Portfolios & Performance

Core Cash Portfolio

Insights

Managed Portfolios Core Cash Insights Graph

Not if – but when?

In its Official Cash Rate statement of 9 February the Reserve Bank of New Zealand left the OCR unchanged at 1.75%, stating monetary policy would remain accommodative for a considerable period.

“Numerous uncertainties remain, particularly in respect of the international outlook, and policy may need to adjust accordingly.”1

The central bank’s comments were widely interpreted as indicating it considered it unlikely it would need to lift the OCR until late this year or in 2018.

However, we remain of the view that the first rate rise in this part of the cycle will come as early as May or June. It could be argued the RBNZ, having cut in November, would be unwilling to reverse its position by signalling a rise so early in the current year.

The RBNZ noted rising long-term New Zealand interest rates and continued upward pressure on the New Zealand dollar.

“The exchange rate remains higher than is sustainable for balanced growth and, together with low global inflation, continues to generate negative inflation in the tradables sector. A decline in the exchange rate is needed.

“Economic growth in New Zealand has increased as expected and is drawing steadily on spare resources.”1

RBNZ Governor, Graeme Wheeler, has indicated he will not seek a second five-year term when his term expires on 26 September.

Due to the proximity of the general election on 23 September, the RBNZ Board will not begin the process of identifying Wheeler’s replacement until later this year. In the meantime, Deputy Governor Grant Spencer will be Acting Governor.

We expect there will be no material changes to the conduct of monetary policy under Spencer’s leadership.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.

1. RBNZ Official Cash Rate statement, 9 February 2017.
* Source: Bloomberg, NZ Funds calculations.

Performance

Performance since inception (28 February 2008) to 28 February 2017
Managed Portfolios Core Cash Performance Graph Managed Portfolios Core Cash Performance Table

Core Cash Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is based on the 'S&P/NZX Call Deposit Total Return Index'.

    The after tax comparative index has been calculated by applying the highest PIR rate (currently 28%) to the comparative index.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Core Cash Portfolio

Complete Portfolio as at 28 February 2017
Managed Portoflios Core Cash Portfolio Table

1. The yield is not the actual return of the portfolio, nor is it a projection or forecast. Details of the yield calculation are available on request from NZ Funds.
2. Net receivables include unrealised profit and loss and net receivables/payables.
3. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to provide a source of capital by primarily investing in income-orientated assets using an active investment management approach.
Investment category Cash
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 1 month +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Foreign currency
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a significant exposure to cash and cash equivalents. From time to time the Portfolio may invest in New Zealand fixed interest and/or international fixed interest.
Redemption restriction The Portfolio has no redemption restrictions.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Core Income Portfolio

Insights

Managed Portfolio Core Income Graph

Managing maturity risk

Broadly speaking, there are two ways to manage the return on an income portfolio – managing credit risk, and managing maturity (or interest rate) risk.

As global economic growth is in stable positive territory, we think a general rise in credit risk is unlikely in the near term. However, periods of economic expansion are typically accompanied by rising interest rates, which introduce an element of maturity risk as bond prices move in the opposite direction to market rates.

Managing the ups and downs of the cycle means placing a high emphasis on the quality of research. We undertake extensive research on each investment in-house, rather than relying on rating agency research and broker notes.

Disciplined research means not only identifying attractive investment opportunities, but also establishing valuation targets so that, in short, we know when to sell.

A recent example is the sale of the United States high-yield index exposure we had in this Portfolio.

This was purchased during August and September last year at a ‘spread’ of 400 basis points – essentially, at 4% above cash rates – on the view that high-yield bonds were cheap compared to their higher-rated investment grade counterparts, and that they would benefit more from accelerating growth in the United States.

The spread has since narrowed to around 320 basis points, implying an increase in the price of the underlying bonds. As they are now looking relatively expensive, we have taken profits and wound up the position.

That we are able to do this demonstrates, again, the value of a flexible mandate for our Portfolios, allowing us to respond quickly to changing circumstances so that we can continue to meet return targets.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
* Source: Bloomberg.

Performance

Performance since inception (23 July 2008) to 28 February 2017
Core Income Performance Graph Core Income Performance Table

Core Income Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is the 'S&P/NZX 90 Day Bank Bills Total Return Index'.

    The after tax comparative index has been calculated by applying the highest PIR rate (currently 28%) to the comparative index.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Core Income Portfolio

Complete Portfolio as at 28 February 2017
Core Income Portfolio Table

1. The yield is not the actual return of the portfolio, nor is it a projection or forecast. Details of the yield calculation are available on request from NZ Funds.
2. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
3. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to provide exposure to income-orientated assets using an active investment management approach.
Investment category Income
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 2 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Foreign currency
• Alternative securities *

* 'Alternative securities' means asset classes not usually accessed by retail investors, for example, private equity, venture capital and hedge funds. These tend to be asset classes where valuation and liquidity may be uncertain and returns may be volatile.
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a significant exposure to cash and cash equivalents, New Zealand fixed interest, and/or international fixed interest.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Global Income Portfolio

Insights

Global Income Insights Graph

A strategic reinvestment

Wellington Management is a Boston-based investment manager operating 13 offices worldwide and managing around US$1.3 trillion on behalf of clients. Its founder, Walter L. Morgan, established the United States’ first balanced mutual fund in 1928, naming it after the Duke of Wellington, the British general who defeated Napoleon.

