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
New Zealand Growth Fund
The New Zealand Growth Fund 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.
Australian Growth Fund
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.
International Growth Fund
Global markets continued the recent strong run in April, with the US first-quarter earnings season off to a better than expected start and recent economic data out of China and the US showing signs of stabilisation. The International Growth Fund returned 5.0% in April, ahead of our global benchmark (+4.5%).
Strong performers for the month included PayPal, MasterCard, Google and Facebook, all of which recently reported first quarter financial results.
Drags on performance were United Parcel Service and Core Laboratories. While the recent slowdown in the global economy had been expected to impact United Parcel Service, its first-quarter revenue growth was worse than anticipated and came in flat year-on-year. This combined with its ongoing investments in facility automation and headwinds from bad weather in the quarter resulted in flat earnings. While the lack of growth this quarter is disappointing, we believe UPS is making the right investments in its network to position the company to benefit from growing freight volumes and ecommerce deliveries.
We added Texas based software company Tyler Technologies to the portfolio. Tyler is the leading provider of software to the local government sector in the US. Tyler is the only company in this market that can offer a full suite of products and it continues to extend its lead through both research & development and bolt-on acquisitions. Despite being the industry leader, Tyler only has 13% market share and we see continued market share gains and margin expansion over the long term.
Property & Infrastructure Fund
Global infrastructure sharemarkets underperformed global sharemarkets for the month, and were up 1.2% versus global equities +3.5%. This was unsurprising given the stabilisation and slight sell-off in global bonds. The Property and Infrastructure fund outperformed the market with a return of 1.4% for the month.
In portfolio news, railroad company Norfolk Southern (+9%) reported a strong first quarter 2019 result. In terms of progress against its 'TOP 21' plan to implement Precision Scheduled Railroading, core performance metrics showed significant improvement with higher train speed and lower terminal dwell, plus 5 other key productivity metrics all showed varying degrees of progress towards the 2021 goals. We continue to like the long runway for strong growth given the relatively high cost profile versus other railroads and early traction so far.
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.
The Income Fund returned 0.2% for the month of April, where global fixed income markets took what could be best described as a “breather”. Volumes were lighter than usual and moves across interest rate markets were more muted than in recent months. This meant the income which our investments accrue were the most meaningful contributor to the fund’s performance.
The aforementioned quietness across fixed income markets in April resulted in very little change in the market value of our securities this month.