The Income Fund rose +0.5% during November, comfortably ahead of the benchmark which was up +0.2%.

US elections drove headlines early in the month with uncertainty around what a second Trump term could mean for markets. Interest rate moves were relatively muted compared to those seen earlier in 2024, but credit markets rallied. This saw the credit spread decrease by about 0.1% across US investment grade bonds and 0.2% in US high yield bonds. The driver of this sentiment is due to markets’ belief that a republican Senate, House & President are good for the US economy and therefore could drive credit risk lower.

Towards the end of the month the Reserve Bank of New Zealand (RBNZ) reduced the official cash rate (OCR) by another 0.5% to 4.25%. The bank cited continued inflation reduction as a key driver of this decision, while noting macroeconomic indicators such as employment, which continue to paint a weak picture of economic activity. At 4.25% the OCR is still in ‘restrictive’ territory according to the RBNZ, so we think further cuts are likely.

Investment highlights for the month were concentrated in offshore bonds, predominantly in the US and Europe and yields fell. Our position in Netflix 2029 bonds rose +1.7% in November as underlying interest rates fell on lower growth expectations for the Eurozone. The company has also been delivering very solid performance, with October’s Q3 result helping to bolster credit spreads for the now A rated company. They are seeing continued success in their new ad-supported offering as well as strong subscriber growth.

A detractor for the month was our position in Ryman Healthcare whose bonds fell slightly at -0.1% in November. Ryman has been struggling to turnover their inventory of new and existing stock in a sluggish New Zealand housing market. A large percentage of people moving into Ryman facilities do so after selling their primary residence, and with a slow housing market this has flowed through to Ryman’s results. We are confident this is a cyclical issue which should rebound as the local economy turns and have further comfort that even at a ‘trough’ in profitability, their debt levels are sustainable.