We have had a relationship with Wellington for around 22 years, and have invested in a number of their funds. In this Portfolio we have until recently had a holding in Wellington’s US$3 billion Global Credit Plus Portfolio, a well-diversified fund with exposure to a broad range of investment-grade securities.

The yield from this investment has been attractive and we have achieved good returns. However, its focus has been on long-dated bonds. We believe the coming rising interest rate environment will provide more attractive opportunities elsewhere, and have redeemed our investment.

Our view is that a more bespoke portfolio is now appropriate, concentrating on securities whose yields are higher than the fundamentals of the issuing companies would justify – offering both a good running yield for the Portfolio and the prospect of capital returns.

In particular, we are looking to reinvest in specific bonds in the financials sector, which will benefit from rising global interest rates.

We continue to see Wellington Management as an excellent manager. Our relationship with them is long-term and we are likely to invest with them again in the future.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
* Source: Bloomberg US Investment Grade Bond Index.

Performance

Performance since inception (31 October 2008) to 28 February 2017
Global Income Performance Graph Global Income Performance Table

Global Income Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is the 'S&P/NZX 90 Day Bank Bills Total Return Index'.

    The after tax comparative index has been calculated by applying the highest PIR rate (currently 28%) to the comparative index.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Global Income Portfolio

Indicative Portfolio as at 28 February 2017
Global Income Insights Table

1. The yield is not the actual return of the portfolio, nor is it a projection or forecast. Details of the yield calculation are available on request from NZ Funds.
2. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
3. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to provide exposure to income-orientated assets using an active investment management approach.
Investment category Income
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 2 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Foreign currency
• Alternative securities *

* 'Alternative securities' means asset classes not usually accessed by retail investors, for example, private equity, venture capital and hedge funds. These tend to be asset classes where valuation and liquidity may be uncertain and returns may be volatile.
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a significant exposure to cash and cash equivalents, international fixed interest, and/or New Zealand fixed interest.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Core Inflation Portfolio

Insights

Core Inflation Insights Graph

Solid foundations

MFA Financial is a New York-based real estate investment trust listed on the New York Stock Exchange and investing primarily in residential mortgage-backed securities. At 31 December 2016 it had total assets of US$12.5 billion1.

MFA does not use an external manager but is ‘self-managed’. Until 2009, it invested only in those mortgages implicitly backed by the United States Government, but has since diversified into non-guaranteed mortgages.

MFA’s status as a listed company gives it ‘permanent capital’, obviating the redemption risk that arises when a company has to liquidate investments to repay investors directly. Unitholders exiting their investment sell units on the market to other investors.

For MFA, this means it can have confidence it will be able to hold its investments until maturity, giving it the ability to plan and focus its book.

Our analysis of MFA’s December 2016 fourth quarter results shows it continues to focus its portfolio towards credit-sensitive securities and away from interest-rate sensitive securities. Its biggest risk is a downturn in the United States housing market, which we see as unlikely in the near term given strong employment data and solid economic growth prospects.

In this Portfolio we have held MFA units since 2013, achieving an annual average return of 12%. We expect this to moderate to around 8% per annum, still an attractive return within the Portfolio.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
1. MFA Financial Fourth Quarter 2016 financial results.
* Source: Bloomberg, NZ Funds calculations.

Performance

Performance since inception (31 October 2008) to 28 February 2017
Core Inflation Performance Graph Core Inflation Performance Table

Core Inflation Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is made up of 50% of the ‘S&P/NZX 90 Day Bank Bills Total Return Index’ and 50% of the ‘MSCI All Countries World Index with net dividends in local currency’.

    A fee of 1.0% pa is deducted which is an estimate of the cost of obtaining a passive exposure through a Portfolio Investment Entity (PIE).

    The after tax comparative index is calculated by applying the appropriate tax calculation for the asset class and the highest PIR tax rate (currently 28%).

Different calculation methodology

  • The performance graph for the Core Inflation Portfolio and the comparative index is calculated and displayed on a pre tax, post Portfolio fees basis.

