What happened this quarter (3 months to 31 March 2020)
During the first quarter of the year, government bond prices around the world rose as central banks aggressively cut interest rates to soften the economic blow from the COVID-19 (coronavirus) outbreak.
In New Zealand, the Reserve Bank of New Zealand cut the Official Cash Rate by 75 basis points, amid growing concern for the local economy on the back of the coronavirus outbreak. In its statement, the central bank said, “the slowdown in the global economy would act as a serious headwind for the New Zealand economy”.
Furthermore, the RBNZ announced in March it would begin quantitative easing, buying up to $30 billion in government bonds.
Despite the decline in interest rates, cash tends to outperform in periods of market uncertainty, acting as a defensive asset for a portfolio.
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How the fund has performed against its objective
The fund aims to achieve (after the fund charge and before tax) over the long term a yearly return in line with the S&P/NZX Bank Bills 90 Day Index.
What does the fund invest in?
The fund invests mainly in cash and cash equivalents. These may include investments issued by New Zealand-registered banks, the New Zealand Government, corporations or local authorities, or non-New Zealand governments.
This chart shows the mix of assets that the fund generally intends to invest in.
See the fund's actual investment mix on page 3 of the Fund update.