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Forsyth Barr New Zealand Fixed Interest Fund

(formerly the Forsyth Barr Premium Yield Fund)

The fund aims to achieve positive long-term returns by investing in selected New Zealand dollar fixed interest assets, subject to the risks associated with investments in debt markets.

Unit Price

AS AT 30 Jul 2021

1.9538 NZD

The unit prices shown do not take into account any adjustment for PIE tax.
Buy/sell spreads may apply when transacting. There are currently none.

Month End Unit Price

As at 30 Jun 2021

1.9527 NZD

Manager's Comment

Market Commentary

The June quarter was an indifferent period for New Zealand fixed interest investors.

For the June quarter, the Forsyth Barr New Zealand Fixed Interest Fund delivered a gross return of 0.38% compared to the return of the fund’s market index of 0.31%.

 

 

Portfolio Positioning

Over the reporting period, we took the opportunity to further reduce cash holdings and also reinvest proceeds of maturing bonds by purchasing longer-dated securities.

This strategy wasn’t so much to increase duration (portfolio interest rate sensitivity) but to seek out securities that offered a compelling yield in excess of the Reserve Bank of New Zealand’s 2% inflation objective, a potential initial target for the Official Cash Rate (OCR), in our opinion.

While we are adamant that domestic bond yields will generally rise over the remainder of the year, our strategy of investing in longer-dated bonds did result in portfolio duration approaching four years – the longest we have been this year. We are comfortable to hold on the basis of our theory that an aggressive but very short-term counter trend move lower in bond yields is likely over the early stages of July.

In our view, the market has simply over- estimated the speed at which the Reserve Bank of New Zealand will raise the OCR and dismantle its Large Scale Asset Purchase programme, and as a consequence will need to re-adjust positioning accordingly.

Outlook

There is no change to our current thesis: we expect domestic interest rates to rise in response to a persistent and sustained bout of inflation.

We’re slightly flummoxed as to why other commentators have not assessed domestic inflation as likely to evolve beyond cost-push to demand-pull inflation.

We acknowledge the current disruptions to the supply channel pushing up prices, which act as a tax if the discretionary portion of consumer income is not increased to compensate.

However, we see increased wages and salaries as a given, judging by recent employment growth and job advertisement numbers.

Add this to the positive wealth effect of the current level of residential property prices and favourable asset price returns over the last year; we forecast an emboldened consumer.  

Our assessment is for inflation to become the real deal: demand pull.

Finally, we believe the Reserve Bank of New Zealand will have no option but tighten both orthodox and unorthodox monetary policy settings – the consequence we see as higher interest rates and a flatter yield curve, as the yields of shorter-dated bonds chase the OCR higher more quickly than those of longer-dated bonds.

Major Investments

As at 30 Jun 2021

Company name Volume
Housing New Zealand 3.36% 12/06/2025 6.10%
New Zealand Local Government Funding Agency Ltd 14/04/2033 3.50% 5.94%
New Zealand Local Government Funding Agency Ltd 15/04/2027 4.50% 4.21%
Westpac New Zealand 1.439% 24/02/2026 3.88%
ANZ transactional bank account 3.84%
Housing New Zealand 2.97% 12/06/2023 3.82%
New Zealand Local Government Funding Agency Ltd 15/04/2025 2.75% 3.12%
New Zealand Local Government Funding Agency Ltd 15/04/2024 2.25% 3.09%
New Zealand Local Government Funding Agency Ltd 14/04/2022 2.75% 2.62%
Housing New Zealand 3.42% 18/10/2028 2.42%
Major holdings as % of total portfolio 39.04%
Total portfolio holdings 90

Performance over time

Return Comparison

As at 30 Jun 2021

1 Month 3 Months 1 Year 3 Years Since commenced operation
Net Fund Return 1 Month 0.15% 3 Months 0.13% 1 Year -0.57% 3 Years 2.44% Since commenced operation 3.76%
Gross Fund Return 1 Month 0.28% 3 Months 0.38% 1 Year 0.00% 3 Years 4.22% Since commenced operation 6.25%
S&P/NZX Investment Grade Corporate Bond Index 1 Month 0.28% 3 Months 0.31% 1 Year -0.96% 3 Years 3.85% Since commenced operation 5.97%

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. Market index returns do not have any deductions for fund charges, trading expenses or tax.

The S&P/NZX Investment Grade Corporate Bond 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 Fixed Interest Fund here.

Fund update

As at 30 June 2021

This document tells you how the Forsyth Barr New Zealand Fixed Interest 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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LOWER RISK
HIGHER RISK

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 31 March 2021. See more information about the risks of investing in the Product Disclosure Statement.

Target investment mix

Cash and cash equivalents 5.00%
New Zealand fixed interest 95.00%
International fixed interest 0.00%
Australasian equities 0.00%
International equities 0.00%
Listed property 0.00%

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 three 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 0.75% p.a. of the value of your investment. This means that we pay management and administration charges along with the Supervisor fee out of this. All fees and charges are quoted exclusive of GST.

Trail commission may be paid to a Financial Adviser responsible for your Investment Funds account. Any trail fee is paid by Forsyth Barr Limited and is not a separate charge on your Investment Funds account.

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 Investment Adviser. 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.

© 2021 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 ‘regulated financial advice’ under New Zealand law has 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. For more information refer to our Financial Services Guide (AU) or Financial Advice Provider Disclosure Statement (NZ) at www.morningstar.com.au/s/fsg.pdf and ww.morningstar.au/s/fapds.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.
The Morningstar Rating is an assessment of a fund’s past performance – based on both return and risk – which shows how similar investments compare with their competitors. A high rating alone is insufficient basis for an investment decision.

 

Get in touch

24 locations around New Zealand

To find out more about our NZ Fixed Interest Fund, speak to one of our Investment Advisers. They will help you determine the role an Investment Fund can play in helping you achieve your goals.