    With regard to the comparative index, this is calculated on a different basis from that used in the Quarterly Fund Updates published for the Portfolio. The calculation for the Quarterly Fund Update requires that the comparative index be calculated and displayed on a gross (before tax and Portfolio fees and expenses) basis.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Core Inflation Portfolio

Complete Portfolio as at 28 February 2017
Core Inflation Portfolio Table

1. The yield calculation represents an estimate of the yield on the Portfolio, calculated using the most recent information provided by the external investment managers involved in managing the Portfolio, hedged back to New Zealand dollars where appropriate. It is not calculated ‘as at’ any particular date as different external investment managers provide data at varying dates. As a result, in some instances the yields may lag the date of this Portfolio summary. The yield is not the actual return on the Portfolio, nor is it a projection or forecast. The Portfolio’s return could be less than the Portfolio’s yield. Details of the yield calculation are available on request from NZ Funds.
2. Price/Earnings is based on next year’s forecast earnings (NPAT) Source: Bloomberg.
3. Where a strategy is shown, the asset class reflects the predominant assets in the strategy. The strategy may include other assets including cash.
4. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
5. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to mitigate the impact of inflation on your investment over the medium and/or long-term by investing in income-orientated assets and growth-orientated assets using an active investment management approach.
Investment category Inflation
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 5 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Australasian equities
• International equities
• Listed property
• Foreign currency
• Commodities
• Alternative securities *

* 'Alternative securities' means asset classes not usually accessed by retail investors, for example, private equity, venture capital and hedge funds. These tend to be asset classes where valuation and liquidity may be uncertain and returns may be volatile.
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a diversified range of assets expected to include cash and cash equivalents, New Zealand fixed interest, international fixed interest, Australasian equities, international equities, commodities, foreign currency, and/or alternative securities.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Property Inflation Portfolio

Insights

Property Inflation Insights Graph

More than bricks and mortar

SkyCity Entertainment Group shares have been included in the Dividend & Growth Portfolio for some time. The company’s range of operations is unique; the Auckland casino has a monopoly franchise, and the shares offer an attractive dividend yield.

We have now included a holding in SkyCity in this Portfolio.

SkyCity is one of the largest property owners in Auckland, and its Auckland operations contribute the lion’s share of earnings – 80% of EBITDA (earnings before interest, tax, depreciation and amortisation) in the half year to December 2016.

Generally, higher interest rates present a headwind to pure property assets as they tend to be valued as ‘pseudo-bonds’, with an interest yield derived from their rents and a modest rate of revenue growth.

Property companies generally trade at significantly higher earnings multiples than do casino operators, and SkyCity has in the past considered splitting out the two facets of its business into a property investment trust and an operating company which would rent the casinos from the trust, run the hotels and make operating earnings from gaming. However, they decided that the valuation uplift would not be sufficient to justify the increased complexity.

Construction of the New Zealand International Convention Centre and a 300-room, 5-star hotel in downtown Auckland is under way, with an expected completion date of July-September 2019.

With our investment in SkyCity, this Portfolio has acquired an asset with a high degree of property exposure, which is valued not only on yield but on earnings from operations.

We see SkyCity as fairly valued at this point in the cycle. While the core assets are still bricks and mortar, we expect the shares to be resilient in a rising interest rate environment.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.

* Source: Bloomberg, SkyCity Entertainment Group.

Performance

Performance since inception (31 October 2008) to 28 February 2017
Property Inflation Performance Graph Property Inflation Performance Table

Property Inflation Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is made up of 50% of the ‘S&P/NZX 90 Day Bank Bills Total Return Index’ and 50% of the ‘MSCI All Countries World Index with net dividends in local currency’.

    A fee of 1.0% pa is deducted which is an estimate of the cost of obtaining a passive exposure through a Portfolio Investment Entity (PIE).

    The after tax comparative index is calculated by applying the appropriate tax calculation for the asset class and the highest PIR tax rate (currently 28%).

Different calculation methodology

  • The performance graph for the Property Inflation Portfolio and the comparative index is calculated and displayed on a pre tax, post Portfolio fees basis.

    With regard to the comparative index, this is calculated on a different basis from that used in the Quarterly Fund Updates published for the Portfolio. The calculation for the Quarterly Fund Update requires that the comparative index be calculated and displayed on a gross (before tax and Portfolio fees and expenses) basis.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Property Inflation Portfolio

Complete Portfolio as at 28 February 2017
Property Inflation Portfolio Table

1. The yield calculation represents an estimate of the yield on the Portfolio, calculated using the most recent information provided by the external investment managers involved in managing the Portfolio, hedged back to New Zealand dollars where appropriate. It is not calculated 'as at' any particular date as different external investment managers provide data at varying dates. As a result, in some instances the yields may lag the date of this Portfolio summary. The yield is not the actual return on the Portfolio, nor is it a projection or forecast. The Portfolio's return could be less than the Portfolio's yield. Details of the yield calculation are available on request from NZ Funds.
2. Price/Earnings is based on next year’s forecast earnings (NPAT) Source: Bloomberg.
3. Where a strategy is shown, the asset class reflects the predominant assets in the strategy. The strategy may include other assets including cash.
4. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
5. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to mitigate the impact of inflation on your investment over the medium and/or long-term by investing in income-orientated assets and growth-orientated assets using an active investment management approach.
Investment category Inflation
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 5 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Australasian equities
• International equities
• Listed property
• Foreign currency
• Alternative securities *

* 'Alternative securities' means asset classes not usually accessed by retail investors, for example, private equity, venture capital and hedge funds. These tend to be asset classes where valuation and liquidity may be uncertain and returns may be volatile.
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a significant exposure to property and/or property related securities including infrastructure assets.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Equity Inflation Portfolio

Insights

Equity Inflation Insights Graph

Early innings for commodities

A year ago, there was no shortage of commentators picking China, the world’s second largest economy, was about to slip into recession. Sharemarkets were retreating around the world amid news China’s growth in 2015 had been the slowest in 25 years1.

