Quarter Three



Changes to Statements of Investment Policies and Objectives (SIPOs)


Effective 1 February 2018 we will be introducing a number of changes to the Funds' SIPOs to codify ethical screens across all Funds.

Investors will be aware that there are already ethical screens in place for the Sustainable Australasian Share Fund and the International Share Fund.

These changes will see an identical ethical overlay to the New Zealand Bond Fund as is currently in place for the Sustainable Australasian Share Fund. The International Bond Funds focus on sovereign bonds avoids investing in companies which may not meet our sustainability criteria.

The Property Fund will be applying an ethical overlay to the acquisition of properties, avoiding properties where the major tenant does not meet sustainability criteria.

We are also amending the maximum exposure limit to a single property within the Fund to allow for the targeted 25% maximum exposure to be exceeded, from time to time, as a result of timing of acquisition and sales, and investor or fund cashflows. 

To read the latest version of the Funds SIPO which reflects these upcoming changes, please click on the below link.

Trust Management News and Articles

Measuring Investment Returns With Cashflows

Trustees of charities need to regularly monitor the returns of their investment portfolios. Returns can be affected by cashflows, and it is important that Trustees understand what is being presented to them.

This article considers the measurements of returns when an investor is regularly taking money in and out of a fund. We explain with an example the difference between a time-weighted return and a money-weighted return.

The Efficient Frontier

The Efficient Frontier is a tool that enables investors to choose their target asset allocation, or the exposure to each asset class. The Efficient Frontier represents the set of optimal portfolios, those that offer the highest expected return for each level of risk.


Fund News

421 East Tamaki Road


After nearly a year of discussions with the Receiver for Pumpkin Patch, Trust Investments Property Fund and the St Johns College Trust Board - as 50/50 owners of 433, 439 & 441 East Tamaki Road have purchased the Freehold land at 421 East Tamaki Road. 

We see this as a strategic purchase and an opportunity to add value to the sites already held.  The purchase was via a market based tender process. 

Farmers Trading Company -
New Tenant


Farmers Trading Company ("Farmers") is a new tenant with the Trust Investments Property Fund. Farmers has taken the retail premises on Broadway which was previously occupied by PaperPlus.

Farmers is a very experienced retailer having been in business for 100+ years. It is one of the largest retailers in New Zealand with 60 department stores throughout New Zealand.

Maori Television Services Opens Office
433 East Tamaki Road


In December 2016 Maori Television Service ("MTS") signalled the commencement of fitting out their new premises at 433 East Tamaki Road with a Karakia.  

After extensive fitting out of the premises, the formal opening of the Maori Television office premises and television studio was held on 24 August.


This commenced with a dawn ceremony which was attended by the then Minister for Maori Development Hon te Ururoa Flavell, members of Parliament, iwi, representatives of the landlord and the Manager of the Fund.


Fund Returns


The Balanced Fund invests in the other five sector funds, maintaining a moderate risk profile with a well-diversified strategic asset allocation of approximately 35% Fixed Interest, 35% Shares and 30% Property. The Fund has a strong focus on the distribution of income and its returns tend to be reasonably stable.

​The Fund returned a solid 3.0% for the September quarter, giving a 10.4% return for the September year. Share markets gained about 5% over the three months, and the Fund’s return was further boosted by the strong outperformance of the Sustainable Australasian Share Fund (see separate commentary). Property and Bond markets were rather more muted, but still contributed positively.

Global growth trends are positive and inflation remains subdued, making for a constructive investment backdrop. Nonetheless we expect the Fund’s returns to be somewhat lower in coming years given that asset valuations are quite stretched and monetary policies are likely to be less accommodating.

To 30 September 2017

Inception Date 01/06/2006


The Fund returned 1.2% for the September quarter, to be up 12.3% for the September year. The portfolio was fully revalued in June, with nine properties showing revaluation gains.

The latest quarter was an active one for the Fund. In August the Fund purchased an industrial property in Freight Place, near Auckland airport, for $9.735m. The property is currently under-rented according to the registered valuation that the Fund commissioned. The next rental review is in 2019.

