors the Strategy is also designed so that investors can easily set up a regular withdrawal programme to fund their retirement.

Since inception (25 January 2017) to 30 September 2026. Returns are stated after full Strategy fees and expenses including performance fees (where applicable), but before any advisory fees or investor tax. No management fee rebates have been applied to these numbers, see PDS for management fee rebate criteria. Past performance is not necessarily an indication of future returns. Maximum decline represents the largest decline in value in the previous 12 months. Volatility 5 Years is the annualised standard deviation calculated from weekly returns of the Strategy over the 5 years ending 30 September 2026. 

†  Share market volatility adjusted weight as per NZ Funds’ risk management model.

The graph displays the change in value of a notional investment of $100 after full fees and tax (assuming a tax rate of 28%) but before any advisory fees (if applicable). No management fee rebates have been applied in the graphs of individual Strategy performance. In the graph above, quarter ends are full standard calendar year quarters except the first quarter from inception (25 January 2017) which is not a full quarter.

The market index for the Strategy annual return is based on a composite index calculated using the market indices and weightings set out in the Statement of Investment Policy and Objectives (SIPO): S&P/NZX Investment Grade Corporate Bond Total Return Index (50%), Bloomberg Global Aggregate Corporate - 1 -3 Years Total Return Index Hedged USD (50%). You cannot invest in these indices and these indices do not take Environmental, Social and Governance (ESG) factors into account. 

NZ Funds takes ESG criteria into account in its investment decisions. This impacts on our investment choices. Our ESG criteria are set out in NZ Funds Managed Superannuation Service SIPO. NZ Funds is an active manager so the securities listed above may not be held in the future. Past performance is not an indicator of future returns. A full list of securities held by the Strategy is available through NZ Funds Digital Wallet. Rounding may affect totals.

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 Strategy Profiles and in the NZ Funds Managed Superannuation Service Product Disclosure Statement (PDS).