One wealth manager who took a different view was Bob Bishop of Impala Asset Management. Bishop observed Chinese President Xi’s anti-corruption campaign was winding down and that this was creating renewed demand in the economy.

Little new capacity is planned. Bishop picked a Chinese recovery would drive higher commodity prices after a five-year slide in metal prices and a three-year bear market in oil.

A year later, Bishop still encounters some scepticism. However, most bulk and metal commodity prices have recovered by between 34% and 100%, and oil prices have risen by around 65%. But prices remain well below their ten-year averages and Bishop’s view is that there is plenty more upside. He bases this on four factors.

First, funding for China’s One Belt, One Road (OBOR) policy, which aims to create new links through Asia to Europe for Chinese goods, is starting to flow.

Second, the Chinese government has committed to closing capacity in heavy-polluting industries such as coal and steel, for environmental as well as economic reasons.

Third, higher prices for their commodity exports is stimulating the economies of emerging markets such as Brazil and Russia

And fourth, as austerity is replaced by fiscal stimulus, a catchup in infrastructure spending is boosting demand for materials.

This Portfolio has an exposure to the Impala Fund LP which rose by 7.2% in the fourth quarter of 2016 and 25% for the full year. While this is not itself an indicator of future performance, we agree with Bishop that the commodities and resources recovery has some way to run.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
1. China’s Economic Growth in 2015 is slowest in 25 years, The Wall St Journal, 19 January 2016.
† Teck resources is one of the largest holdings in the Impala Resource Fund.
* Source: Bloomberg, NZ Funds calculations.

Performance

Performance since inception (31 October 2008) to 28 February 2017
Equity Inflation Performance Graph Equity Inflation Performance Table

Equity Inflation Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is made up of 50% of the ‘S&P/NZX 90 Day Bank Bills Total Return Index’ and 50% of the ‘MSCI All Countries World Index with net dividends in local currency’.

    A fee of 1.0% pa is deducted which is an estimate of the cost of obtaining a passive exposure through a Portfolio Investment Entity (PIE).

    The after tax comparative index is calculated by applying the appropriate tax calculation for the asset class and the highest PIR tax rate (currently 28%).

Different calculation methodology

  • The performance graph for the Equity Inflation Portfolio and the comparative index is calculated and displayed on a pre tax, post Portfolio fees basis.

    With regard to the comparative index, this is calculated on a different basis from that used in the Quarterly Fund Updates published for the Portfolio. The calculation for the Quarterly Fund Update requires that the comparative index be calculated and displayed on a gross (before tax and Portfolio fees and expenses) basis.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Equity Inflation Portfolio

Complete Portfolio as at 28 February 2017
Equity Inflation Portfolio Table

1. The yield calculation represents an estimate of the yield on the Portfolio, calculated using the most recent information provided by the external investment managers involved in managing the Portfolio, hedged back to New Zealand dollars where appropriate. It is not calculated ‘as at’ any particular date as different external investment managers provide data at varying dates. As a result, in some instances the yields may lag the date of this Portfolio summary. The yield is not the actual return on the Portfolio, nor is it a projection or forecast. The Portfolio’s return could be less than the Portfolio’s yield. Details of the yield calculation are available on request from NZ Funds.
2. Price/Earnings is based on next year’s forecast earnings (NPAT) Source: Bloomberg.
3. Where a strategy is shown, the asset class reflects the predominant assets in the strategy. The strategy may include other assets including cash.
4. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
5. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to mitigate the impact of inflation on your investment over the medium and/or long-term by investing in income-orientated assets and growth-orientated assets using an active investment management approach.
Investment category Inflation
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 5 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Australasian equities
• International equities
• Listed property
• Foreign currency
• Commodities
• Alternative securities *

* 'Alternative securities' means asset classes not usually accessed by retail investors, for example, private equity, venture capital and hedge funds. These tend to be asset classes where valuation and liquidity may be uncertain and returns may be volatile.
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a significant exposure to Australasian equities, international equities, and/or alternative securities.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Core Growth Portfolio

Insights

Core Growth Insights Graph

Regime change

We believe a fundamental shift has occurred in the United States economy. This shift was under way before the election of President Donald Trump but, somewhat ironically, it is likely to prove to be a political tailwind for his administration.

Immediately after the Global Financial Crisis of 2008-2009, corporate America went into cost-saving mode, which manifested itself in subdued wage and employment growth.

Recovery from the GFC is now complete and around six months ago we began to see anecdotal evidence that employers’ mindsets were beginning to change. Companies such as Walmart, Starbucks and JP Morgan indicated they were looking to raise the wages of their lower paid employees as a means of retaining them in an increasingly competitive environment for labour.

