Quarter Two

Update

 

Lunch with Cameron Bagrie

 

Trust Management is pleased to offer the opportunity to join Cameron Bagrie, Chief Economist ANZ, for lunch at Trust Management on Wednesday 6 September 2017 at midday.

Cameron will discuss the economic environment in this politically uncertain time, and share his thoughts on a number of topics.

Cameron is always an informative and entertaining speaker. If you would like to join us please click on the button below to register your interest.

 

Patrick O’Reilly Elected President of the Property Institute of New Zealand

Patrick O’Reilly, Trust Management’s General Manager Property has been elected President of the Property Institute of New Zealand.

 

The Property Institute has over 2,500 members throughout New Zealand and the world. It was formed in the year 2000 to act as the voice of property professionals. 

The Institute incorporates the membership of the New Zealand Institute of Valuers (NZIV), the Institute of Plant and Machinery Valuers (IPMV), and the Property and Land Economy Institute of New Zealand (PLEINZ). It now represents the interests of Valuers, Property and Facilities Managers, Property Advisors and Plant and Machinery Valuers. 

Since inception, the Institute has developed into the leading professional body for standards, qualifications and ethics across all facets of the property professions within New Zealand. The Institute works with government, industry and other professional associations, education stakeholders and the media to promote it's standards and views. 

 

The Institute plays an active role in promoting professionalism, ethical conduct and innovative thinking.

Trust Management Supports Property Careers Expo

A number of the Trust Management property team provided support to the Property Institute of New Zealand (PINZ) by manning the property careers stall at the Careers Expo held at the ASB Stadium in May.

 

The aim was to highlight to school leavers that there is a great variety of careers within the property industry sphere.  The photo shows Felicity Berry and Thomas Snedden from Trust Management - before the doors opened to the expo! 

 

At the end of the day Felicity noted, “It was great to see the level of enthusiasm and interest from many of the attendees during the day.  Of particular interest was the number of females asking questions about a career in property.  It was a great opportunity to encourage them and to answer questions about university courses and training opportunities.”     

Fund News

 

Trust Management News

Property Fund - Stellar Performance

 

The Trust Investments Property Fund (“Property Fund”) contributes data to the MSCI/IPD New Zealand commercial property return database. The performance index produced reflects the returns from 422 commercial properties within New Zealand.  

 

The 31 March 2017 results have been released, with the Trust Investments Property Fund achieving the top property portfolio performance ranking for 1 year and 2nd for 3 years.

 

439 East Tamaki Road Leased

 

Trust Management is pleased to announce the leasing of 439 East Tamaki Road to Cottonsoft Limited.  Cottonsoft  is a well-known supplier of paper towels and toilet paper. 

 

The Receiver of Pumpkin Patch vacated the building in May 2017.  Building works have been undertaken over the last few months and the lease with Cottonsoft commenced 1 August 2017. 

 

Cottonsoft will be using the warehouse for product storage, predominantly on pallets.  The lease is for a one year term and allows time for refurbishment works to the office area, before securing a long term tenant for the site.

 

The Cottonsoft leasing will provide a valuable cash flow to the Property Fund while these works are undertaken.

IZone Recognised at PCNZ Property Awards

 

With 83 properties being entered into the Property Council of New Zealand Property Industry Awards 2017 the competition was very high. 

 

Trust Management, in conjunction with The Warehouse Limited (“TWL”), submitted the TWL South Island Distribution Centre at IZone Industrial Park for the Industrial Property Award.

 

At the Awards Dinner held on Friday 16 June at the Spark Arena, the Property Fund’s IZone property was recognised with a Merit Award.  The judges recognised the complexity of the project, undertaking a building expansion adjoining a fully operational distribution centre. 

 

Property Fund Purchases an Auckland Industrial Property

 

The Trust Investments Property Fund has purchased an industrial property in the popular Airport Oaks area near Auckland Airport.

 

The property located at 2 Freight Place, was purchased through a tender process and settlement is due later in August.

 

Online Distribution (“Online”) is the trading name of the tenant.  Online is a New Zealand based third party logistics company and has been operating since the 1980s.  The property is leased through to October 2024.  Under the net lease the tenant has a number of rights of renewal.

 

The property is currently under-rented and has both CPI rental increases plus market based rental reviews.  The next market rental review is in October 2019.  The property was purchased for $9.735m at an initial yield of 5.75%. 

 

Patrick O’Reilly, General Manager Property noted, “The purchase of this modern, well located, industrial property further enhances the Property Fund property portfolio.”

 

Fund Returns

BALANCED FUND

The Balanced Fund invests in the other five sector funds, maintaining a moderate risk profile with a strategic asset allocation of approximately 35% Fixed Interest, 35% Shares and 30% Property. While not immune to market volatility, the Fund has a strong focus on the distribution of income and its returns tend to be reasonably stable.

​The Fund’s return for the June quarter was 2.8%, giving a return of 9.5% for the year to June, with all asset classes contributing. Most share markets gained ground, highlighted by the NZ market’s 5.7% return, although the performance of international shares was dampened by the 5% rise in the NZ dollar versus the US dollar. Property returned a strong 3.8% with several revaluations in the portfolio. Bond markets returns were also solid at over 1%.

​The Fund offers a well-diversified portfolio which continues to provide consistent returns in most market conditions. We expect returns in the future to be lower than those of recent years given the likelihood of modest economic growth and less favourable monetary policy settings.

To 30 June 2017

Inception Date 01/06/2006

PROPERTY FUND

The Fund returned 3.8% for the quarter. The portfolio was revalued at 30 June 2017, with nine properties showing revaluation gains, indicating continued strength in the NZ commercial property market.

