Investing highlights & lowlights — March 2017

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Investing highlights & lowlights — March 2017.

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

New Zealand Growth Fund
The NZX50 was up in March (+0.4%) and the New Zealand Growth Fund (+1.5%) outperformed the market by 1.1% Fisher & Paykel Healthcare was one of our top contributors for the month, lifting 6.5%. The medical devices manufacturer continued to recover after the market’s overreaction to ResMed’s patent infringement lawsuit. The key underperformer was Tegel (-11.7%) as it remains under pressure from persistently weak poultry pricing.

Australian Growth Fund
The Australian portfolio was slightly ahead of a strong Aussie market in March. CSL continued to win investor favour on the success of its key immune therapies and expectations of a strong recovery in its recently acquired flu vaccine business. After falling precipitously over the end of 2016, Australian IVF volumes started to improve providing support for the share price of Virtus Health. AUB Group (previously Austbrokers) rallied on expectations that commissions would benefit from rising insurance premiums.

International Growth Fund
In the International portfolio, adidas was up (13%) in March, after a strong full year result with revenue growth driven by demand for its sportswear and adidas Originals casualwear line. The company’s recent efforts to launch new products and reinvigorate its brands have started to pay dividends, with the company lifting its long term guidance and now targeting earnings growth of 20-22% per annum out to 2020. Blackhawk was also a standout performer, up (11%) over the month, after announcing a series of cost saving initiatives. The flipside of adidas’s strong results was that Nike released slightly disappointing quarterly results during March. Share gains by Under Armour and adidas in the lucrative US market resulted in underwhelming growth in Nike’s home market. While the company’s share price fell 7% immediately after the result, it clawed back most of these losses to close the month down (2.5%).

Property & Infrastructure Fund
The Property & Infrastructure Fund was up 2.5% in March. Flughafen Wien was our top performer for the month up 11.5% (in local currency). The airport company reported solid results for 2016 and an improved outlook, supported by solid passenger growth of 6.5% for February. The biggest detractor from performance was Norfolk Southern Corporation (-7.5%). The railway company’s share price consolidated after experiencing strong share price gains in previous months.

Income Fund
A resounding Trump (and Republican) defeat this month over the planned repeal of the Affordable Care Act further dampened optimism that the Trump Presidency will be as effective as hoped. This fueled demand for safe-haven assets such as government bonds, continuing a trend that has now been in place since the start of the year. Since the sharp rise in yields during the second half of last year, we have favoured US government bonds in our fixed income portfolios. This decision has been a key contributor to our stronger returns so far this year.

We have been taking the opportunity to reduce a number of our corporate investments following a very strong performance of these bonds over the past year.


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