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New Zealand Equities Fund

The fund aims to achieve positive long-term returns by investing in selected New Zealand shares, subject to the risks associated with investments in share markets.

Unit Price

AS AT 3 Aug 2020

3.6205 NZD


Month End Unit Price

As at 30 Jun 2020

3.5545 NZD

Manager's Comment

Market Commentary

The month of June ended a remarkable quarter of recovery in asset prices. However, while the quarterly return from equities was one of the best for many years, it offset a very tough first quarter resulting in calendar-year-to-date (CYTD) returns for the NZ equity market largely flat since the start of the year.

In June, the benchmark S&P/NZX 50 G rose +5.2%, bringing its CYTD return to -0.4%, however the average return for market index members is -12.5% CYTD. This difference highlights the concentrated nature of the NZ equity market where the two largest companies (Fisher & Paykel Healthcare and a2 Milk) currently make up ~30% of the index. Over the June quarter, the S&P/NZX 50 G returned +16.9% (the average member return was +21%).

Portfolio Positioning

The Forsyth Barr New Zealand Equities Fund rose 4.6% in the month of June underperforming the  market index by 0.6% (gross of fees and tax). Over the June quarter the Fund increased 15.9% underperforming the reference index by 1% (gross of fees and tax). Not owning Pushpay Holdings (PPH), an underweight position in Auckland International Airport (AIA), and holding an approximate 50-60% (varying during the quarter) index weight in Fisher & Paykel Holdings (FPH) cost the portfolio 1.07%, 1.00% and 0.82% of performance respectively for the quarter under review. In the six months to 30 June 2020 the FPH underweight has cost 3.05% of underperformance.   

FPH is a high quality business benefitting at the margin from the COVID-19 pandemic and as at June approximately 10% of the fund was invested in this name versus an index weight of approximately 17%. However in the nine months since September 2019 we have seen a 125% increase in FPH’s market cap on a 12% consensus upgrade to FY22 earnings. That doesn’t seem particularly sustainable and we remain comfortable (and have continued to add to the underweight) with FPH being the largest underweight position in the fund.

With COVID-19 still raging around the world, and a second wave re-emerging in Australia the prospect of international travel resuming in the near term seems unlikely and we remain comfortable carrying a large underweight position in AIA.

These three names aside, the Forsyth Barr New Zealand Equities Fund performed well with notable contributors to performance being strong share price performance in long term fund favourites Delegat Group, Infratil, and Skellerup Holdings.

The funds five largest investments are a2 Milk, Fisher & Paykel Healthcare, Spark, Contact Energy and Meridian Energy.   

Outlook 

Actions from governments and central banks have stabilised financial markets, but there is still plenty of uncertainty, and as we’ve seen over the past few months, sentiment can change quickly. There is potential for further market volatility ahead. Most countries are grappling with the tension between curbing the health effects of COVID-19 and minimising the economic damage of restrictions and lockdowns. Whilst the virus does continue to disrupt most economies, lockdown measures are generally being eased. On balance, economic activity has generally been better than most feared two or three months ago. The question being asked in the United States and elsewhere around the world is the same one we’re asking in New Zealand. What does the economic picture look like once pent-up demand from lockdown has passed and government support for workers and businesses ends? Only in time will we get a clear view on the health of the underlying economy.

The defensive positioning that served us so well in March was dialled back somewhat during the June quarter with rotation out of electricity, communications, and consumer staples into some of the more bombed out stocks we didn’t own on the way down including Freightways, Kathmandu, Summerset, and Vista Group. We added to positions in ones we did own that had been heavily sold off including Fletcher Building and Sky City.  However the fund still has a defensive bent to it which we remain comfortable with given the quite remarkable recovery in markets with the worst of the economic news still to come. We participated in a number of capital raises and expect there are more to come. As such, and with our cautious bias in mind, we carried a cash balance of 4.6% at quarter end.