The Warehouse South Island Distribution Centre building expansion in Christchurch was completed in March 2017. The Fund received around $24m in April 2017 as settlement for 50% of this property, aligning with the 31 March 2017 valuation. Following the sale, the Fund has surplus cash and the Manager is looking to acquire further good quality assets.

Further to the Fund last year leasing a substantial portion of the Pumpkin Patch premises to Maori Television Services on a 15-year term, the Receiver for Pumpkin Patch continued to occupy 439 East Tamaki Road, paying full rental until surrendering the property in May 2017. The Fund has since negotiated a one-year lease on this property, providing good cash flow until a long-term tenant is identified.

The Fund continues to generate solid and consistent returns. There is a strong emphasis on the regular distribution of income via quarterly distributions.

To 30 June 2017

Inception Date 01/03/2001

SUSTAINABLE AUSTRALASIAN SHARE FUND

The Fund returned 6.5% for the quarter, outperforming the benchmark’s 5.7%, to give a June 2017 year return of 15.4% (benchmark 11.0%).

The NZ market, with its relatively high exposure to bond sensitive stocks, benefited from the fall in long term bond yields and also gained support from generally positive earnings guidance upgrades. Some growth stocks performed particularly well, notably a2 Milk, Xero and Fisher and Paykel Healthcare which are overweighted in the Fund. Underperformers included Westpac, ANZ, Metlifecare and Sky Television.

The Australian market was impacted by weakness in the telecom, financials, energy and consumer staples sectors, partly offset by industrial, healthcare and information technology stocks. Bank stocks fell after the announcement of a Bank Levy proposal, some mixed profit results and concerns about housing debt. Retail stocks weakened following lower than expected sales and concerns about Amazon’s pending entry into the market. Weak iron ore and coal prices weighed on resource stocks.

After its strong returns over the last few years, it would not be a surprise to see the NZ market consolidate from here.

The Fund has an ethical screen in place whereby stocks whose major activities involve alcohol, tobacco, armaments, pornography and gambling are excluded from the portfolio, along with companies involved in the production and/or extraction of fossil fuels.

To 30 June 2017

Inception Date 01/12/2002

INTERNATIONAL SHARE FUND

The Fund returned 1.5% for the quarter (benchmark 1.3%), to give a strong 17.8% return for the June year (benchmark 18.0%). The world’s major share markets continued to be buoyed by steady growth in economic activity and company earnings against a backdrop of low inflation, although investors began to question the durability of easy monetary policies.  

​In local currency terms, the US market rose 2.6% over the three months while the Japanese market gained 5.9%. The larger European markets were flat. The return of the Fund was diluted by the NZ dollar’s 5% appreciation versus the US dollar. 

​Solid economic data and earnings results continue to underpin markets, but the prospect of further monetary policy tightening and higher long-term interest rates lies ahead. A period of consolidation is likely after the strong gains of recent months.

The Fund invests in an indexed product that excludes companies involved in the manufacture of tobacco and controversial weapons. This product tracks the MSCI World ex-Australia Index excluding these sectors of the market. The Fund’s foreign exchange exposures are 50% hedged to New Zealand dollars.

To 30 June 2017

Inception Date 01/12/2005

NZ BOND FUND

The Fund returned a solid 1.3% for the quarter (benchmark 1.4%). The return for the June 2017 year was 1.9% (benchmark 0.2%).

Long-term yields in the New Zealand market declined about 0.2% over the quarter. The yield on the Government Stock 2027 maturity closed at 2.98%, compared to 3.33% at the start of the year and a low of 2.12% last August. The fall in yields was consistent with the decline in yields in the U.S. and Australia.

Stable short-term interest rates and low inflation (1.7% for the June year) means that long-term yields are more likely to be driven by the trend in offshore markets.

​The Fund remains defensively positioned with a duration profile around a year shorter than the market benchmark. This strategy has protected the Fund from capital losses over the last year. We expect long-term yields to gradually rise and offer better investment opportunities in the future.

​The Fund’s strategy prioritises the level and stability of distributed income.

To 30 June 2017

Inception Date 01/09/2005

INTERNATIONAL BOND FUND

The Fund returned 1.1% for the quarter, in line with the benchmark. The June 2017 year return was -0.9% (benchmark -0.7%).

Long-term sovereign yields in the major markets were reasonably stable over the three months, in contrast to their large increases in the second half of 2016. The 10-year yield in the US declined a little, from 2.39% to 2.30%, although yields in Germany rose from 0.32% to (a still very low) 0.46%.  Yields in most developed countries remain very low by any historical comparison.

Low inflation in Europe and Japan and high debt levels in many countries are expected to limit any rise in yields. However any sign of higher inflation (particularly in the US), and less accommodating monetary policies are expected to lead to some increase in long-term interest rates.   

​The Fund invests in an index fund that invests only in sovereign securities. This product tracks the Citigroup Index hedged to Australian dollars. A further hedge is applied to hedge the Australian dollar exposure back to New Zealand dollars. Returns tend to lag the benchmark slightly as the cost of hedging is excluded from the benchmark return calculation.

To 30 June 2017

Inception Date 01/09/2005

Under the Financial Markets Conduct Act this communication may be deemed to be an advertisement for an offer of units. Trust Investments Management Limited is the issuer of the units to be issued under the offer to which this advertisement relates. A product disclosure statement for the offer, which sets out the terms and conditions of the offer, is available, and can be obtained at www.trustmanagement.co.nz/investment-products.