United States jobs data has been strong for some months now, but signs are emerging that the employment market is entering a new phase.

Between 2005 and 2007, around 16% of the group aged between 25 and 54 were outside the workforce, through choice or necessity. Post-GFC, workforce non-participation rose to around 19%, but we are now seeing signs of an emerging downward trend, with the non-participation rate slipping again to 18%.

This can be interpreted as a sign the United States economy is moving from a stabilisation phase into a jobs recovery phase. In our view, the United States Federal Reserve is well aware of this, and is signalling interest rate rises to help combat the associated wage inflation pressures.

United States jobs and employment trends give further weight to our conviction that a shift from quantitative easing to fiscal stimulus is under way, and we are realigning this Portfolio away from defensive exposures towards cyclicals that we expect will fare well in the next phase of the global economy.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
* Source: US Census Bureau – 25-54 year olds not in paid employment, 23 February 2017.

Performance

Performance since inception (31 October 2008) to 28 February 2017
Core Growth Performance Graph Core Growth Performance Table

Core Growth Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is the ‘MSCI All Country World Index with net dividends in local currency’.

    Since October 2015, a fee of 1.00% pa has been deducted to reflect the cost of obtaining a passive global share market exposure through a Portfolio Investment Entity (PIE). Prior to October 2015, a fee of 1.75% was used.

    The after tax comparative index is calculated by applying the appropriate tax calculations for the asset class and the highest PIR tax rate (currently 28%).

Different calculation methodology

  • The performance graphs for the Core Growth Portfolio and the comparative index are calculated and displayed on a pre tax, post Portfolio fees basis.

    With regard to the comparative index, this is calculated on a different basis from that used in the Quarterly Fund Updates published for the Portfolio. The calculation for the Quarterly Fund Update requires that the comparative index be calculated and displayed on a gross (before tax and Portfolio fees and expenses) basis.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Core Growth Portfolio

Complete Portfolio as at 28 February 2017
Core Growth Portfolio Table

1. The yield calculation represents an estimate of the yield on the Portfolio, calculated using the most recent information provided by the external investment managers involved in managing the Portfolio, hedged back to New Zealand dollars where appropriate. It is not calculated ‘as at’ any particular date as different external investment managers provide data at varying dates. As a result, in some instances the yields may lag the date of this Portfolio summary. The yield is not the actual return on the Portfolio, nor is it a projection or forecast. The Portfolio’s return could be less than the Portfolio’s yield. Details of the yield calculation are available on request from NZ Funds.
2. Price/Earnings is based on next year’s forecast earnings (NPAT) Source: Bloomberg.
3. Where a strategy is shown, the asset class reflects the predominant assets in the strategy. The strategy may include other assets including cash.
4. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
5. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to grow your investment over the long-term by investing in income-orientated assets and growth-orientated assets using an active investment management approach.
Investment category Growth
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 10 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Australasian equities
• International equities
• Listed property
• Foreign currency
• Commodities
• Alternative securities *

* 'Alternative securities' means asset classes not usually accessed by retail investors, for example, private equity, venture capital and hedge funds. These tend to be asset classes where valuation and liquidity may be uncertain and returns may be volatile.
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a diversified range of assets with a significant exposure to growth-orientated assets.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Global Multi-Asset Growth Portfolio

Insights

Global Multi Asset Growth Insights Graph

A ‘Red Flag’ response

Responsible investing is increasingly becoming a focus for fund managers in their choice of investments.

Given this, NZ Funds has contracted ISS Ethix, a governance risk manager, to provide research and recommendations on responsible investment as part of its investment research process.

Last month ISS-Ethix issued a ‘Red Flag’ assessment of Phillips 66, a New York Stock Exchange-listed energy company involved in the construction of the Dakota Access Pipeline, an oil pipeline linking North Dakota and Illinois.

The pipeline project has encountered public protests in support of the Standing Rock Sioux Tribe of North Dakota, which alleges the pipeline threatens its drinking water and could disrupt a sacred site of historical and cultural significance to the tribe.

Some of the land required for the pipeline is owned by the United States Army, whose initial consent was challenged by the United Nations Special Rapporteur (UNSR) on the rights of indigenous peoples. The UNSR supports the tribe’s right to participate in decision-making. In December 2016, the US Army denied a final land easement approval for the pipeline project and recommended the completion of an Environmental Impact Statement.

On 24 January 2017 United States President, Donald Trump, issued a memorandum instructing the US Army to issue the approvals necessary for the pipeline to proceed.

ISS-Ethix’ Red Flag assessment was issued on the basis Phillips 66, as a shareholder in Dakota Access Pipeline LLC, has failed to obtain the free, prior and informed consent of the tribe in connection with the pipeline, as required by the UNSR.

NZ Funds has accordingly sold its Phillips 66 shares and reinvested the proceeds in Keane Group, RPC Inc and C&J Energy Service Company shares.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
* Source: Wikipedia under Creative Commons licensing.