Major Investments

As at 30 Jun 2020

Company name Volume
The a2 Milk Company Limited 13.64%
Fisher & Paykel Healthcare Corporation Limited 9.69%
Spark New Zealand Limited 7.70%
Contact Energy Limited 5.65%
Meridian Energy Limited 5.58%
Infratil Limited 5.31%
ANZ transactional bank account 4.63%
Ebos Group Limited 4.41%
Z Energy Limited 4.02%
Mainfreight Limited 3.68%
Major holdings as % of total portfolio 64.30%
Total portfolio holdings 42

Return Comparison

As at 30 Jun 2020

1 Month 3 Months 1 Year 3 Years* Since commenced operation*
*Annualised
Net Fund Return 1 Month 4.47% 3 Months 15.55% 1 Year 4.67% 3 Years* 12.67% Since commenced operation* 11.50%
Gross Fund Return 1 Month 4.61% 3 Months 15.89% 1 Year 6.79% 3 Years* 15.16% Since commenced operation* 13.84%
S&P/NZX 50 Gross with Imputation Index 1 Month 5.26% 3 Months 16.93% 1 Year 9.85% 3 Years* 15.70% Since commenced operation* 12.30%

The unit prices shown do not take into account any adjustment for PIE tax.

Net Fund Returns are calculated after deduction of fund charges, trading expenses and accrued tax for a New Zealand resident paying individual tax at the highest Prescribed Investor Rate (28%). Gross Fund Returns are calculated before deduction of taxes and fund charges but after deduction of trading expenses and including imputation credits where applicable. Market index returns do not have any deductions for fund charges, trading expenses or tax.

The S&P/NZX 50 Index (“Index”) is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Forsyth Barr Limited. Copyright © 2015 S&P Dow Jones Indices LLC, a subsidiary of McGraw Hill Financial Inc., and/or its affiliates. All rights reserved. Redistribution, reproduction and/or photocopying in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit www.spdji.com. S&P® is a registered trademark of Standard & Poor’s Financial Services LLC and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein.

Morningstar Performance

Morningstar, are a leading global provider of independent investment research that rank and report on Funds within New Zealand and Australia. View the latest Fund Report for the New Zealand Equities Fund here.

Fund update

As at 30 June 2020

This document tells you how the Forsyth Barr New Zealand Equities Fund has performed and what fees were charged. The document will help you to compare the fund with other funds.

General Fund Information

Risk indicator

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The risk indicator is rated from 1 (low) to 7 (high). The rating reflects how much the value of the relevant fund’s assets goes up and down (volatility). A higher risk generally means higher potential returns over time, but more ups and downs along the way. The risk indicator is based on the returns data for the five years to 30 June 2020. See more information about the risks of investing in the Product Disclosure Statement.

This risk indicator is calculated as at 31/03/20 and differs from the risk indicator shown in the current Product Disclosure Statement dated 22 July 2019.

Target investment mix

Price Volume
Cash and cash equivalents 5.00%
New Zealand fixed interest 0.00%
International fixed interest 0.00%
Australasian equities 85.00%
International equities 0.00%
Listed property 10.00%

Things to note

  • Manager: Forsyth Barr Investment Management Limited
  • Date the fund started: 26 June 2008
  • Tax status: Portfolio Investment Fund (PIE)
  • Minimum suggested investment time frame: At least five years
  • Benchmark: None
  • Currency: New Zealand dollars
  • View the Product Disclosure Statement for detailed information about this Fund and Forsyth Barr Investment Funds Scheme.

Fees

Annual fund charges are currently 1.30% of the net asset value of the fund (estimated), made up of our management fee (1.25%) and other annual fund charges (0.05%, estimated).

All fees and charges are quoted exclusive of GST.

Forsyth Barr Investment Management is the manager of the Investment Funds. The comments on this webpage do not take your personal circumstances into account. Before acting on this information, please contact your Forsyth Barr Authorised Financial Adviser. His or her disclosure statement is available on request and free of charge. Forsyth Barr Limited and its affiliates do not make any representation or warranty (express or implied) that this webpage 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 webpage. This webpage is not intended to be distributed or made available to any person in any jurisdiction where doing so would constitute a breach of any applicable laws or regulations.

© 2020 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. Any general advice or ‘class service’ have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Refer to our Financial Services Guide (FSG) for more information at www.​morningstar.​com.​au/s/fsg.​pdf.​ You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser

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