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Investing highlights & lowlights — September 2016

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Investing highlights & lowlights — September 2016.

This month we share how each investment portfolio is tracking, including some of the highs and lows direct from our investment team.

Farewell Murray Brown
We are sad to farewell Murray this month after an exemplary eight years at the helm of our New Zealand share portfolios and our Property & Infrastructure fund. Murray has decided to retire and change his focus from managing a portfolio of shares to managing a portfolio of leisure and other interests! We wish him the very best and will introduce Murray’s successor in due course.


 

New Zealand Growth Fund
It was relatively quiet on the news-front in New Zealand during September, although the New Zealand portfolio managed to produce a positive return in a market that fell 0.5%. Restaurant Brands recorded solid second quarter sales, with KFC, Starbucks and Pizza Hut all recording positive same store sales growth. The Tegel share price fell during the month as its major competitor Inghams looked to list in Australia. There was some selling of Tegel shares as investors looked to fund a potential investment in its competitor, and lower poultry prices in domestic supermarkets have put pressure on Tegel’s earnings.


Australian Growth Fund
September saw a continued rally in mining stocks on stronger commodity prices, and continued weak demand for shares of companies offering reliable earnings and cash flows, making for a challenging performance environment for our Australian portfolio. Nanosonics was up on strong sales growth prospects, Credit Corp responded well to a maturing of its Aussie consumer lending business and Ooh Media and APN Outdoor rebounded from oversold positions. Shares of Vocus were weak as the shares of a peer communications company, TPG Telecom fell following a poor earnings outlook.


International Growth Fund
A key highlight this month for the International portfolio was the significant share price performance of Alibaba, based on a strong set of quarterly results and a number of analyst upgrades. PayPal also performed well, beating revenue and earning estimates. However, a lowlight was the resignation of the President of Cognizant, a global leader in business and technology services. His resignation comes at the same time the company announced an internal investigation into certain payments relating to gaining permits and licences in India.


Property & Infrastructure Fund
During September we added toll road operator Atlantia to the Property & Infrastructure Fund. Atlantia is a listed toll road operator with the majority of its operations in Italy and small toeholds in higher growth markets like Brazil and Chile. Atlantia is a well-managed business that generates a growing stream of cash flows from its toll concessions.

September was a difficult month for property & infrastructure shares as global investors started to fret about potential US interest rate hikes. Segments of the market that had benefited from the hunt for yield came under significant pressure, with Australian listed property shares down circa 8% mid-September. This impacted our Australian property stocks Dexus down 5%, Arena down 8% and Folkestone Education Trust down 8% during the month.


 

High Income Fund
Despite a bout of volatility washing over markets this past month, our fixed income funds were largely unmoved. Elevated uncertainty surrounding both the global economic and political outlook has led us to hold a greater-than-usual allocation to shorter term, cash-like investments at present. Investor risk appetite waned this past month, causing most global asset classes to post weaker returns. Our fixed income funds were negatively affected by a mild fall in the value of their corporate bond investments in particular.

 

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