OneAnswer KiwiSaver Scheme New Zealand Fixed Interest Fund

Fund report as at 31 December 2023

How has the fund performed?

Performance as at 31 December 2023

Rate

3 months

5.94%

1 year

6.07%

3 years (p.a.)

-2.38%

5 years (p.a.)

0.78%

10 years (p.a.)

2.93%

Since launch (p.a.)

3.87%


Performance is after the annual fund charge and before tax. Legal information and disclaimers.


What happened this quarter (three months to 31 December 2023)

  • During the final quarter of the year, the local bond market largely took its lead from overseas bond markets. The strong close came as the likelihood grew that central banks were done with raising interest rates, with interest rate markets now suggesting many central banks would in fact be cutting rates in 2024.
  • New Zealand bonds delivered strong gains over the quarter, with yields dropping to multi-month lows. Despite this, at its November meeting, the Reserve Bank of New Zealand (RBNZ) raised the neutral rate (the rate at which it expects the Official Cash Rate to peak) to 5.69%. However, these expectations were tempered by news the domestic economy shrank in the third quarter – well below forecasts, including those of the RBNZ. 
  • Duration strategy was generally positive over the quarter, with the fund – for the most part – positioned long on the view that bond yields would decline after a strong run over the past couple of years. Pressure on domestic bond yields, especially during the early stages of the quarter, was driven by offshore market events, including softer US inflation data and signs that labour markets are slowing.
  • In New Zealand, initial economic data (‘sticky inflation’) and a hawkish RBNZ initially pushed bond yields higher, which allowed us to add or re-enter our long position. This proved beneficial, especially as New Zealand economic data towards the end of the quarter began to soften – notably GDP (Gross Domestic Product), which showed the domestic economy shrank by 0.3% in the three months to September 2023.
  • In December, the Treasury released its Half Year Economic and Fiscal Update (HYEFU), which showed there wasn’t any improvement in the fiscal accounts. In fact, given Treasury finalised the numbers before the release of the weaker-than-expected Q3 GDP figures, it’s likely the books are in weaker shape than forecasted.
  • It was a relatively busy period for fund activity, which included deals with Coles (A$12m), National Australia Bank (A$6m) and Auckland Airport (NZ$2.5m). Participation was largely based on the strong credit profiles and attractive pricing.
  • The fund continued to favour high-quality corporate bonds, which offer slightly more income than government bonds, but do not compromise the fund’s focus on quality. Given the strong performance of government bond markets – both locally and abroad – it’s no surprise that government bonds outperformed corporate bonds over the quarter.

What does the fund invest in?

The fund invests mainly in New Zealand fixed interest assets. Investments may include:

  • Fixed interest assets in New Zealand dollars, or issued by New Zealand located or incorporated entities and hedged back to New Zealand dollars
  • Cash and cash equivalents.

This chart show the mix of assets that the fund generally intends to invest in – 100% fixed interest.



See the fund's actual investment mix on page 3 of the fund update.


Important information

ANZ New Zealand Investments Limited ('ANZ Investments') is the issuer and manager of the OneAnswer KiwiSaver Scheme. Important information is available under terms and conditions. Download the guide and product disclosure statement.