Investing highlights & lowlights — June 2017

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Investing highlights & lowlights — June 2017.

A snapshot of the key factors driving the performance of markets and your funds last month

New Zealand Growth Fund
The New Zealand share market rose for the sixth month in a row, adding another 2.6% in June and taking the market to +10.6% for the year, broadly in line with global share markets. The market has now regained all the ground it lost in September and October last year. Our New Zealand portfolio was up 2%.

For the third month in a row, Fisher & Paykel Healthcare was our top contributor for the month, up 8%. However, the best performing stock in the portfolio was Restaurant Brands, up 13%. The company reported a strong start to the financial year with same store sales growth in its KFC NZ business +7.1% and KFC Australia +7.7%, ahead of expectations. Michael Hill was down 7.3% and was the largest drag on the portfolio performance as the Australian consumer continues to be under pressure.

Australian Growth Fund
The Australian share market ended a volatile month much where it started. There was little in the way of company specific information, with many companies finalising their financial year-ends. The share market moved on a variety of micro-themes over the period, the dominant of these being shifting energy prices, agonising around the detrimental effect of Amazon’s entry into Australia on the competitiveness of retailers, and a variety of real and imagined mergers and acquisitions. The Australian portfolio was slightly ahead of the market, benefiting from continued strong momentum in key holdings like CSL, ResMed and Controversy around the potential outcome of an investigation into wage fraud at Dominos continued to plague the company’s share price.

International Growth Fund
Alibaba was the standout performer during June, jumping 13% the day after its annual investor day. At the upbeat event, Alibaba announced that it expects to grow its revenues a staggering 45-49% in 2018 and also plans to double the volume of goods sold on their ecommerce platforms by 2020. Recent portfolio addition Abbott Labs (a diversified healthcare company) was also a strong performer in June, up 6.5%.

Alphabet was the biggest detractor from performance in June, with its share price down 6% for the month. This weakness was partly driven by a broad sell-off in technology stocks, but also by a 2.4bn euro fine levelled on Alphabet by the EU antitrust regulator. This fine was larger than expected and the European regulator argued that Alphabet abused its dominant online search position to favour its own comparison shopping services. We remain comfortable with our position in Alphabet and it is likely that they will appeal this decision. Alphabet has been a strong performer in 2017, up 17% year to date.

Property & Infrastructure Fund
The Property & infrastructure portfolio was down 0.4% in June. Aeroports de Paris was our top contributor and our best performing stock (for the second month in a row), up 5.3%. Investors reacted positively to the airport owner/operator on the back of a favorable broker report reiterating that 2017 will be a year of recovery not only for passenger growth but also for retail spending. The biggest detractor from performance was Flughafen Zurich -1.9%. There was no specific news for the airport owner/operator — the share price consolidated after being one of the strongest contributors to portfolio performance in the last few months.

Income Fund
The strong run we’ve observed in global fixed income markets this year came to a rather abrupt end in June, selling off for the first time in four months. The sell-off was widespread having an effect on a wide range of our holdings. Despite this, a number of key preferences in the portfolio did provide some respite. An example of this was our decision to favour U.S dollar investments over European equivalents — allowing the portfolio to avoid areas of the market that were most heavily hit.

As yields reversed course and rose this month, our growing preference for higher quality government-issued bonds acted as a drag on performance. Pleasingly the diverse composition of our portfolio did limit the damage somewhat.


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