NZ Fund Managers

[Snoopy]

So what do I make of all this? That's next.

Is there any reason why the best fund performances seem to come from those targetting the Australian market? Let's do a quick round up of the largest positions of our protagonists that invest in Australia., and see where they are investing.

	Milford Trans Tasman Equity	Harbour Australasian Equity Fund	Harbour Australasian Equity Focus Fund	Fisher Australian Growth Fund
	BHP.ASX (5.62%)	MFT (9.95%)	MFT (10.2%)	CSL.ASX (9.52%)
	FPH (5.48%)	FPH (8.42%)	MQG.ASX (9.06%)	WTC.ASX (6.79%)
	CBA.ASX (4.70%)	EBO (7.64%)	EBO (7.59%)	CAR.ASX (6.31%)
	CSL.ASX (4.45%)	CEN (5.33%)	CSL.ASX (7.53%)	SEK.ASX (5.12%)
	IFT (4.35%)	MEL (4.71%)	BHP.ASX (7.39%)	CBA.ASX (4.84%)
	MFT (3.50%)	SUM (4.53%)	SUM (6.68%)	NXT.ASX (4.58%)
	CEN (3.44%)	PEB (4.05%)	PEB (3.91%)	MQG.ASX (4.40%)
	EBO (3.40%)	IFT (3.87%)	XRO.ASX (3.67%)	BXB.ASX (4.21%)
	NAB (3.33%)	CSL.ASX (3.81%)	GHG.ASX (3.58%)	AUB.ASX (4.04%)
	AIA (2.70%)	AIA (3.46%)	VSL.ASX (3.31%)	RMD.ASX (4.06%)

All of the above funds have had very respectable 5 year returns (post 33). Looking at the top holdings you might be forgiven for thinking that the 'Harbour Australasian Equity Fund', was really an NZ fund with one or two token Australian investments. But the 31-03-2022 Fund summary sheet says that 29.3% of all holdings are on the ASX.

Best performing fund over both 1 and 5 year periods was the 'Harbour Australasian Equity Focus Fund'. I observe that they are the only fund to have a significant holding in Macquarie Bank and BHP over the five year period, over which the MQG and BHP share price doubled. Both have continued to hold their value in the current rising interest rate and rising commodity market, where banks and commodity miners generally do well. Their largest holding back in 31-03-2020 was A2 Milk, making up 14% of the fund's value. By 31-03-2021 this holding had sunk from 13.43% to 5.57% of the funds value as the share price sank from $17 to $9 over the same period. This indicates a net reduction of one quarter of the fund's position in A2, over and above 'index shrinkage'. So some profit taking was likely booked as the outlook of the A2 milk company turned sour.

At the bottom of the larger holdings list in the 'Harbour Australasian Equity Focus Fund' sits Vulcan Steel, which was a very successful float from six months ago (+10% over the ensuing period to now).

Another 'two bagger' over five years has been Australian drug maker CSL, in which the 'Harbour Australasian Equity Focus Fund' had a 7.53% stake at the 30-03-2022 reporting date, verses just 3.81% for the 'less focussed' 'Harbour Australasian Equity Fund'. The 'Harbour Equity Focus Fund' is also by far the smallest fund here at just $35m in size, only one eighth the size the more broadly invested 'Harbour Australasian Equity Fund'. Being so relatively small and so nimble for an investment fund is an asset.

Milford Asset management are the second best performing fund of our quadrio. At the end of March 2020, A2 milk was the funds top holding. One year on and it fell outside the top ten, minimising the A2 share price carnage. In the year to 30-03-2020, an investment in Xero was disclosed. Two years later that investment was gone at what looks like a good profit. This is active investing at its best. The Milford portfolio was cushioned, of late, from rising interest rates by having a couple of decent holdings in Australian banks, and also BHP to take advantage of commodity price hikes. I would like to say this was pre-emptive positioning. But in fact these resource and bank holdings had been in place for some years. Considering this fund is more than three times the size of the next largest fund under consideration, the ability to switch portfolio positions , and overall fund performance is very creditable. It has a slightly lower base fee than the other funds too, which always helps. There is no 'split' given on how much of the fund overall is invested in the NZX or the ASX.

Nevertheless if you are looking for a pure 'Australian' investment, the only choice here is the 'Fisher Australian Growth Fund'. Names on the top ten holding list will be a bit less familiar to kiwis. CSL is Australia's largest drug manufacturer. Further down the list there are a couple of familiar banks (Commonwealth & MacQuarie). All good holds for present times.

Next we have a series of leading tech businesses, with the extraordinary connecting factor that they all make a profit! 'Wisetech' is a software for supply chain businesses worldwide. 'Carsales.com.au' and 'seek.com.au' are, respectively, leading web based motor vehicle and job seeking website based businesses. NextDC is an Australian data centre operator.

To finish off the top ten, we have Brambles as the Aussie equivalent of Mainfreight. AUB is an insurance broker and underwriting business. Resmed is the principal Australian competitor to our own Fisher & Paykel healthcare.

I would like to say this Fisher fund has repositioned themselves for the new business environment going forwards. But looking at the change in holdings year to year, the addition of NextDC apart, all the right building blocks were already in place. Well done Fisher Funds management!

So quite a high tech modern look to the 'Fisher Australian Growth Fund' then. And CSL holding apart, very different to the others in terms of fund constituents.

Decision time Which of the above four funds to choose? I have to go with the top performer in both the long term (5 year) and agility (1 year) contest. And that is the 'Harbour Australasian Equity Focus Fund'. Yet that fund is closed to new investors :-(. But if I wanted to diversify my trans-tasman portfolio adding either the Milford Trans Tasman Equity Fund or the Fisher Australian Growth fund would be good options. And both have complimentary investments to my first choice.

SNOOPY

P.S. What about the question I posed right at the beginning at the start of this post? Australia looks to be the place for profitable banks, in demand and quality resources and mature and profitable tech. That adds up to quite a sweet spot for investing in 2022.