Summer New Zealand Fixed Interest
Summer New Zealand Fixed Interest fund performance summary as at 31 May 2024.
Fund at a glance
Unit price (as at 31 May 2024): $1.1427
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% | 1.27% | 0.61% | 0.66% | 3.20% | -0.23% |
| 17.50% | 1.45% | 0.70% | 0.76% | 3.66% | -0.27% |
| 10.50% | 1.58% | 0.76% | 0.82% | 3.97% | -0.29% |
^ 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 43.68% of the fund.
Manager's Commentary
What happened in the markets that you invest in?
May was a much better month, in general, for New Zealand fixed interest investors.
Pleasingly, market participants were able to look through stubborn inflation numbers and tough central bank rhetoric, preferring instead to keep collectives eyes-on-the-prize: Lower inflation and lower interest rates.
The numbers don’t lie – locally, inflation is falling and against the backdrop of an economy operating well below par, the next likely move for New Zealand term rates and bond yields are down, according to market forecasts.
How did your portfolio perform?
Summer New Zealand Fixed Interest delivered a return net of fees and before tax of 0.85% in May. For the 12 months to the end of May the fund delivered a return net of fees and before tax of 4.44%.
What are we thinking about the future?
We believe domestic inflation peaked some time ago and that the Reserve Bank of New Zealand (RBNZ) will have the confidence to begin reducing its Official Cash Rate (OCR) towards the end of this year. This is earlier than the RBNZ’s forecast, where it predicts the first OCR cut next year1.
The New Zealand Fixed Interest Fund is very well positioned, in our view, to navigate through the rest of the calendar year. The portfolio duration2 was around 4.95 years at the end of May with a gross yield to maturity3 approaching 5.25%.
The recent strategy of rotating into New Zealand Government bonds – by selling non-Government securities - has boosted weighted-average portfolio credit quality to a current AA4.
Extreme market volatility that has plagued investors over recent years is likely to continue in our view. We expect interest rates to fall further and while the initial impetus is a positive news story – falling inflation – we see the next driver as more sinister – economic recession.
On this basis, we will continue to accumulate New Zealand Government bonds while rationing capital to non-Government securities; in general corporate bond spreads don’t currently reflect the risks of the next economic cycle, in our opinion, so we’re opting for “hard duration” in the form of Government bonds on the expectation of delivering capital gain to our investors, as and when the OCR is cut, pushing done term interest rate and bond yields.
1Monetary Policy Statement, Reserve Bank of New Zealand, May 2024
2Duration is the weighted-average portfolio sensitivity to changes in value resulting from changes in the level of New Zealand wholesale interest rates
3Gross yield to maturity is calculated as the weighted-average gross yield of all securities in the portfolio as at 31 May 2024, assuming that all amounts owed by the issuer will be received by the Fund and is based on our assessment of the calculation methodology made available by the manager of the fund’s market index; and does not include the deduction of any taxes, fund charges, trading expenses or fees
4Calculated as the weighted-average credit quality of the fund’s securities; where a security does not have an external credit rating we have assigned an internal credit rating based on our assessment, we also use a linear credit scale (and not exponential)
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.
