What happened this quarter (3 months to 30 June 2020)
During the second quarter, cash, which acts as a defensive asset, underperformed and detracted from performance.
Globally, government bond prices traded in relatively tight ranges as accommodative central bank policy kept interest rates near multi-year lows.
In New Zealand, the Reserve Bank of New Zealand (RBNZ) said at its 13 May meeting it would nearly double its quantitative easing programme, announcing it would buy up to another $27 billion in bonds over the next 12 months. The RBNZ added that it expects the Official Cash Rate to remain at 0.25% until early 2021.
In the US, the Federal Reserve left interest rates unchanged. However, the Fed said it would begin buying corporate bonds directly from companies to alleviate cash flow and other financing concerns.
While interest rates remain historically low, cash tends to outperform in periods of market uncertainty, acting as a defensive asset for a portfolio.
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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.