Balanced Fund Asset Allocation Change
The Balanced Fund is a well-diversified portfolio which provides consistent returns in most market conditions. It invests in five sector funds, maintaining a moderate risk profile with a strategic asset allocation split quite evenly across Fixed Interest, Shares and 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 asset allocation of the Fund was changed on 22 December 2016. The target weighting to International Bonds was reduced to 10% (previously was 20%) offset by higher allocations to NZ Bonds (25% up from 18%) and Australasian Shares (15% up from 12%).
The change in asset allocation was prompted by the significant fall in global interest rates. International Bonds are currently offering lower yields and have a higher risk profile than at any time over the last 20 years.
The fall in interest rates has led us to review the fundamental reasons for including International Bonds in a balanced investment portfolio. Indeed, one may wonder at the justification for maintaining any allocation to International Bonds at all.
However, our research concludes that International Bonds are still expected to play an important risk-reduction role in a balanced portfolio. That said, as a source of income, International Bonds' relative appeal versus Shares and Property had reduced.
On balance we judged that a superior return/risk outcome for the portfolio and a boost to the Fund’s income would likely be achieved by substituting half of the International Bonds allocation in favour of NZ Bonds (which offer a higher yield and a lower probability of large capital loss) and Australasian Shares.
The Fund’s new strategic target asset allocation is shown below:
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