Performance

Performance since inception (7 November 2011) to 28 February 2017
Global Multi Asset Growth Performance Graph Global Multi Asset Growth Performance Table

Global Multi-Asset Growth Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is the ‘Bloomberg Commodity Total Return Index’.

    Since October 2015, a fee of 1.00% pa has been deducted to reflect the cost of obtaining a passive global commodity exposure through a Portfolio Investment Entity (PIE). Prior to October 2015, a fee of 1.75% was used.

    The after tax comparative index is calculated by applying the appropriate tax calculations for the asset class and the highest PIR tax rate (currently 28%).

Different calculation methodology

  • The performance graph for the Global Multi-Asset Growth Portfolio and the comparative index is calculated and displayed on a pre tax, post Portfolio fees basis.

    With regard to the comparative index, this is calculated on a different basis from that used in the Quarterly Fund Updates published for the Portfolio. The calculation for the Quarterly Fund Update requires that the comparative index be calculated and displayed on a gross (before tax and Portfolio fees and expenses) basis.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Global Multi-Asset Growth Portfolio

Complete Portfolio as at 28 February 2017
Global Multi Asset Growth Portfolio Table

1. The yield calculation represents an estimate of the yield on the Portfolio, calculated using the most recent information provided by the external investment managers involved in managing the Portfolio, hedged back to New Zealand dollars where appropriate. It is not calculated ‘as at’ any particular date as different external investment managers provide data at varying dates. As a result, in some instances the yields may lag the date of this Portfolio summary. The yield is not the actual return on the Portfolio, nor is it a projection or forecast. The Portfolio’s return could be less than the Portfolio’s yield. Details of the yield calculation are available on request from NZ Funds.
2. Where a strategy is shown, the asset class reflects the predominant assets in the strategy. The strategy may include other assets including cash.
3. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
4. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to grow your investment over the long-term by investing in income-orientated assets and growth-orientated assets using an active investment management approach.
Investment category Growth
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 10 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Australasian equities
• International equities
• Listed property
• Foreign currency
• Commodities
• Alternative securities *

* 'Alternative securities' means asset classes not usually accessed by retail investors, for example, private equity, venture capital and hedge funds. These tend to be asset classes where valuation and liquidity may be uncertain and returns may be volatile.
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a diversified range of assets with a significant exposure to commodities and/or alternative securities.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Global Equity Growth Portfolio

Insights

Global Equity Growth Insights Graph

Around the world in 90 days

Every three months we review our asset allocations regionally to ensure our Portfolios are focused where the prospects are strongest.

This involves looking at the relative valuation of each market, looking at the direction and momentum of corporate earnings within each market, and examining whether economists are revising earnings expectations upwards or downwards.

We then analyse each market’s sectoral exposure – a predominance of financial or agricultural stocks, say – and overlay that with analysis of our general view of global economic themes.

This results in adjustments to our exposures within the Portfolios relative to world equity market indices.

Following our latest review, the Portfolios have a higher than ‘normal’ exposure to the United States and Japan.

Although the United States market looks fully valued at present, we see economic growth momentum as strong. Furthermore, some of newly-elected President Donald Trump’s announced policies – for example, tax reductions and the wind back of regulation – are likely to boost economic growth further.

In Japan, ‘quantitative easing’ by the Bank of Japan has yet to wind down. Together with governance reforms aimed at increasing Japanese companies’ return on equity, this is likely to drive better performance by corporate Japan.

Our exposure to Europe is currently at the long-term average. While we feel those markets look cheap on a valuation basis, political and economic headwinds offset the lower valuations.

We are underweight the index in the United Kingdom and in emerging markets. Uncertainty over the course of Brexit still necessitates caution, while for emerging markets the possibility of trade wars with the United States is a major consideration.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
* Source: NZ Funds calculations.

Performance

Performance since inception (31 October 2008) to 28 February 2017
Global Equity Growth Performance Graph Global Equity Growth Performance Table

Global Equity Growth Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is the ‘MSCI All Country World Index with net dividends in local currency’.

    Since October 2015, a fee of 1.00% pa has been deducted to reflect the cost of obtaining a passive global share market exposure through a Portfolio Investment Entity (PIE). Prior to October 2015, a fee of 1.75% was used.

    The after tax comparative index is calculated by applying the appropriate tax calculations for the asset class and the highest PIR tax rate (currently 28%).

Different calculation methodology

  • The performance graphs for the Global Equity Growth Portfolio and the comparative index are calculated and displayed on a pre tax, post Portfolio fees basis.

