Summer New Zealand Fixed Interest

Summer New Zealand Fixed Interest fund performance summary as at 30 April 2024.

Fund at a glance

Unit price (as at 30 April 2024): $1.331

Date the fund started: 19 September 2016

For information on fees, see our Fees page.

For more information on the Summer New Zealand Fixed Interest fund read the latest quarterly fund update and the product disclosure statement

Fund objective and strategy

See the New Zealand Fixed Interest page for the Summary of investment objective and strategy.

Fund returns 

PIR Total since inception (annualised) 1 Month 3 Month 1 Year 3 Years^
28% 1.21% -0.74% -0.13% 2.45% -0.53%
17.50% 1.38% -0.85% -0.15% 2.80% -0.61%
10.50% 1.49% -0.92% -0.17% 3.04% -0.67%

   ^ 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 3% 20/04/2029 5.96%
2 New Zealand Government 14/04/2033 3.5% 5.37%
3 New Zealand Government 4.50% 15/05/2030 4.66%
4 ANZ transactional bank account 4.42%
5 Westpac New Zealand 1.439% 24/02/2026 4.31%
6 New Zealand Government 15/05/2028 0.25% 3.88%
7 New Zealand Government 15/05/2032 2.00% 3.80%
8 New Zealand Government 1.5% 15/05/2031 3.76%
9 New Zealand Local Government Funding Agency Ltd 15/04/2027 4.50% 3.09%
10 Dunedin City Treasury 1.93% 18/04/2028 2.83%

The top 10 investments make up 42.08% of the fund.

Manager's Commentary

What happened in the markets that you invest in?

April was a difficult month, in general, for New Zealand fixed interest investors. Reluctantly, in response to better-than-expected economic data and associated central bank statements, market participants adjusted inflation and interest rate expectations higher over the course of the month. The resultant sell-off in bond yields delivered capital losses to investors in the fund. However, as we have noted previously, return volatility is not unexpected, and we remain extremely confident that bond yields and term interest rates are at or approaching peaks. 

How did your portfolio perform?

Summer New Zealand Fixed Interest delivered a return net of fees and before tax of -1.03% in April. For the 12 months to the end of April the fund delivered a return net of fees and before tax of 3.39%.

What are we thinking about the future?

We believe domestic inflation peaked some time ago and that the Reserve Bank of New Zealand (RBNZ) will have the confidence to begin reducing its Official Cash Rate (OCR) towards the end of this year. This is earlier than the RBNZ’s forecast, where it predicts the first OCR cut towards the middle of next year1.

The New Zealand Fixed Interest Fund is very well positioned, in our view, to navigate through the rest of the calendar year. The portfolio duration2 was around 4.90 years at the end of April with a gross yield to maturity3 approaching 5.35%.

The recent strategy of rotating into New Zealand Government bonds – by selling non-Government securities - has meant that the fund has enjoyed significant capital appreciation over the last 12 months.

Extreme market volatility that has plagued investors over recent years is likely to continue in our view. We expect interest rates to fall further and while the initial impetus is a positive news story – falling inflation – we see the next driver as more sinister – economic recession.

On this basis, we will continue to accumulate New Zealand Government bonds while rationing capital to non-Government securities; in general, corporate bond spreads don’t currently reflect the risks of the next economic cycle, in our opinion.   

1Monetary Policy Statement, Reserve Bank of New Zealand, February 2024  

2Duration is the weighted-average portfolio sensitivity to changes in value resulting from changes in the level of New Zealand wholesale interest rates 

3Gross yield to maturity is calculated as the weighted-average gross yield of all securities in the portfolio as at 30 April 2024, assuming that all amounts owed by the issuer will be received by the Fund and is based on our assessment of the calculation methodology made available by the manager of the fund’s market index; and does not include the deduction of any taxes, fund charges, trading expenses or fees

 

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.