Income Fund

    A conservative investment option

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    Performance chart

     

    * S&P/NZX 2 Year Swap Index (1/11/2016 to now) New Zealand Government Stock Index (Inception to 31/10/2016)

    Fund performance figures are after deductions for charges but before tax. Please note that past performance is not necessarily indicative of future returns. Returns can be positive or negative, and returns over different time periods may vary. No returns are promised or guaranteed.

    Fund highlights

    October 2023

    The income fund returned 0.27% in October as solid gains in New Zealand bonds were offset by mixed returns offshore. Locally, future short-term interest rate expectations finally began to ease as signs of a cooling New Zealand economy saw investors begin to again price in cuts to the Official Cash Rate in 2024.

    Offshore, US and Australian long-term interest rates hit record peaks, with the US 10-year reaching heights not seen since 2007. In contrast, European and UK rates dipped, with two to five-year maturities benefiting the most due to growing economic worries in those regions.

    Individual country economic data releases have different lags and timing, with a mix of positive and negative datapoints. As such we are not surprised by this ‘seesawing’ of interest rates as markets try and grapple with their implications.

    Notable highlights for the fund this month were Netflix where third-quarter results showed a significant jump in subscriber numbers and improved cash flow, bolstering the company’s financial health. The company continues to grow profitability without growing debt levels, driving credit quality higher at pace. We see future credit ratings upgrades for the issuer in the near term.

    Bank bonds such as those issued by Caixa Bank, Intesa San Paolo and UBS also did well as their credit spreads narrowed after positive results. Bank profitability continues to grow, and although we are wary of upcoming impacts from potential bad debts, banks are extremely well positioned having worked hard to bolster balance sheets for many years.

    Laggards for the month included holdings in US dollar-denominated bonds, especially for companies with longer maturities like Charter Communications and Microsoft, who didn't do as well. Even though these companies had good third-quarter results, the negative impact of the rising US interest rates was stronger and pushed their bond prices down.

    The fund's performance this month highlights the importance that higher initial yields can have on performance as positive absolute returns were achieved despite some headwinds from rising offshore yields.

    Portfolio Team

      Our Managed Funds

      • Conservative Fund

        Aims to provide stable returns over the long term by investing mainly in income assets with a modest allocation to growth assets.

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      • Growth Fund

        Aims to grow your investment over the long term by investing mainly in growth assets.

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      • Income Fund

        Aims to provide stable returns over the long term by investing in New Zealand and international fixed interest assets.

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      • Property & Infrastructure Fund

        Focuses on growth of your investment over the long term by investing in New Zealand and international property and infrastructure assets.

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      • New Zealand Growth Fund

        Focuses on growth of your investment over the long term by investing in quality New Zealand companies which can consistently produce increasing earnings.

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      • Australian Growth Fund

        Focuses on growth of your investment over the long term by investing in quality Australian companies which can consistently produce increasing earnings.

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      • International Growth Fund

        Focuses on growth of your investment over the long term by investing in quality international companies which can consistently produce increasing earnings.

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