    With regard to the comparative index, this is calculated on a different basis from that used in the Quarterly Fund Updates published for the Portfolio. The calculation for the Quarterly Fund Update requires that the comparative index be calculated and displayed on a gross (before tax and Portfolio fees and expenses) basis.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Global Equity Growth Portfolio

Complete Portfolio as at 28 February 2017
Global Equity Growth Portfolio Table

1. The yield calculation represents an estimate of the yield on the Portfolio, calculated using the most recent information provided by the external investment managers involved in managing the Portfolio, hedged back to New Zealand dollars where appropriate. It is not calculated ‘as at’ any particular date as different external investment managers provide data at varying dates. As a result, in some instances the yields may lag the date of this Portfolio summary. The yield is not the actual return on the Portfolio, nor is it a projection or forecast. The Portfolio’s return could be less than the Portfolio’s yield. Details of the yield calculation are available on request from NZ Funds.
2. Price/Earnings is based on next year’s forecast earnings (NPAT) Source: Bloomberg.
3. Where a strategy is shown, the asset class reflects the predominant assets in the strategy. The strategy may include other assets including cash.
4. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
5. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to grow your investment over the long-term by investing in income-orientated assets and growth-orientated assets using an active investment management approach.
Investment category Growth
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 10 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Australasian equities
• International equities
• Listed property
• Foreign currency
• Commodities
• Alternative securities *

* 'Alternative securities' means asset classes not usually accessed by retail investors, for example, private equity, venture capital and hedge funds. These tend to be asset classes where valuation and liquidity may be uncertain and returns may be volatile.
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a diversified range of assets with a significant exposure to Australasian equities, international equities, and/or alternative securities.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Dividend and Growth Portfolio

Insights

Dividend And Growth Insights Graph

A steelmaking investment

In November last year the Portfolio purchased shares in BlueScope Steel, Australia’s largest steel manufacturer – and New Zealand’s only steel manufacturer.

BlueScope’s share price has suffered in recent years amid weak global demand for steel and excess Chinese capacity. However, China has taken decisive steps to address the imbalance – see this month’s Insight on the Equity Inflation Portfolio – and BlueScope’s management has completed a rigorous ‘cost-out’ exercise designed to ensure the steelmaker can make money at any point in the cycle.

Steel prices have recovered from their post-GFC lows, alongside steel spreads (the price of commodity steel, less major inputs such as iron ore). BlueScope has reduced debt levels and its earnings have improved substantially. For the six months to December 2016, earnings rose 162% and return on invested capital was 20%, up from 8%. However, management emphasises the continuing need for productivity improvements.

In addition to steelmaking in Australia and New Zealand, BlueScope owns a small but highly efficient mill in the United States, and has an extensive footprint of steel building product operations in Asia and North America.

The investment complements the Portfolio’s holding in Rio Tinto shares, and backs our conviction that the global commodity price recovery is still in its early stages.

BlueScope’s shares have risen over 40% from our entry price, and maintain strong momentum, however the company is highly cyclical, and its dividend yield is modest, so we will continue to closely monitor financial results and the operating environment.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
* Source: Bloomberg, NZ Funds calculations.

Performance

Performance since inception (31 October 2008) to 28 February 2017
Dividend And Growth Performance Graph Dividend And Growth Performance Table

Dividend and Growth Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is made up of 70% of the ‘NZX 50 Portfolio Index Gross with imputation credits’ (or its predecessor index) and 30% of the ‘S&P/ASX 200 Accumulation Index’.

    Since October 2015, a fee of 1.00% pa has been deducted to reflect the cost of obtaining a passive market exposure through a Portfolio Investment Entity (PIE). Prior to October 2015, a fee of 1.75% was used.

    The after tax comparative index is calculated by applying the tax rules and the highest PIR tax rate (currently 28%). It has been assumed that New Zealand dividends are fully imputed and Australian dividend yields are 5% pa.

Different calculation methodology

  • The performance graphs for the Dividend and Growth Portfolio and the comparative index are calculated and displayed on a pre tax, post Portfolio fees basis.

    With regard to the comparative index, this is calculated on a different basis from that used in the Quarterly Fund Updates published for the Portfolio. The calculation for the Quarterly Fund Update requires that the comparative index be calculated and displayed on a gross (before tax and Portfolio fees and expenses) basis.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Dividend and Growth Portfolio

Complete Portfolio as at 28 February 2017
Dividend And Growth Portfolio Table

1. The yield calculation represents an estimate of the yield on the Portfolio, calculated using the most recent information provided by the external investment managers involved in managing the Portfolio, hedged back to New Zealand dollars where appropriate. It is not calculated ‘as at’ any particular date as different external investment managers provide data at varying dates. As a result, in some instances the yields may lag the date of this Portfolio summary. The yield is not the actual return on the Portfolio, nor is it a projection or forecast. The Portfolio’s return could be less than the Portfolio’s yield. Details of the yield calculation are available on request from NZ Funds.
2. Price/Earnings is based on next year’s forecast earnings (NPAT) Source: Bloomberg.
3. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
4. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portoflio is to grow your investment over the long-term by investing in income-orientated assets and growth-orientated assets using an active investment management approach.
Investment category Growth
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 10 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Australasian equities
• International equities
• Listed property
• Foreign currency
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a diversified range of assets with a significant exposure to Australasian equities.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

TERMS & CONDITIONS

By accessing and/or using www.nzfunds.co.nz (the "NZ Funds Website") you agree to be bound by the Terms and Conditions set out below.

