New Newsletter


Welcome to our new quarterly newsletter. We have changed the format of our traditional newsletters to deliver you more information about what is happening in the charitable sector, Trust Management's service offering, and what is happening within investment markets.


We trust you will enjoy the format and information contained within this newsletter and we look forward to making further refinements to provide you with engaging information. 


A new newsletter is not the only change at Trust Management, we also have a number of new staff, including the senior appointments of Patrick O'Reilly and Anne Edwards. To read more, please click below.

We are also pleased to annouce we have made a number of refinements to our Group Investment Funds, including introducing to the ethical screen an exclusion for those companies whose primary activity involves the extraction/production of fossil fuels. We have also changed the management style of our NZ Bond Fund to ensure the Fund is better aligned to the needs of our charitable investors.

Though there has been an increase in volatility recently, markets have been performing very well as evidenced by our Balanced Fund returns over the past year, three and five years. For the latest on what is happening within the markets, and the performance of our Group Investment Funds, please click the below link.


Fund News

Australasian Share Fund - Fossil Fuels


The investment mandate of the Fund includes an ethical screen which screens out any companies whose major activity involves;


  • alcohol,

  • tobacco,

  • armaments,

  • pornography,

  • or gambling.


From 1 October 2015, the screen has been extended to exclude any companies whose major activity involves the extraction and/or production of fossil fuels.


Our research and analysis on this extension of the ethical screen concludes that it is not likely to have a material impact on the return, the volatility of the return or the correlation with other asset classes.


In summary, we believe the change will better align the Fund’s ethical screen with investors’ ethical views, without having a material impact on the investment objectives of the Fund.

NZ Bond Fund – Income Focus


From 1 October 2015, the investment strategy and management style of the NZ Bond Fund has focused more explicitly on generating income for investors.


This change has been made because most current investors in the Fund rely on the income to achieve their charitable purposes. Therefore we believe it is important to place more emphasis on the income of the Fund rather than its total return.


We have conducted extensive analysis to establish whether managing the Fund in this way would impact any of the other key characteristics of the asset class, specifically its expected overall return, the volatility of the return and correlation with other asset classes.


Our research concludes that an “income focus” strategy is likely to result in significant income enhancement for investors relative to the current market approach. At the same time it is not expected to have a material impact on the total return or correlation with other asset classes.


While this change of management style may result in slightly higher volatility of the Fund’s total return, our research suggests the higher levels of income generated will be more stable and consistent from year to year.


In summary, we believe the change will better achieve investors’ investment objectives by generating a higher and more stable level of distributable income.


Trust Management News

Patrick O'Reilly


We are pleased to announce the appointment of Patrick O’Reilly as General Manager Property. Patrick joins Trust Management following previous roles with AMP Capital, DNZ Property Fund and Brookfield.


With over 20 years of senior leadership experience in the property industry, Patrick is a proven commercial manager who has delivered exceptional results within listed and private entities, bringing a strategic approach to every element of his role.


Patrick holds a Masters in Property, a Post Graduate Diploma in Commerce and Bachelor of Commerce in Valuation and Property Management.


We look forward to introducing Patrick over the coming months as he reviews the strategy of the Property Fund.

Anne Edwards


Trust Management has also appointed Anne Edwards as General Manager Finance to oversee our rapidly expanding Financial Service Team.


Anne has significant experience in the financial services sector and joins Trust Management from the New Zealand offices of Swiss bank, UBS where she was Associate Director for the past 13 years. Anne also guided UBS through the transition to New Zealand equivalents to International Financial Reporting Standards (NZ IFRS)


Prior to UBS, Anne was an Audit Manager for PWC both in New Zealand and the UK.


Anne is a Chartered Accountant (CA) and holds a Bachelor of Commerce from Audencia Nantes, France and an MBA from Bowling Green State University, Ohio, USA.

RICS Award 2015


We are pleased to report that Trust Investments recently received the RICS award for Property Fund Management Team of the Year. We are certainly pleased that the efforts of the team have been acknowledged in this way.


Garry Anderson, Property Investment Manager, said that the RICS award is a major endorsement of Trust Management’s market-leading position in the Fund Management sector. “The two funds we nominated for the awards lead the most rigorous of rankings: the IPD NZ retail, Office and Industrial Universe (Properties <$20m). In 2014, one is number 1 and the other is number 2 based on 10 year total returns.


Fund performance and commentary1


NZ Bond Fund

The Fund returned 2.0% in the quarter, slightly below the market’s 2.2%. The slowing economy and lowering of the Official Cash Rate to 2.75% drove yields on short and medium-term maturities lower. Yields on longer maturities however rose slightly, resisting the offshore trend of rates declining.


The Fund currently has a slightly shorter than market duration, 3.4 years versus the benchmark's 4.4 years. This strategy is based on the probability that the inflation rate increases from 0.4% (June year), the risk that global bond yields rebound from their current levels, and the low market premium for investing in longer maturities.


The Fund’s strategy was recently changed to put a greater focus on income.


International Bond Fund

The Fund returned 2.7% as sovereign yields declined, generating some capital gains. The benchmark for the Fund, the Citigroup World Government Bond Index NZ dollar Hedged, also returned 2.7%.


The Fund invests in an index fund that tracks the Citigroup Index hedged to Australian dollars. We then apply a further hedge to eliminate the Australian dollar exposure. Returns for the Fund tend to slightly lag the benchmark as the cost of hedging is not included in the benchmark return calculation.


Australasian Share Fund

The NZ share market performed creditably against its global counterparts in the quarter, but returns were still negative.


The market has been supported by falls in interest rates and the decline in the NZ dollar, but earnings growth has been muted. Given the slowdown in economic growth the market may struggle to perform strongly from here, although much depends on global markets.


The Australian market struggled in the quarter to be down 8%. Australian stocks comprise around 20% of the Fund.


The Fund recently extended its ethical screen to exclude stocks involved in the production and/or extraction of fossil fuels.


International Share Fund

The world’s major share markets all retreated in the quarter. In local currency terms the US S&P 500 was down 7%, the Japanese market 14% and UK 7%.


For unhedged share investors, the fall in the NZ dollar, down 6.6% versus the US dollar, partly offset these negative returns. Figure 2 shows the NZ dollar since June 2014 on a trade-weighted basis.


Figure 2: NZ Dollar – 12 months to September 2015

The Fund invests passively in an indexed product which tracks the MSCI World Index. 50% of the Fund’s foreign exchange exposure is hedged back to NZ dollars. The Fund has therefore received half of the currency gains from the fall in the NZ dollar.


Property Fund


The Fund continues to generate a steady return, characterised by strong and consistent income. The Fund currently has surplus cash and is eyeing up several new opportunities for investment.


Balanced Fund

The Balanced Fund invests in all the other five funds, and has a moderate risk profile of around 30% Shares, 30% Property and 40% Fixed Interest. While not immune from market volatility, the Fund has a strong focus on income generation and its returns are generally stable.


The Fund experienced a very small negative return in the quarter as the large falls in share markets outweighed the gains in fixed interest and property markets.


While returns from here will likely be lower than those of the last three years, it is important to maintain a balanced asset allocation to ensure that the portfolio risk is limited via diversification.



[1] Returns are gross of management fees and expenses but net of any delegated management fees.