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  1. #41
    On the doghouse
    Join Date
    Jun 2004
    , , New Zealand.

    Default Investing 'Trans tasman'.

    Quote Originally Posted by Snoopy View Post
    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. '' and '' 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'. 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.


    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 quiet a sweet spot for investing in 2022.
    Last edited by Snoopy; 16-05-2022 at 10:51 AM.
    Investment Portfolio Truth: "Betting against the ACC is an accident waiting to happen."

  2. #42
    On the doghouse
    Join Date
    Jun 2004
    , , New Zealand.

    Default Investing 'Internationally'

    Quote Originally Posted by Snoopy View Post
    So what do I make of all this? That's next.
    'Internationally' in the New Zealand investment context means outside of Australia and New Zealand. If we look through all of the funds offered by our protagonists, there are just three that fit into this category. Let's see where they are invested.

    Holdings @ 31-03-2022 Milford Global Equity KiwiWealth Growth Fund Fisher International Growth Fund
    MSFT.NASDAQ (4.53%) AAPL.NASDAQ (4.6%) FB.NASDAQ (8.98%)
    GOOGL.NASDAQ (4.34%) MSFT.NASDAQ (4.4%) GOOGL.NASDAQ (7.28%)
    Cash NZD (4.03%) GOOGL.NASDAQ (3.1%) PYPL.NASDAQ (7.20%)
    AAPL.NASDAQ (3.40%) AMZN.NASDAQ (2.7%) BABA.NASDAQ (5.80%)
    MA.NYSE (3.13%) UNH.NYSE (1.4%) AMZN.NASDAQ (5.78%)
    COST.NASDAQ (3.12%) ASML.AMS (1.3%) Tencent.HKG (5.44%)
    ICE.NYSE (2.69%) TSLA.NASDAQ (1.2%) ICLR.NASDAQ (5.09%)
    EOG.NYSE (2.68%) V.NYSE (1.2%) FND.NYSE (4.57%)
    AON.NYSE (2.48%) MC.EPA (1.1%) BSX.NYSE (4.55%)
    ACN.NYSE (2.26%) Two Trees Hedge Fund (1.0%) SBNY.NASDAQ (4.37%)

    Those 'stock tickers' I have listed above may not mean much to our NZ based readers. So for clarity I will use the names of the 'invested in companies' in my round up of the three fund protagonists investment results and philosophies below.

    KiwiWealth has had the best one year 'market shock' performance. So how was it they manged to 'calm the bear'? The NASDAQ fell by 10.2% over the first three months of this year. By contrast, the four largest KiwiWealth holdings -also part of the NASDAQ- fell by -4.1 % (Apple), -7.9% (Microsoft) , -4.1% (Alphabet) and -4.4% (Amazon). Absent from the top ten KiwiWealth holdings was Meta (Facebook) (-34.3%). KiwiWealth were also relatively underweight holding the NASDAQ number 4 ranked company Tesla (-10.2%).

    By contrast, Fisher funds were relatively overweight for the quarter in Meta (-34.3%) and Paypal (-40.7%). For the full year overweight Alibaba was 50% down too. It is clear that the Fisher NASDAQ investments, over the last year, have released a lot more 'hot air' than the KiwiWealth ones. The Fisher International Growth Fund has had what can only be described as a 'disastrous investment performance' over one year: 16.7% in total of fund value was lost. Despite this, the five year performance of the Fisher International Fund was quite acceptable, or even 'good' (+11.3% per year, compounding for five years).

    Other significant KiwiWealth investments over the first three months of the year like United Health +1.6% and Visa (no change) helped steady the KiwiWealth ship.

    There is a different class of asset called 'Hedge Funds' that KiwiWealth invests in. These, like Two Tree Systematic Global Macro Fund, are targetting superior returns uncorrelated to traditional asset classes, and can help smooth returns. The other two comparative international funds have not declared any hedge fund assets.

    Apple and Microsoft make up around 22% of the NASDAQ top 100 index. From that, you might argue that Fishers are showing more 'independent thinking' (check out Fisher's lack of a position in these two companies in the list above), whereas KiwiWealth and Milford are more in the 'me too' investor box. KiwiWealth has reduced their position in Meta over the last few months while Fishers have increased their holding. Short term KiwiWealth are looking smarter. But Fisher claim a trend of more video content on Facebook will increase time spent on the platform and advertising revenue in the future.

    KiwiWealth has selected 'United Health', which is the top non pharmaceutical healthcare company on the NYSE by capitalisation. Likewise KiwiWealth's Visa investment is the top NYSE fintech listing. My impression is that KiwiWealth's portfolio has more of an 'index look'. But it also has the lowest base fee structure, complete with no return eroding 'bonus fees'.

