6/8/2021 12:00:00 AM

Fund Reviews: Diversified

Written by Mike Taylor,  Founder & CEO


The Conservative Fund finished the month down slightly on -0.2% and has a 12-month return of 4.9% versus its index at 4.0%.

It was a testing month again for conservative assets, with the RBNZ providing guidance of rate hikes for the first time since Covid-19. The market now sees “neutral” (which is usually where the 10-year rate sits) at 1.85% as at the time of writing. So while the OCR will likely rise in 2022, the market has already priced this in to bonds. A key risk from here would be that the economy runs hotter than the RBNZ expects or that inflation is not transitory but, instead, persistently above 3%.

It’s worth noting that at this stage the RBNZ remains out on a limb globally with its Hawkish stance. Most other central banks are opting for a wait and see approach. We’ve come a long way from 12 months ago when the RBNZ told the industry to prepare for negative rates! For the moment I’m running the cash weighting higher than usual for a conservative fund and continue to favour shorter dated bonds. Having said that, there are some reasonable corporate bonds appearing back in the market with rates in the mid 3s.

From an equity perspective, sticking with the bike and pet theme of our other funds, the Conservative Fund has added Shimano, a Japanese bike component manufacturer, and the UK-based Pets at Home. The team feels both continue to offer good long-term prospects with sustainable tailwinds to the growth story. With the increased volatility and criminal crackdown on Bitcoin, gold fared better in April which resulted in a strong rally for our two gold holdings.

Positions in healthcare company Ebos Group and Australian real estate company Homeco Daily Needs REIT traded at 52-week highs during the month.

Information is current as at 31 May 2021. Pie Funds Management Limited is the manager of the funds in the Pie Funds Management Scheme. Any advice is given by Pie Funds Management Limited and is general only. Our advice relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees, like brokerage, if you act on any advice. As manager of the Pie Funds Management Scheme investment funds, we receive fees determined by your balance and we benefit financially if you invest in our products. We manage this conflict of interest via an internal compliance framework designed to help us meet our duties to you. For information about how we can help you, our duties and complaint process and how disputes can be resolved, or to see our product disclosure statement, please visit www.piefunds.co.nz. Please let us know if you would like a hard copy of this disclosure information. Past performance is not a guarantee of future returns. Returns can be negative as well as positive and returns over different periods may vary.