Investing highlights & lowlights — May 2017

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Investing highlights & lowlights — May 2017.

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

New Zealand Growth Fund
The NZX50 continued its uninterrupted five month rally with a +0.5% move in May. The market has regained almost all the ground it lost in September and October of last year. Our New Zealand portfolio was up 1.5%; outperforming the market. Fisher & Paykel Healthcare was again our top contributor for the month, up 6.0%. The portfolio's best performing stock, Port of Tauranga, was up 9% due to a strong rebound in log volumes through the port (+21% year to date) and rising container volumes. Summerset was the largest drag on portfolio performance, down 6%, as the market remains concerned about a possible peak in house prices and the impact to earnings.

Australian Growth Fund
The Australian portfolio was down 2.9% for the month, comparing favourably with the Australian share market which fell 6.5% in New Zealand Dollars; the worst month for the market since August 2015. With the exception of the Industrials sector, which was buoyed by a small number of shares rallying on very specific issues, all other sectors were down. Stock selection, reducing exposure to mining and banking positions earlier in the year, and currency hedging contributed to the portfolio's outperformance of the market. In company news, Wisetech announced a development partnership with global freight leader UPS, and AUB Group continued a strong rally on expectations of rising insurance premiums.

International Growth Fund
Global markets continued their upwards climb in May with our International portfolio up 1.8% for the month. Outperformance of the global benchmark was driven by our core technology holdings such as Expedia, Alibaba and Cognizant and positive contributions from recent additions to the portfolio.

Hearing aid manufacturer, William Demant, which was added to the portfolio earlier this year was the strongest performer in May (+11%), with management reporting that new product launches are driving strong growth and market share gains. Sarine Technologies was the weakest performer in the portfolio (-9%), with first quarter sales below expectations due to weaker than expected demand for their diamond inclusion mapping systems and a competitor making traction with a similar product.

Property & Infrastructure Fund
The Property & Infrastructure portfolio was up 2.2% in May. For the second month in a row, Flughafen Zurich was our top contributor up 9%. However, the best performing stock in the portfolio was Aeroports de Paris, up 11%. The airport owner/operator benefited from an upgrade to earnings guidance on the back of stronger passenger growth. The biggest detractor from performance was again Kinder Morgan -9%. The oil and gas pipeline company's share price fell as the IPO price of its Canadian business was below expectations.

Income Fund
Global growth expectations continue to fall back down to reality, having risen strongly after the election of Donald Trump. In light of this more challenged outlook, investors are undoubtedly finding solace in the safe-haven qualities of fixed income assets – allowing their rich vein of form this year to continue. Our cautious positioning, which favours government-issued bonds over corporate bonds, also proved a valuable contributor to the strong performance of our fixed interest portfolio this month.

While still posting positive returns for the month, it was our corporate bond investments that lagged this month’s rally. As we have highlighted in recent months, we have been taking the opportunity to reduce our corporate bond holdings as valuations reach our target. This process continues.


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