The Inflation Category fulfills an important role in the investment solutions that NZ Funds offers to clients. At their heart, Inflation Category portfolios are, as the name suggests, looking to achieve a return that grows clients’ capital at the rate of inflation or better. Given this goal, a mix of asset classes are required. An allocation to growth assets such as shares is needed to generate returns that can be expected to be consistently ahead of inflation. However, these portfolios are not intended to experience the ups and downs that pure growth portfolios, such as those which invest fully in shares, do. As a result, a percentage of Inflation Category portfolios have been invested in less volatile income assets such as bonds. Bonds are more stable investments, but the trade-off is that they offer a lower rate of return than shares. Given the goal of beating inflation, income assets utilised in Inflation Category portfolios have targeted bonds that genera...

The recent events at Lynnmall shopping centre in West Auckland provided a stark reminder of the risks of developing a mindset which is intolerant of other points of view. Although this was an extreme example, even in our day-to-day lives, we are all too prone to revert to our own established thinking and not willing to consider other points of view. Perhaps factionalism comes pre-packed as part of the 'human condition'. My observation is that, if we succumb to this way of thinking, we limit ourselves and our opportunities. When it comes to financial advice, there are common themes that most advisers will agree on: diversifying your capital across different asset classes and geographies, investing in accordance with your risk profile, time frame, and being mindful of tax efficiency are examples. However, the area where factionalism tends to 'rear its head' is the question of active management vs passive management. The difference between these two styles 1 can be ...

Prices of energy commodities are spiking globally with gas, oil and uranium all rising significantly this year. Gas has spiked to levels not seen since 2014. In fact, gas prices have got so high in Europe it is forcing some industrial companies to temporarily shut down production as it is no longer profitable to produce their goods. With governments around the world focussed on the fossil fuels to green energy transition to reduce carbon emissions, the current gas price crisis serves as a timely reminder of how reliant on fossil fuels we still are. Glut in demand The surge in gas prices has been driven by many factors all coming together. The global economic slowdown caused by the COVID-19 crisis significantly reduced the demand for gas. This demand reduction pushed global gas prices, which had been falling since late 2018, into a deep bear market. By mid-2020, global gas prices were at the lowest levels seen since 1995. Naturally, the deeply depressed prices led to ...

In Investment Insight | 06 September 2021 | Spring has sprung we discussed that August was a turning point for our growth portfolios. In this Investment Insight, we discuss clean energy as an investment opportunity. While still early in our investment thesis timeline, clean energy has made a strong contribution to returns over the past month. The decarbonisation conundrum Two-thirds of the world economy has committed to achieving carbon neutrality by 2050 (China by 2060). To achieve this ambitious target, governments around the world are planning to spend huge amounts on clean energy infrastructure. This presents significant investment opportunities. It also presents governments with a conundrum. The world's population is expected to increase substantially by the middle of the century. In many parts of the developing world, living standards are also expected to increase. This creates significant new energy demand. So how does the world meet these new energy demands ...

Spring has sprung, and we are excited about the investment opportunities for the remainder of the year. In the first Investment Insight of each month we will look back at the key themes and trends for the previous month; and forward, setting out our views on what will affect client performance in the months to come. Month in review - active management positive for shares Clients’ growth portfolios performed well in August. This was driven by a combination of strong share markets but also by individual share selection. August is typically a busy month for United States companies’ second quarter earnings announcements. In New Zealand and Australia, companies report their June year end results. Our large New Zealand and Australian shareholdings all reported very positive results, a key driver of performance in August. In our Investment Insight | 19 July 2021 | Famous Five we summarise the mega-cap technology companies owned in clients’ growth portfolios. Thes...