2018 - What Happened?!



In the end 2018 was a year one might prefer to forget. It marked something of a turning point in financial markets and featured trade wars, rising interest rates, a fickle political climate and high volatility. It saw the end of 10 years of an unconventional monetary policy of artificially low interest rates and quantitative easing. 

 2019 - What to Watch

Global markets face something of a hangover now that the long party of recent years - a period of easy monetary policies, low volatility, political stability and strong corporate earnings growth - may be over.

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Trust Management News and Articles

2018 Responsible Investment Association Conference

Grant Hope recently attended the Responsible Investment Association Australasia conference in Melbourne. It was clear to Grant that despite the increasing desire of investors for Environmental, Social and Governance (ESG) investments, many Fund Managers and advisors in the room were paying little more than lip service to ESG and others were in catch-up mode. Most importantly, Grant came away with the view that many fund managers and investment advisors are scrambling to try and understand and meet changing investor expectations without truly understanding the values behind ESG investing.

Trust Management continues to invest significant time and effort into finding appropriate investments which have a positive social impact and you'll hear more about this in future bulletins and discussions.

The conference coincided with the RIAA's annual report on Responsible Investment, a copy of which can be obtained by clicking on the link below.

Profile: Shane Coward
General Manager

Shane Coward has over 20 years of experience in finance and management. He has dedicated 16 of those years to Trust Management and its mission to help clients advance their charitable purposes, 12 years as the GM Finance and four as General Manager.

Shane’s diverse experiences within the industry have enabled him to develop a wide breadth of commercial and business understanding, which he applies in both the management and task-oriented capacities of his job.

Fund News

Rātā Foundation

Trust Investments Property Fund announced in December that after a period of due diligence, it had entered into an unconditional contract for the purchase of three commercial properties in Christchurch.  The properties were purchased from Rātā Foundation (previously The Canterbury Community Trust).


The properties were acquired for $27.3m and Rātā Foundation received payment by way of additional Units in the Property Fund (Rātā Foundation being an existing investor). 


Please click below to read more about this transaction and the properties acquired.


EDI Downer, Shands Road, Hornby. One of three purchased.


Fund Returns


The Balanced Fund invests in the other five sector funds. It has a moderate risk profile with a well-diversified target asset allocation of 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 -2.4% for the December quarter, with a large 14% fall in International Shares offset by solid returns from Property and Fixed Interest. The Fund’s return for calendar 2018 was 4.4%.

The last three months of the year were very volatile as investor sentiment turned negative amid heightened concerns about global growth, trade wars, Brexit uncertainty and tighter US financial conditions. Bond markets rallied strongly as investors gravitated to low-risk assets. The oil price fell almost 40%. Property benefited from the fall in interest rates.

Although growth in global economic activity and corporate profits is moderating, the investment environment remains supportive. The valuation of growth assets is more attractive now after the fall in share markets and the decline in long-term interest rates. Geopolitical risks – trade wars, Brexit and China’s economy – and less accommodating monetary policy settings however point to modest returns and episodes of volatility. 

To 31 December 2018

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Inception Date 01/06/2006



The Fund returned a solid 3.4% in the December quarter and 11.7% for calendar 2018, reflecting solid rental income and capital growth in the portfolio. A key milestone was achieved in December with the Fund growing to over $200m.

The quarter was an active one highlighted by a major lease extension, the purchase of a large industrial property and a significant transaction with Rātā Foundation. 

The lease on the Countdown supermarket at Lynfield, Auckland was extended to 2027. As a consequence only 3.7% of the Fund’s income is exposed to lease expiry risk in 2019.

The purchase of 105 Wiri Station Road for $20.12m was settled in November. This is a quality, extensively refurbished industrial property with a new 15 year lease to an established infrastructure contractor.

In December the Fund purchased three commercial properties in Christchurch from Rātā Foundation for $27.33m with Rātā receiving units in the Fund as consideration.

The Fund has a strong emphasis on generating regular income for investors via its quarterly distributions. The performance of the Fund is compared against the returns of the NZX 90 Day Bank Bill Index +2.5%. Solid revaluation gains have underpinned the performance in recent years.

To 31 December 2018

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Inception Date 01/03/2001



The Fund returned -7.8% in the December quarter, underperforming the benchmark return of -5.5%. The 2018 calendar year return was 3.0%, compared to the benchmark’s 5.2%.

The quarter marked a significant change in market sentiment as concerns about global growth, trade wars, Brexit uncertainty and tighter US financial conditions led to higher volatility and a sell-off in global equity markets.

The NZ market outperformed global equities with its skew to defensive utilities, telco and infrastructure and property sectors. Growth stocks underperformed as premium valuations fell and risk appetite faded. In many cases share prices declined despite solid earnings reports.

NZ companies on balance provided negative surprises in the period. Z Energy, Heartland Group and Fletcher Building suffered share price falls of 20-30%. However Fletcher Building announced the sale of its Formica business and signalled the restoration of dividends in 2019.

The Australian banking sector remained under pressure from the Royal Commission, higher capital requirements and a slower housing market. The NZ listed retirement village sector weakened due to flat Auckland house prices.

