Strategic Asset Allocation -

 Balanced Fund

Strategic Asset Allocation Change 


In October 2016, Trust Management reviewed the strategic asset allocation of the Balanced Fund in light of revisions to the long-term financial market assumptions of each asset class. The review focused on the Fund’s allocation to International Fixed Interest, which had become a much less attractive asset class with a lower expected return and higher risk profile than assumed previously. 


The outcome of the review was that several changes were made to the target weightings. Table 1 shows the Fund’s target asset allocation before and after the change.

Table 1: Balanced Fund Strategic Asset Allocation

  1. The key difference between the original and revised strategy was the 10% reduction in the International Fixed Interest allocation. This 10% was reallocated to NZ Bonds (+7%) and Australasian Shares (+3%).

  2. The difference in the risk characteristics of the old and revised strategy was insignificant.

  3. The revised strategic asset allocation was recommended to, and accepted by, the Trust Management Board on 27 October 2016. The change in asset allocation was fully implemented at the end of December 2016. 




For the 12 months (calendar 2017) since the strategic asset allocation change was implemented, the benchmark returns for each asset class have been as shown in Table 2.

Table 2: Benchmark Returns for Calendar 2017

The strategic asset allocation change - switching from International Fixed Interest (-10%) to NZ Fixed Interest (+7%) and Australasian Shares (+3%) - has to date benefited investors given that in 2017:

  • International Fixed Interest underperformed all other asset classes (except Cash)

  • NZ Fixed Interest outperformed International Fixed Interest

  • Australasian Shares (S&P/NZX Portfolio Index) returned 23.7% 

Furthermore, the return of Australasian Shares was buoyed by the significant outperformance of Harbour Asset Management, with the Sustainable Australasian Share Fund generating a gross return of 32.8% for the year.


We can quantify the benefit of the change by comparing the returns of the old and revised/new strategies, using the weighted average benchmark returns shown in Table 3.

Table 3: Benchmark Returns for Calendar 2017


We conclude that, for the year since the revised strategy was implemented, the change has benefited investors, boosting the Fund’s return by 0.8%. This has been achieved with no significant change in risk profile.


We reaffirm that the current strategy is consistent with the investment objectives of the Fund.      


John Williams

Investment Manager

09 550 4046





Grant Hope

Chief Executive Officer

09 550 4044





Shane Coward

General Manager

09 550 4045

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