NZ Cash and Mortgages
Winner:Guardian Trust
Guardian
Mortgage Fund
Unlike the other funds in the sector, the New Zealand
Guardian Trust (NZGT) Mortgage Fund does not concentrate on residential mortgages.
Instead, the Fund places emphasis on rural and commercial mortgages, with exposure to
retail, residential and industrial mortgages also within the portfolio. The manager's
conservative lending criteria (the fund applies a maximum of 50% loan to valuation ratio
and a maximum loan repayment to gross income ratio of 30% to all mortgages) reduces the
potential risk of capital loss for investors. Fund guidelines require that no loan to any
borrower can exceed 2% of the portfolio. Note that this fund has a one-year lock-in
period.
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NZ Property
Winner: New
Zealand Funds Mgmt
NZ Funds Property
&
Infrastructure Trust
NZ Funds Management has combined property and
infrastructure assets to provide a comprehensive exposure to physical assets in New
Zealand. These sectors are correlated to similar economic factors and therefore offer
similar investment characteristics, i.e. high capital investment and stable revenues. The
aim of the Trust is to provide an attractive and reliable income stream to investors
wanting exposure to the real assets in New Zealand. With the divestment of much public
infrastructure over the past 5 years, the available pool of investment assets has expanded
sufficiently to provide a reasonably broad range of investment opportunities from which to
diversify across.
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NZ Equity
Winner: AXA
New Zealand
AXA NZ
Select Equities Trust
AXA New Zealand out-sources it’s
asset management to Alliance Capital (NZ). Alliance Capital is a growth style manager that
believes that profit growth drives shareholder returns and the equity market rewards
companies that deliver consistent long-term earnings growth. Alliance Capital has a
repeatable and disciplined stock-picking approach using large cap growth models in their
portfolio selection.
The return of equity and earnings
momentum-screening process, concentrate the analysts on the stocks that will make the
grade. Once the investment universe has been narrowed down, qualitative analysis on the
securities takes place.
The key criteria for stocks in this
portfolio include: (1) Value relative to market, and (2) Companies which are well managed,
financially sound, and have a management focus on shareholder's interests. The strategy of
the Fund is to invest in at least 10 companies and no more than 20, with a maximum
exposure of 15% to any one company. The exception to this rule is Telecom NZ, where the
portfolio may invest up to the index weighting plus 5%. Australian listed stocks, other
than those in the NZSE40 Index, are not to represent more than 40% of the total portfolio.
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International Equity
Winner: BNZ
Investments and Insurance BNZ International
Equity
Trust
BNZ Investment Management out-sources the asset
management of its international equities to Franklin Templeton Investments (Templeton).
Templeton is a global investment group that has specialised in global equity management
since 1949. The organisation was sold in 1993 and is now owned by U.S. fund manager
Franklin Resources.
As a value-based, bottom-up manager, Templeton ignores
index composition when constructing stock portfolios and base their holdings on a buy-list
of "bargain" stocks drawn from the analyst's coverage of over 2000 stocks.
"Value" in the Templeton philosophy means identifying those companies selling at
the greatest discount to future intrinsic value, which over time are expected to produce
the greatest share price returns with minimal risk. Templeton have built up an enviable
record in stock selection and portfolio performance and are regarded as one of the premier
international bottom-up 'stock pickers'.
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NZ Fixed Interest
Winner: Tower
Managed Funds Tower
SuperPlus Income
Fund
The SuperPlus Income Fund, unlike Tower's typical fixed
interest portfolios, does not concentrate on duration management as its primary method to
add value. Instead this fund seeks to add value through credit risk. By investing in the
debt of NZ corporate companies, many of which have below investment grade (BBB-) credit
ratings, the fund aims to achieve a higher running yield than would be possible with
comparable maturity Government stock issues. Note that the investment guidelines allow the
manager to invest in subordinated debt.
As with any investment the issue for the manager to
decide here is whether the return offered over and above Govt. Stock is adequate
compensation for the additional credit and liquidity risk which it brings. The composition
and philosophy of this fund doesn't make it a capital stable product and as such we have
placed the SuperPlus Income Fund in with other fixed interest oriented superannuation
vehicles.
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International
Fixed Interest
Winner:BT Funds Management
BT NZ – Global Bond Fund
BT Funds Management Limited, a subsidiary of Bankers
Trust Australia Limited, is the manager of this fund. The international fixed interest
team based in Sydney uses various in-house investment specialists including economists,
domestic and international bond managers for research and market information. BT aims to
retain the ability to move quickly and therefore relies on the marketability of securities
confining its global bond portfolio investments to the more liquid government bonds, bank
bills or other similar international issues. Futures and options are used as an
alternative to physical investment, often to hedge downside risk.
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Diversified Balanced
Winner:NZ Funds Management
NZ Funds Balanced Trust
The Balanced Fund is the more conservative of the two
diversified trusts offered by NZ Funds and is aimed at the medium risk investor. NZ Funds
performs the asset allocation process in conjunction with FundSource, with a focus upon
interpreting structural and cyclical economic change, and relative value between asset
classes.
The key forums for reviewing and updating asset
allocation and sector strategies are the monthly asset allocation meeting which, updates
strategy in the light of current and forecast market and economic events. The monthly
review incorporates a top-down assessment of short and medium term economic prospects and
reviews market expectations and the key risks impacting upon those assumptions. The final
output, the tactical asset allocation strategy, is based on relative value between asset
classes (risk adjusted) based on historic norms. Sector strategies are implemented using
the feeder fund concept to achieve exposures through NZ Funds Management’s range of
specialist funds.
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Diversified Defensive
No winner for this sector
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Diversified Growth
Winner: BT Funds Management
BT NZ
-Managed Growth
The primary forum for the development of
asset allocation strategies is the quarterly strategy meeting with direction and inputs
coming from the domestic sector specialists as well as the Australian asset allocation
team.
The basic cornerstone inputs into
the process are forecast investment returns and ranges for each sector based on both 3 and
6 month tactical time horizons. In-between times, these forecasts are reviewed and
adjusted where appropriate at weekly investment team meetings.
The NZ investment team adds a NZ overlay
to the international asset allocation decisions to determine under/over weightings versus
pre-determined strategic asset class benchmarks. Specific asset exposures are obtained on
a feed-in basis through the following routes: NZ Fixed Interest - (NZ Bond Fund), Int'l
Bonds - (BT NZ- Int'l Bond Fund), Int'l Equities - (BT NZ- Int'l Equity Fund), NZ Equities
- (Direct), Cash - (Direct).
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