A snapshot of the key factors driving the performance of markets and your funds in April 2019
All Fund returns below are after fees & before tax
The New Zealand portfolio had a strong month returning 3% compared to the local sharemarket that was up 1.7% (NZX50).
Portfolio company Port of Tauranga (+9%) delivered strong share price performance during a month where the Ministry of Transport released its interim report on Upper North Island Supply Chain Strategy. The report contained no clear conclusions, but there continues to be interest in shifting Ports of Auckland operations to Northport. Regardless of the ultimate outcome here, Port of Tauranga is well placed. Two further reports are due later in 2019.
A drag on performance was retirement village provider Summerset (-15%) after releasing a weak quarterly new sales figure, citing that increased settlement times in the residential property market are impacting settlement of its units. Following our recent site visit in March, we nonetheless believe that the company remains well positioned despite this short-term market-related weakness
In a strong month for our portfolio and the market, the Australian fund rose 3.1% in April. Share prices of Nanosonics (+13.3% in A$) and Technology One (+9.9%) continued their robust performance of recent times, with no new incremental news for either company. Credit Corp (+7.5%) raised $135m in fresh equity in a placement that was well supported by the market and which we supported. The additional funding gives them further leeway to capitalise on debt buying opportunities in the core ANZ market when pricing improves.
After some strong share price performance in recent months, Wisetech (-3.2%), oOh! Media (-3.2%) and Rio Tinto (-2.6%) gave some of this back in April. oOH! Media in particular may have suffered from some advertising spending uncertainty in the run up to the federal election in May. Any disruption to advertising spend is likely to be relatively short lived with the election only a few weeks away.
The International Equity Fund performed in line with the S&P Global LargeMidCap benchmark during the month, rising 5.7% in NZ dollar terms. This continued strong performance makes this one of the best starts to the year in history for global stock markets. Investors were encouraged after China announced its economy grew by 6.4% in the first quarter of the year, beating economists expectations, while market volatility remained subdued across most asset classes.
The relative performance of the fund was improved by higher exposure to European markets, followed by a higher weight to US Banks. Having a lower exposure to stocks that have performed well over the past 12 months, or recent winners also contributed positively to returns. The major detractor to returns was less exposure to those firms whose current value is mainly derived from higher expected growth in the future (also known as ‘growth’ stocks).
Drivers of performance included The Walt Disney Company which was up over 23% after unveiling a new streaming service Disney+, and the most recent instalment in the ‘Avengers’ series broke box office records. Qualcomm, a semiconductor and telecommunications equipment firm also contributed considerably. The firm's stock price rose over 50% after announcing it had reached a settlement with Apple over a patent dispute.
Intel Corporation detracted from performance, falling 5% after the company forecasted lower revenue later on in the year.
The fund returns were further boosted by a weakening NZ Dollar which fell 2% versus the US Dollar. The Kiwi dollar took a step lower after Statistics NZ announced inflation which underwhelmed expectations.
A recent, notable shift in positioning by PIMCO produced a promising uptick in results this month. The global fixed income manager has materially increased duration of their portfolio over the past six weeks and the extra yield this accrues in the Fund played a key role in their outperformance in April.
All funds produce inline or better returns that their respective indices this month. Pleasingly, there were no major underperforming assets across the funds this month.