These Terms and Conditions are in addition to and do not replace, any specific terms and conditions applicable to any New Zealand Funds Management product or service. To the extent that there is any conflict between these Terms and Conditions and those of any specific products or services, the terms applicable to those products or services will prevail.

Any reference to "NZ Funds", "we", "us" and "our" is a reference to New Zealand Funds Management Limited, its directors, employees and related parties.

Disclaimer

The content of the NZ Funds Website is general in nature, and for information purposes only. While care has been taken to supply information on the NZ Funds Website that is correct, accurate and up to date, we do not guarantee that this is the case, or that the information is relevant or suitable for your intended use. NZ Funds is not liable for any loss, liability or damage suffered by any person that may result from any errors, omissions, recommendations or opinions expressed on the NZ Funds Website. Accordingly, before making any investment or taking or refraining from taking any action based upon this information, we recommend that you first consult with an Authorised Financial Adviser.

Further, we do not guarantee the relevance or accuracy of any information in any other websites accessed through the NZ Funds Website or any information, opinions or projections included in articles sourced from third parties.

Neither NZ Funds nor any other party guarantees the performance of any product included on the NZ Funds Website. Any predictions or projections (including those made in any article that appears on the NZ Funds Website) are an expression of opinion only. Any information about past performance is not necessarily an indication as to future performance.

While care has been taken to prevent the introduction of viruses on this website, we do not guarantee that it is free of viruses and we accept no responsibility or liability for any harm attributable to such destructive features.

For further information on any of the Portfolios included on the NZ Funds Website or to request a copy of either the NZ Funds Managed Portfolio Service Product Disclosure Statement or the NZ Funds KiwiSaver Scheme Product Disclosure Statement, you should contact NZ Funds on
0508 733 337 or by email to info@nzfunds.co.nz.

Copyright

Unless otherwise specified, the copyright in information, images, texts and screens on the NZ Funds Website is owned by NZ Funds or its suppliers and may not be altered, copied, published, reposted or reused without our prior consent. This includes, but is not limited to, the NZ Funds Website's content, text, graphics, logos, images, audio clips and software. You may not create a hyperlink to the NZ Funds Website without our consent.

Privacy

We may collect information provided by you when using the NZ Funds Website, including where we authenticate you as part of a log on process and through the use of cookies. Cookies are a small file stored on your computer that enables us to identify your computer. Cookies do not read your hard drive and cannot be used to personally identify you. They are designed to facilitate easier website use by registering information about your preferences.

Any personal information that you may provide to us on the NZ Funds Website will be held at our offices at Level 16, Zurich House, 21 Queen Street, Auckland and may be used by us to provide or communicate information about our products and services to you. Personal information may also be shared with relevant authorities, including the IRD. You have the right to access and correct any personal information that NZ Funds holds by contacting us on 0508 733 337.

Jurisdiction

These terms and conditions are governed by the laws of New Zealand and are subject to the non-exclusive jurisdiction of the Courts of New Zealand.



OUR OFFICES

Auckland

Level 16
Zurich House
21 Queen Street
Auckland 1010

Private Bag 92163
Auckland 1142

09 377 2277
0508 693 8637

Wellington

Level 3
Central on Midland Park
40 Johnston Street
Wellington 6011

PO Box 2697
Wellington 6140

04 473 7701
0800 850 000

Christchurch

Unit 7A
9 Sir Gil Simpson Drive
Burnside
Christchurch 8053

PO Box 1686
Christchurch Mail Centre
Christchurch 8140

03 366 9088
0800 697 526

Timaru

Level 1
2 Sefton Street East
Timaru 7940

PO Box 85
Timaru 7940

03 683 1989

Wanaka

Level 2
Brownston House
21 Brownston Street Wanaka 9305
PO Box 769
Wanaka 9343

03 443 2300
0800 697 526

Dunedin

Level 2
Bracken Court
480 Moray Place
Dunedin 9016

PO Box 5215
Dunedin 9058

03 477 4647
0800 697 526

Invercargill

98C Yarrow Street
Invercargill 9810

PO Box 364
Invercargill 9840

03 218 2895
0800 697 526

Complaints


Client complaints

Our business philosophy is to establish and enhance long-term, positive relationships with all of our clients. We recognise though that from time to time, despite our very best efforts, clients may wish to make a complaint. It is important in such instances that clients have an efficient mechanism through which they can receive a fair consideration of their concerns.

If you have a complaint contact us:


Complaints Handling Officer
New Zealand Funds Management Limited
Private Bag 92163
Auckland 1142

0508 733 337
info@nzfunds.co.nz

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How we deal with complaints

Upon receipt of your complaint we will immediately log it into our complaints register and it will be forwarded to the appropriate staff member for consideration.

Within five working days of receipt, we will provide you with a letter of acknowledgement that your complaint has been received. We will endeavour to keep you notified and updated on the progress of our consideration.

If your complaint cannot be resolved to your satisfaction through our internal complaints process you can elect to take it up with NZ Funds' independent dispute resolutions scheme.


Financial Services Complaints Limited
PO Box 5967
Wellington 6011

0800 347 257
info@fscl.org.nz