Summer Balanced Selection

Summer Balanced Selection fund performance summary as at 31 December 2019. 

Fund at a glance

Unit price (as at 31 December 2019): $1.2969

Date the fund started: 19 September 2016

For information on fees, see our Fees page.

For more information on the Summer Balanced Selection fund, read the latest quarterly fund update and the product disclosure statement

Fund objective and strategy

See the Summer Balanced Selection page for the Summary of investment objective and strategy.

Fund returns

 Annualised total since inception1 Month3 Months1 Year3 Years
Fund 7.59% -0.32% 0.90% 15.65% 8.67%

Fund returns are calculated net of fund charges, trading expenses and accrued tax for a New Zealand resident individual paying tax at the highest Prescribed Investor Rate (28%). 

Tactical asset allocation

Summer Balanced Selection Allocated %
New Zealand cash 5.0%
New Zealand fixed interest 33.0%
International fixed interest 7.0%
Total income assets 45.0%
New Zealand equities 15.5%
Australian equities 12.5%
Listed property 5.0%
International equities 22.0%
Total growth assets 55.0%
Total 100.0%

We have chosen the above tactical asset allocation for Summer Balanced Selection as at 1 November 2019. This can move in line with market movements and we review the portfolio and adjust asset allocation accordingly. For the current tactical asset allocation and date of most recent review, please go to the Summer Balanced Selection page.

Top 10 investments 

  Asset name % of fund net assets
1 ANZ transactional bank account 5.31%
2 The a2 Milk Company Limited 1.57%
3 Bank of New Zealand Subordinated Note 17/12/2025 5.314% 1.48%
4 Amazon.com, Inc. 1.46%
5 New Zealand Local Government Funding Agency Ltd 14/04/2033 3.50% 1.42%
6 New Zealand Local Government Funding Agency Ltd 15/04/2025 2.75% 1.34%
7 CSL Limited 1.30%
8 BHP Group Limited 1.26%
9 Kiwi Property Group Limited 1.13%
10 Meridian Energy Limited 1.10%

The top 10 investments make up 17.37% of the fund.

Market Commentary

The Summer Balanced Selection Fund generated a 0.90% return during the December quarter:

  • Returns across higher risk asset classes – New Zealand, Australian, and global equity markets – were positive over the quarter, offset by a pullback in fixed income. Listed property also made a positive contribution as the underlying investment fund outperformed the broader sector which continued its recent correction. 
  • The final quarter of 2019 capped off a very strong year for equity returns. The US S&P 500 index was up +28.9% for the year in USD terms, its biggest one-year gain since 2013. The tech dominated NASDAQ index led the broader market gains, rallying +35.2% in 2019, with Apple and Microsoft gaining +86.2% and +55.3% respectively.

The last quarter of 2019 heralded a substantial shift in sentiment among financial market participants. The mood lifted from cautiously wary, to a more optimistic outlook for the year ahead.

The main reason for this uplift in sentiment was the coordinated response by global central banks to subdued inflationary pressures. During the last few months of 2019, the major central banks including the Federal Reserve in the US, European Central Bank (ECB), Bank of Japan (BOJ), and the Peoples Bank of China (PBoC), all eased monetary policies by cutting interest rates and other measures. The central banks of New Zealand and Australia had also moved to reflate their respective economies in the latter months of 2019 by lowering interest rates, as did a host of other central banks around the world.

Low inflation and renewed stimulus by global central banks complimented an improving geopolitical and trade outlook. By the end of the year, a substantial victory at the polls for Boris Johnson and the UK Conservative Party went a long way to remove much of the uncertainty surrounding Brexit. And the trade war between the US and China de-escalated as a ‘Phase 1’ deal was agreed to, likely to be signed mid-January. 

With low inflation keeping central bank policy in a stimulatory phase, the global consumer should continue to provide the ‘heavy lifting’ for global growth over the next few months as it has over the past year. Not only have households benefited from lower debt servicing costs, lower interest rates have boosted asset valuations including equities, property and, until recently, bonds. The rising wealth effect of higher asset prices is contributing to the consumer’s ability to spend, and underpinning global growth.

Portfolio Positioning

The New Zealand dollar (NZD) appreciated sharply (+7.6%) against the USD during the last quarter. The Australian currency (AUD) also rose against the USD, but it was less buoyant than the NZD. While the stronger currency offsets some of the investment returns from international assets, when translated back in NZD’s, it reflects a growing global demand for things that we produce, in particular, our primary produce. The attraction for ‘NZ Inc.’ also included exposure to our financial assets, including domestic assets such as government bonds and locally listed companies. The latest current account (Q3, 2019) data confirms a surge of inward investment from international investors to New Zealand during the second half of 2019. At the same time, our terms of trade, which reflect the value of our exports over the cost of our imports, remains at a record high. Despite the tariff war that has slowed global trade, demand for what we produce in New Zealand has increased, boosting volumes and prices. This has been reflected in strong performances in domestic stocks such as A2 Milk (ATM), freight and logistics companies Freightways (FRE) and Mainfreight (MFT), and port companies such as Port Tauranga (POT).

Low interest rates and higher cash balances also contributed to a very buoyant mergers and acquisitions (M&A) scene during 2019. Metlifecare was the latest company to receive a takeover offer during the last quarter of 2019. Combined with the resurgent housing market, the aged care sector (Summerset, Arvida, Oceania Healthcare, and Ryman) enjoyed a substantial lift in value over the last quarter.

Outlook

Economic expansions generally last for many quarters, or years, while recessions tend to be brief.  The current economic expansion is now the longest on record, continuing for over 10 years in a number of countries. Expansions generate increased prosperity and wealth. This is reflected in rising equity prices. Recessions generally see a correction in equity markets, but in most instances, these are great buying opportunities for long term investors. While the day to day headlines can be cause for concern, investors are well served by focussing on long-term trends. Investors that maintain sensibly diversified portfolios with a focus on quality companies and control of credit risk will be able to ride out most short term corrections that happen from time to time. 

Foreign currency exposures associated with international fixed interest are hedged to the New Zealand dollar. We actively manage the fund’s currency exposures associated with international and Australian equities. As at 31 December 2019, these exposures represented 33.81% of the value of the fund. After allowing for foreign currency hedges in place, approximately 26.23% of the value of the fund was unhedged and exposed to foreign currency risk.

 

This is not a recommendation to buy or sell any financial product and does not take your personal circumstances into account. All opinions reflect our judgement on the date of communication and may change without notice. Past performance is not a reliable guide to future performance. We recommend you take financial advice before making investment decisions. We have prepared this web page in good faith based on information obtained from other sources, but we do not guarantee the accuracy of that information. We do not make any representation or warranty (express or implied) that this web page is accurate, complete, or current and to the maximum extent permitted by law disclaim any liability for loss which may be incurred by any person relying on this web page.