In September the Fund purchased a strategic freehold land holding in East Tamaki Road. Securing the freehold interest in the site provides greater flexibility for the Fund’s interests in East Tamaki Road.

A lease with Farmers Trading Company (“Farmers”) was concluded for the largest of the Fund’s retail units on Broadway, Newmarket. Farmers has a strong tenant covenant and is a high quality company to add to the Fund’s list of tenants.

The Fund’s current Cash weighting is a little over 20% and we are actively seeking new investments. Due diligence is currently being undertaken on a small number of quality properties.

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 September 2017

Inception Date 01/03/2001


The Fund returned 8.2% for the September quarter, strongly outperforming the benchmark (4.6%) and giving a September year return of 18.2% (benchmark 9.6%). The rally in the New Zealand market was consistent with the global trend, and supported by solid economic data, growth in company earnings and continued low inflation.

The June profit reporting season for the New Zealand market was in line with expectations, although future profit guidance disappointed, particularly for cyclical and defensive yield stocks. The results season also highlighted structural challenges for a few companies such as Sky Television and Fletcher Building.

Secular growth stocks, such as a2 Milk, Fisher & Paykel Healthcare and Xero, were key contributors to the market’s strong returns and the Fund’s outperformance. The Fund’s relative performance was also helped by its underweighting or zero exposure to underperforming stocks Auckland Airport, Chorus, Skycity, Trade Me and Z Energy.

In terms of the Australian June profit results, resource stocks surprised on the upside in terms of cash returns, but telcos and insurance stocks disappointed. The best performing sectors for the quarter were energy, materials and consumer staples, and the worst were telcos, utilities and healthcare. The Fund’s weighting in the Australian market is around 15-20%.  

Given current valuations and recent strong returns, we would not be surprised to see both markets take a breather over the next year or so.

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 September 2017

Inception Date 01/12/2002


The Fund returned 5.7% for the September quarter (benchmark 5.3%), to give a strong 20.0% return for the September year (benchmark 19.6%). The major share markets continued to be buoyed by solid economic activity, positive earnings trends and low inflation. Geopolitical factors and the threat of monetary policy tightening were generally overlooked by investors.   

​In local currency terms, the US market was up 4.0% over the three months, as were the larger European markets, while the Japanese market gained 1.6%. The Fund also benefited from the fall in the NZ dollar.   

​Given the rally over the last year, the relatively full valuations, and the prospect of higher long-term interest rates, share markets are expected to generate lower returns than those of recent years.

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 NZ dollars.

To 30 September 2017

Inception Date 01/12/2005


The Fund returned 1.0% for the quarter (benchmark 0.9%). The return for the September year was 1.6% (benchmark 0.2%).

Long-term yields in the NZ market moved little in the three months, consistent with the trend offshore. The yield on the Government Stock 2027 maturity fluctuated in a narrow 2.8-3.0% range, closing at 2.97%. This compares to 3.33% at the start of the year and a low of 2.12% in August 2016.

Steady inflation (1.9% for the September year) and likely little change in short-term rates means that long-term yields in New Zealand 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 helped to protect the Fund from capital losses over the last year. We still 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 September 2017

Inception Date 01/09/2005


The Fund returned 0.7% for the quarter, in line with the benchmark’s 0.8%. The September year return was -0.4% (benchmark -0.3%).

Long-term sovereign yields in the major markets at the end of September were little changed from June and remain very low by any historical comparison. They fell quite sharply in August, prompted by North Korea’s missile tests, but subsequently rebounded. The yield on US 10-year Treasuries closed the quarter at 2.33%, while 10-year yields in Japan and Germany were 0.07% and 0.46% respectively.

Global inflation remains low, at 2.2% in the US, 1.5% in Europe and 0.7% in Japan, but these rates are all higher than a year ago. While high debt levels in many countries will be a constraining factor, any sign that core inflation is on the rise will lead to less accommodating monetary policies and a likely 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 NZ dollars. Returns tend to lag the benchmark slightly as the cost of hedging is excluded from the benchmark return calculation.

To 30 September 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.