The quarter saw three takeover announcements, with bids for TradeMe, Restaurant Brands and Methven. Steel & Tube fended off an indicative offer from Fletcher Building.

The portfolio benefited from underweighting underperformers Ryman Healthcare, Z Energy and Fisher & Paykel Healthcare, while investments in Mainfreight, Volpara and Pacific Edge boosted returns. Weak returns from GTN, Lend Lease, Syrah and Gentrack detracted, as did an underweight position in takeover target Trade Me.

Key changes to the portfolio over the quarter included exiting National Australia Bank and Janus Henderson, and reducing investments in Lend Lease and GTN. Restaurant Brands was partly sold into the corporate bid. Wealth management platforms Hub24 and Link were introduced into the portfolio, and investments in Mercury, Fletcher Building, Precinct, a2 and Kiwi Property increased.

To 31 December 2018

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Inception Date 01/12/2002


The Fund returned -13.5% in the December quarter (benchmark -13.9%) to give a calendar year return of -4.3% (benchmark -4.8%). In local currency terms, the US and Japanese markets fell 14% and 17% respectively, with other major markets retracing over 10%. The NZ Dollar appreciated slightly in the quarter, offering no offsetting benefit for investors.

The mild recovery in markets in November proved to be a false dawn after large price falls in October. The three months were very volatile as sentiment abruptly turned negative amid heightened investor concerns about global growth, trade wars, Brexit uncertainty and tighter US financial conditions.

Markets remain supported by positive increases in company earnings, generally easy monetary conditions, and (in the US) strong consumer confidence. However these positive factors are moderating. 

While there is evidence of more subdued growth in global economic activity and corporate profits, the investment environment continues to be supportive. The valuation of growth assets is more attractive now after the fall in prices and a decline in long-term interest rates. We expect markets to generate solid returns in 2019, although geopolitical risks – trade wars, Brexit and China’s economy – and less accommodating monetary policy settings point to more frequent episodes of volatility. 

The Fund invests in an indexed product that excludes companies involved in the manufacture of tobacco, controversial weapons or nuclear weapons. Relative to the MSCI World ex-Australia Index, the Fund also targets a 20% improvement in the ESG score as well as a 50% reduction in current and potential carbon emissions. The Fund’s foreign exchange exposures are 50% hedged to NZ dollars.

To 31 December 2018

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Inception Date 01/12/2005


The Fund returned 1.3% in the December quarter (benchmark 1.5%) to give a 4.7% return for calendar 2018 (benchmark 4.6%).

In line with the trend offshore, long-term yields in the New Zealand market declined about 0.25% over the three months, generating good capital gains. The yield on the 10-year Government Stock (2029) maturity closed the year at 2.37%, 0.35% lower than 12 months earlier.

The rally in the quarter was prompted by the large fall in global share markets and an increase in risk aversion as concerns about global growth changed investor sentiment.


Short-term rates were unchanged in the quarter. The Reserve Bank has now left the Official Cash Rate unchanged at 1.75% since November 2016, and furthermore expects to keep it at this level into 2020.

Economic indicators such as retail sales, house prices and business confidence suggest some moderation of New Zealand’s GDP growth rate. Underlying inflation appears well contained despite a strong labour market and the fall in the NZ dollar though 2018.

We view current long-term yields as unattractive, noting the thin margin over the 2.0% inflation rate target and the significant negative yield premium versus the US market.

We are maintaining a cautious stance with a portfolio duration target around a year shorter than benchmark, expecting long-term interest rates to rise in the coming year.

The Fund’s strategy continues to prioritise the level and stability of distributed income.

To 31 December 2018

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Inception Date 01/09/2005


The Fund returned 2.2% for the December quarter (benchmark 2.3%), giving a calendar year return of 2.4% (2.7%).

Long-term sovereign bond yields fell significantly over the quarter, more than reversing their increases in the September quarter, resulting in some strong capital gains. 10-year yields declined by 0.38% in the US, 0.12% in Japan, 0.23% in Germany and 0.29% in the UK.  

The rally in the quarter was prompted by the large fall in global share markets and an increase in risk aversion as concerns about global growth changed investor sentiment. 

In line with market expectations, the US Federal Reserve lifted the Fed Funds rate by a further 0.25% in December to 2.25-2.50%, the fourth hike of 2018. The Fed’s “dot plot” suggests two further rate increases in the coming year.  

After the recent rally, despite inflation remaining generally well controlled, it is difficult to see value in global bond markets at current yields. The gradual reversal of quantitative easing in the US and Germany and the funding of a US budget deficit of almost US$1 trillion is expected to put upward pressure on long-term interest rates. We expect modest returns from the Fund until interest rates move higher.

The Fund invests in an index fund that invests only in sovereign securities. This product tracks the FTSE World Government Bond Index hedged to Australian dollars. A further hedge is applied to hedge the Fund’s Australian dollar exposure to NZ dollars. Returns tend to lag the benchmark slightly as the cost of hedging is excluded from the benchmark return calculation.

To 31 December 2018

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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.