Diversified Funds
Closed to new investors
On this page:
This fund aims to provide a higher return than cash and provide regular income through distributions while maintaining capital value. The fund does this by investing in a combination of bonds and income-generating shares.
The fund holds bonds and shares across companies that have been carefully selected based on their ability to provide reliable, sustainable income. Unlike a term deposit, the value of your investment can fall, so the amount you receive when you redeem could be less than the amount you invested. However, if the value increases, the amount you redeem could be higher than the initial amount you invested. Our Income Fund offers a range of new benefits, including a 6.5% p.a defined distribution rate, paid out quarterly.
Find out more about the Nikko AM Income Fund
Risk Indicator (volatility)
Target Asset Allocation
This number indicates the relative 'risk' level of this fund based on the types of assets it is invested in, ranging from level 1 (least risky) to 7 (most risky).
| Risk category | Description of volatility |
| 1 | Very low |
| 2 | Low |
| 3 | Medium |
| 4 | Medium to High |
| 5 | High |
| 6 | Very high |
| 7 | Extremely high |
The risk indicators are calculated using returns of the funds, the returns of the fund’s market index or a combination of both, for the previous five years. Index returns or a mix are used if the fund has existed for less than five years. All Managers are required to use the same methodology so you can compare the risk of different funds if you are researching more than one manager.
| One month | Three months | One year | Three years (p.a) | Five years (p.a) | |
|---|---|---|---|---|---|
| Fund performance1 | 1.10% | 2.25% | 8.75% | 2.11% | 1.88% |
| Appropriate Market Index (AMI)2 | 1.41% | 2.61% | 11.16% | 2.99% |
AMI (appropriate market index) is a theoretical portfolio with similar underlying assets as the fund. This allows investors to see a comparison of how the value of those assets have changed in the market relative to the fund.
| Security Name | Percentage |
|---|---|
| Powerco Ltd 070330 6.397 Cb | 4.79% |
| Westpac New Zealand Ltd 160932 6.19 Cb | 4.64% |
| Infratil Limited | 4.03% |
| Auckland International Airport Ltd 090528 5.67 Cb | 3.43% |
| Chorus Limited | 3.29% |
| Westpac New Zealand Ltd 140234 6.73 Cb | 3.21% |
| Spark Finance Ltd 180931 5.45 Cb | 3.12% |
| Kiwibank Ltd 191027 5.737 Gb | 3.12% |
| Christchurch International Airport 150431 5.44 Cb | 3.10% |
| Industrial And Commercial Bank Of China New 090429 5.784 Gb | 3.09% |
Commentary
As of 30 November 2024
Market Overview
Fund Commentary
The Income Fund increased by 1.10% over November. The bond market and equity market performed well, propelled higher by global influences and confirmation the Reserve Bank of NZ will continue to cut the cash rate over 2025.
The NZ equity market continued its strong recent performance. The NZ equity market as measured by the NZX50 (gross with imputation credits) increased 3.39% over the month as the prospect of lower interest rates continued to increase the appeal of New Zealand listed companies. The NZ Composite Bond Index also had a good month advancing 0.57% as longer-term bond yields fell after being pushed higher by global anxiety over what a new Trump Presidency may mean for economic growth, inflation and new bond issuance.
The RBNZ cut the cash rate by an additional 0.5% on the 27th of November to 4.25% and markets are anticipating a further 0.5% cut early next year. The pace of cuts is expected to slow however an ultimate target of around 3% is likely. The Reserve Bank continues to expect global economic growth to remain subdued in the near term so it is unlikely NZ can rely on global growth to help our local economy. Geopolitical conditions and policy uncertainty could also contribute to increased economic and inflation uncertainty so it is no surprise that lower cash rates will be delivered in NZ even if there is some degree of volatility in the flow of economic data.
If cash rates move significantly lower over the next year or two, we would expect bond rates to follow but not to the same extent. We are also aware that large falls in cash rates are already priced into markets so any disappointment could see some retracement in prices/yields however if this does occur it could represent a good buying opportunity. Global developments will likely see bond market volatility continue at least in the short term.
The S&P/NZX 50 Gross (with imputation credits) Index increased by 3.39% over November as falling cash rates continued to encourage investors to look for buying opportunities. Skellerup’s share price continued its recent strong performance, up 6.9% for the month. The property sector and Heartland Bank tailed the field however 11 of the 14 equity names in the portfolio increased in price.
The Composite Bond Index increased by 0.57%, reversing the previous month’s fall. Longer term bonds were the best performing part of the fixed income sector and if the RBNZ carry out their rate cut projections bond yields will be significantly higher than cash returns over the next few years.
With cash rates forecast to fall we continue to believe investors should seek income from a diverse range of sources. Looking ahead over the medium term a lower rate environment should be supportive for both bond and equity returns. The Income Fund remains invested in a range of NZ companies listed on the NZX that pay a consistent level of dividends or who have the likelihood of doing so in the future. In addition to dividend income, we expect over time the industry sectors and business models adopted by these companies should be rewarded by a steady or rising share price.