Summer Balanced Selection

It was a strong month for Global equity markets, led by the US with President-elect Trump being seen as positive for business and growth. Asian markets were generally much weaker as they will endure the worst of any proposed tariff increases from a Trump presidency and already have generally weaker economies.

Political upheaval continues with France and South Korea also facing political crises whilst armed conflicts in the Ukraine and Middle East continue. For now, markets are seeing these events as not material for market returns but we continue to watch for escalation.

For further information on each of the single asset class funds used by the Summer Balanced Selection, refer to the relevant single asset class fund commentary. 

The Summer Balanced Selection delivered a return net of fees and before tax of 1.70% for the month of November.

For the 12 months to the end November, the Summer Balanced Selection delivered a return net of fees and before tax of 13.55%.

Of the funds utilised within the Summer Balanced Selection, all our equity funds bar the Listed Property Fund underperformed their respective market indices, whilst our cash and fixed interest funds bettered their market indices.  For further information on each of the single asset class funds used by the Summer Balanced Selection, refer to the relevant single asset class fund commentary.

We actively manage the fund’s foreign currency exposures associated with global and Australian equities and hedge foreign currency exposures associated with global bonds. As of 30 November 2024, these exposures represented around 37% of the value of the fund. After allowing for foreign currency hedges in place, approximately 16% of the value of the fund was unhedged and exposed to foreign currency risk. The NZ dollar, relevant for our portfolios with unhedged foreign currency exposures, rose 0.60% against the US dollar, and 0.06% against the Australian dollar. 

Of the investment markets your fund invests in, we see better than average returns available in listed property and NZ equities, and below average returns from international equities. Again, we need to separate our view on valuations from the underlying economy. For listed property and NZ equities, we think improving outlooks for earnings supported by falling interest rates are not reflected in market valuations. For international equities, the key US economy continues to be robust, but we think that backdrop is more than reflected in market valuations. The potential introduction of trade tariffs, along with US growth and budget deficits, could lead to a temporary rebound in inflation which would negatively impact returns in fixed interest and listed property.

The Octagon investment committee met recently and maintained our overweight exposure (versus strategic asset allocation) to listed property, and New Zealand equities, funded with an underweight position to Australian equities and cash. The Australian economy is performing solidly with government spending and tax cuts supportive, but interest rates have little room to fall, and valuations are full. The committee also chose to increase our exposure to NZ fixed interest as inflation continues to fall, funded from international fixed interest where US inflation may stop falling on the back of tax cuts, tariffs and higher government borrowing.



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