    Milford are unusual in declaring a large (4.03%) cash holding. Normally I would mark a fund down for that. If I want to keep a bit of cash on hand I can do that myself! I don't need a fund manager to do it for me. However, cash also represents opportunity. In a turbulent market, I am pleased to see that Milford have some cash on hand to take advantage of investment opportunities as undoubtedly will arise. I note that Milford favours 'Mastercard' as their number one fintech investment, ahead of the more well known and larger 'Visa'. Milford also have a share of 'Intercontinental Exchange' (no. 142 on the NYSE), which owns the 'New York Stock Exchange' itself! Milford's other high conviction positions include low cost retailing (Costco), Oil exploration (EOG Resources), Accenture (Infotech) and AON (Insurance). These share selection themes are consistent with a rising interest rate, rising commodity price, high tech economy. My impression is that Milford are not trying to do anything radical with their share selections. But they are trying to pick out 'best in class' operators, to colour a quite conventional share selection picture.

    Decision Time I am going for the KiwiWealth growth fund as my international fund manager pick for the following reasons.

    1/ They offer a chance to acquire some big NASDAQ names at a somewhat beaten down price.
    2/ They hold some hedged investments which they are using to damp down the NASDAQ volatility.
    3/ They have the lowest fees by some measure (around 30% less than the others as a minimum).
    4/ KiwiWealth have just been gifted a large lump of default Kiwisaver cash. That should give them the scale to keep running a relatively low cost operation.
    5/ This is the only growth fund in shares that KiwiWealth run. If they stuff it up the whole KiwiWealth operation will go in the punishment bin. They did this before in 2017. But since you learn more from your mistakes than your successes I am picking that KiwiWealth has learned not to make those same mistakes again.

    I find myself agreeing with the Fisher philosophy of buying good companies and hanging on to them. But I have that sinking feeling that Fishers may have paid too much for their 'good ideas' in their international investment fund. It would be a useful diversification to add Fishers as a complimentary international investment manager. But my gut feeling is to wait for a year to see what if anything Fishers learn from their heavy FY2022 investment write-downs. And that just leaves Milford.

    Milford looks like an index+ high fee manager, that nevertheless has delivered the worst (albeit still adequate 9.80%) five year fund performance of all funds in all market classes looked at. Milford appear to deliver their best results closer to home. Maybe that fine edge of 'Brian Gaynor magic' has departed this fund with Brian's own departure for 'other worlds' yesterday? I am leaving the Milford 'Global Equity Fund' outside of my recommendations.

    Last edited by Snoopy; 17-05-2022 at 08:07 PM.
    Investment Portfolio Truth: "Betting against the ACC is an accident waiting to happen."

  3. #43
    On the doghouse
    Join Date
    Jun 2004
    , , New Zealand.


    Quote Originally Posted by Snoopy View Post
    The revenue item 'Customer and Client Fees'......

    If we look in Kiwi Wealth Annual Report 2021 on p2 this figure is $51.908m. If we look at the Kiwi Wealth Managed Funds Annual Report 2021 on page 3, the listed management expenses paid include $117.546m for the Conservative Fund, $257.838m for the Balanced Fund and $218.214m. Adding those three totals up, I get $593.598m, which is more than ten times the figure in the Kiwi Wealth books. Even with the balance date mismatch, something is not adding up here.

    A thought occurred to me that maybe the Kiwi Wealth accounts referred to only the much smaller managed fund side of the business, and the Kiwisaver fees were accounted for elsewhere in a separate company structure. However, if I look under note 4 in the Kiwi Wealth accounts, that shows two separate management fee entries for 'KS' (Kiwisaver) and 'MF' (Managed Fund) accounts. So it appears this is not the explanation.

    Anyone else got a theory to explain this 10:1 fee mismatch?
    No-one else has bitten to answer this question, so I have come up with a new theory of my own.

    The page below:

    tells us of the KiwiWealth fund structures. Ordinary plebs, like me, have only the choice of investing in the KiwiWealth 'Growth Fund'. But if you are a 'wholesale investor', then you have a choice of 'Global Thematic' (Total funds under management $1,992m), 'Global Quantitative' (Tfum $1,502m) and 'Core Global' (Tfum $986m). That adds to a total of $4,480m.

    Go back to the Kiwi Wealth fund documentation:

    On page 5, I add up the net assets attributable to unit-holders as follows:


    If $138m represents the 'client' portfolio and $4,480m represents the 'customer' portfolio, that represents a huge mismatch in relative size of assets under management.

    If you take the 'customer and client ' fees from the income statement in the reference below

    That is $51.908m. Spread across all funds under management, this represents a management fee rate of:

    $51.908m / ($138m + $4,480m) = 1.12%

    I would suggest that wholesale investors will pay a lesser percentage management fee than retail investors. So the information on the wholesale funds which I can combine with information on the retail funds makes the management fees declared as earned by KiwiWealth ballpark believable.

    Last edited by Snoopy; 17-05-2022 at 01:43 PM.
    Investment Portfolio Truth: "Betting against the ACC is an accident waiting to happen."


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