Summer New Zealand Fixed Interest
Summer New Zealand Fixed Interest fund performance summary as at 31 October 2024.
Fund at a glance
Unit price (as at 31 October 2024): $1.1918
Date the fund started: 19 September 2016
For information on fees, see our Fees page.
For more information on the Summer New Zealand Fixed Interest fund read the latest quarterly fund update and the product disclosure statement.
Fund objective and strategy
See the New Zealand Fixed Interest page for the Summary of investment objective and strategy.
Fund returns
| PIR | Total since inception (annualised) | 1 Month | 3 Month | 1 Year | 3 Years^ |
| 28% | 1.59% | -0.36% | 0.67% | 7.75% | 1.60% |
| 17.50% | 1.82% | -0.42% | 0.76% | 8.90% | 1.83% |
| 10.50% | 1.97% | -0.46% | 0.82% | 9.67% | 1.98% |
^ Annualised
Fund returns are calculated net of fund charges, trading expenses and accrued tax for a New Zealand resident individual paying tax at the Prescribed Investor Rate identified above.
Top 10 investments
The top 10 investments make up 51.74% of the fund.
Manager's Commentary
What happened in the markets that you invest in?
October was a negative month, in general, for New Zealand fixed interest investors.
While the easing of New Zealand’s monetary policy is in full swing, indeed, the Reserve Bank of New Zealand (RBNZ) slashed its Official Cash Rate (OCR) by 0.50% to 4.75% at the beginning of October, market participants have started to temper expectations around the frequency and magnitude of future OCR reductions, as well as the terminal OCR.
Fatigued market participants took a cautious approach over the month, reducing fixed interest exposure by selling securities, which in turn pushed term interest rates and bond yields higher, resulting in capital losses for investors in Summer New Zealand Fixed Interest.
How did your portfolio perform?
Summer New Zealand Fixed Interest delivered a return net of fees and before tax loss of -0.52% for the month of October and for the 12 months to the end of October, the Summer Zealand Fixed Interest delivered a return net of fees and before tax of 10.85%.
What are we thinking about the future?
General market consensus is that domestic inflation peaked some time ago and its flight path and ultimate destination are lower, back to well within the regulator’s target band of 1% - 3%. Encouragingly, September’s annual inflation number of 2.2% was further evidence that New Zealand’s inflation is now well contained.
In fact, we see the risks that inflation could undershoot the RBNZ’s 2.00% mid-band target. Here we observe the price action of the New Zealand Government 2035 inflation-linked bond which at one stage over October implied a longer-term inflation rate closer to 1.80%, well under the regulator’s mid-band target of 2.0%. We would also quickly counter that domestic inflation-linked bonds have typically been a poor indicator of inflation outcomes, so we would need to see some sort of collaborating evidence before considering as a realistic outcome. For now, we’ll wait and watch.
Local economic data continues to be poor and notwithstanding the associated actions of the RBNZ, has been the dominant driver of domestic interest rates. We have no idea what the economic priorities will be for the new administration post the US presidential election. And despite the rhetoric for peace, we have no clue as to how global political tensions and conflicts will conclude, if at all.
Continued and excessive market volatility is likely to continue, in our view.
The fund’s duration, a measure of how sensitive the portfolio is to a given change in New Zealand wholesale interest rates, was around 4.75 years at the end of October and our intention is to increase it to around 5.0 years – opportunistically as and if term interest rates and bond yields move higher.
The fund’s gross yield to maturity, calculated as the weighted-average gross yield of all securities in the portfolio, was around 4.45% and the weighted-average portfolio credit quality was AA- (where a security does not have an external credit rating we have assigned an internal credit rating based on our assessment).
Our investment strategy is to continue to accumulate New Zealand Government bonds while rationing capital to short-dated non-Government securities. Corporate bond spreads, roughly the difference in price between a Government security and its non-Government equivalent, are simply too tight, in our view. At around long-term averages and do not appropriately reflect the risks of the current economic cycle.
This is not a recommendation to buy or sell any financial product and does not take your personal circumstances into account. All opinions reflect our judgement on the date of communication and may change without notice. Past performance is not a reliable guide to future performance. We recommend you take financial advice before making investment decisions. We have prepared this web page in good faith based on information obtained from other sources, but we do not guarantee the accuracy of that information. We do not make any representation or warranty (express or implied) that this web page is accurate, complete, or current and to the maximum extent permitted by law disclaim any liability for loss which may be incurred by any person relying on this web page.
