Summer New Zealand Fixed Interest
Summary of investment objective and strategy
To achieve long-term returns (before fees, taxes and other expenses) greater than the Bloomberg NZBond Composite 0+ Yr Index.
These investments typically have low to moderate levels of movement up and down in value.
Strategic investment mix
| Category | % |
|---|---|
| Cash and cash equivalents | 5.00% |
| New Zealand fixed interest | 95.00% |
| International fixed interest | 0.00% |
| Total income assets | 100% |
| Australasian equities | 0.00% |
| Listed property | 0.00% |
| International equities | 0.00% |
Risk indicator
The risk indicator is rated from 1 (low) to 7 (high). The rating reflects how much the value of the fund’s assets goes up and down (volatility). A higher risk generally means higher potential returns over time, but more ups and downs along the way.
* The composite benchmark for each multi-asset class fund is made up of the single asset class benchmarks weighted by the target asset allocation for the asset class.
Minimum suggested investment timeframe
At least three years
Fund at a glance
Unit price (as at 31 December 2025): $1.2630
Fund returns
| PIR | Total since inception (annualised) | 1 Month | 3 Month | 1 Year | 3 Years^ |
|---|---|---|---|---|---|
| 10.5% | 2.29% | -0.15% | -0.18% | 4.22% | 5.30% |
| 17.5% | 2.11% | -0.14% | -0.16% | 3.89% | 4.88% |
| 28% | 1.85% | -0.12% | -0.14% | 3.39% | 4.25% |
^ Annualised
Fund returns are calculated net of fund charges, trading expenses and accrued tax for a New Zealand resident individual paying tax at the Prescribed Investor Rate identified above.
Top 10 investments
| # | Asset name | % of fund net assets |
|---|---|---|
| 1 | New Zealand Government 1.5% 15/05/2031 | 7.24% |
| 2 | New Zealand Government 14/04/2033 3.5% | 6.82% |
| 3 | New Zealand Government 15/05/2032 2.00% | 5.58% |
| 4 | NZ Government 4.25% 15/05/2034 Green Bond | 5.35% |
| 5 | New Zealand Government 4.5% 15/05/2035 | 5.33% |
| 6 | New Zealand Government 4.25% 15/05/2036 | 4.95% |
| 7 | New Zealand Government 4.50% 15/05/2030 | 4.54% |
| 8 | New Zealand Government 3% 20/04/2029 | 4.44% |
| 9 | New Zealand Government 15/05/2028 0.25% | 3.81% |
| 10 | ANZ transactional bank account | 3.44% |
| Top 10 investments total | 51.5% | |
Manager's Commentary
How did your portfolio perform?
The New Zealand Fixed Interest Fund (the fund) delivered a return after fees and before tax of –0.17%. for the month of December. For the 12 months to the end of December, the fund delivered a return after fees and before tax of 4.73%.
What happened in the markets that you invest in?
December was a largely indifferent month for investors in the New Zealand Fixed Interest Fund.
The domestic fixed interest market ended the 2025 calendar year with a whimper, still smarting from the hawkish tone of the Reserve Bank of New Zealand’s (RBNZ) Monetary Policy Statement in November. The RBNZ delivered an expected 0.25% cut, taking the Official Cash Rate (OCR) to 2.25%, but followed up its announcement with contradictory signals and commentary from RBNZ decision-makers about how long the OCR would remain at that level. Longer term rates rose in sympathy.
What are we thinking about the future?
While the broader market confidently predicts an end to the multi-year easing in domestic momentary policy, there is little consensus as to when the OCR will be raised from its current nadir of 2.25%.
Our view is that market participants will be nimble, as they lack conviction in any single view, and will generally over-react to each key data release. Typically, this a tougher trading environment for fixed interest funds.
The fund’s gross yield to maturity, calculated as the weighted-average gross yield of all securities in the portfolio, was 4.00%. In addition to this yield, the fund may also earn a ‘roll-down return’. A roll-down return is a capital gain. It happens because a bond’s market value usually rises as it gets closer to its maturity date, however because the yield curve is upward-sloping, meaning longer-term bonds have higher yields than shorter-term bonds, the yield falls as the bond gets closer to maturity and ‘rolls down’ the yield curve.
A simple way to understand roll-down is to look at a New Zealand Government bond. At the end of the year, a 5-year government bond had a yield of 3.92%. Assuming interest rates do not change, that same bond will become a 4-year bond one year later. At the end of 2026, a 4-year bond is expected assumed to have a lower yield of 3.77%. As the yield falls while the bond ‘rolls down’ the yield curve, the bond’s market value increases. That increase is known as the ‘roll-down return’.
Based on current market conditions, we believe the fund could earn an extra 1% per year from this roll-down effect.
The fund’s weighted-average credit quality was AA-. Where a security does not have an external credit rating, we assign an internal credit rating based on our assessment. We use the lowest available credit rating for New Zealand Government bonds, Fitch’s AA+.
Other opportunities include inflation-linked bonds, which look too cheap in our view. We doubt that current inflation of ~3% per annum will return to RBNZ’s mid-band 2% target anytime soon. We also like short-maturity credit (non-government bonds) yielding more than 4.50%. An improving domestic economy and better financial performances from those issuers linked to discretionary consumer spending and/or the residential property market should support returns in these bonds.
We also see several opportunities developing from the RBNZ’s 2025 Review of Key Capital Settings, applicable to the local banking sector, with various subordinated bank bonds now looking attractive to us. We also see earlier government announcements around supporting renewable generation developments improving the perceived credit standing of capital bonds issued by Genesis Energy, Mercury Energy, and Meridian Energy.
Overall, we are positive on the opportunities and outlook for Fixed Interest in 2026.