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  1. #121
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    Default Investing 'Trans tasman'. (2024 perspective)

    Quote Originally Posted by Snoopy View Post
    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%) GMG.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.

    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.
    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 Barramundi
    FPH (5.94%) FPH (11.4%) IFT (7.76%) CSL.ASX (10.24%) CSL.ASX (10.4%)
    IFT (5.26%) AIA (8.28%) SUM (7.36%) WTC.ASX (7.66%) WTC.ASX (8.0%)
    CSL.ASX (4.33%) IFT (7.65%) MFT (7.35%) CAR.ASX (5.09%) CAR.ASX (5.2%)
    BHP.ASX (3.97%) MFT (7.34%) CSL.ASX (7.32%) XRO.ASX (5.04%) XRO.ASX (5.0%)
    SPK (3.43%) CEN (6.12%) GMG.ASX (5.86%) RMD.ASX (4.85%) RMD.ASX (4.9%)
    AIA (3.39%) ATM (4.82%) AIA (5.80%) CBA.ASX (4.82%) MQG.ASX (4.9%)
    CEN (3.27%) SUM (4.81%) XRO.ASX (5.47%) MQG.ASX (4.79%) AUB.ASX (4.8%)
    XRO.ASX (3.24%) MEL (6.95%) MQG.ASX (4.74%) AUB.ASX (4.69%) CBA.ASX (4.7%)
    ANZ (2.88%) CSL.ASX (3.78%) VHT.ASX (4.45%) SEK.ASX (4.25%) SEK.ASX (4.3%)
    MEL (2.59%) SPK (3.32%) RYM (3.87%) BXB.ASX (4.05%) BXB.ASX (4.1%)
    Total 38.3% 64.5% 60.0% 55.5% 56.3%

    The above four funds (note: I have also included Barramundi which is the NZX listed version of the 'Fisher Australasian Growth Fund', and virtually identical in composition) have had respectable but diverse returns ranging from 5.27% to 13.1% annually over five years (post 120). Looking at the 'top holdings list', 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 31-03-2024 'Fund Update' sheet says that 25.51% of all holdings by value are on the ASX.

    Best performing fund over both 1 and 5 year periods (post 120) was the 'Fisher Australian Fund'. They are the only one of our four protagonists to be purely invested in Australia. And of the four, it looks like their constituent portfolio has changed the least over the previous two years (see referred quoted post). This means they are managers of conviction in their investment choices. It is notable that the champion fund from two years ago, the 'Harbour Australasian Equity Focus Fund', now has a five year return only around half that of Fishers.

    Unlike Fishers, Harbour, with both of their highlighted funds, have changed their holdings significantly over the last two years. Previous number one holding, Mainfreight, has had their share price slide around 20% over the last two years. Mainfreight remains a globally respected freighting company with international reach. But it had been 'priced to perfection' which is a perpetual risk for investors in popular well managed companies. Similarly former top ten holding Ebos coming off a 20 year growth path and likewise 'priced to perfection' lost a major supply contract in Australia, which saw the share price come off by around 10% (and Harbour reduced their holding). Best in class retirement village operator Summerset had a similar fall in price over the period, as investors put extra scrutiny on the retirement industry operating model in a time of a flat to falling property market. Finally the near 4% proportional constituency holding in Pacific Edge Biotechnology has proved disastrous. These negative share price performances have weighed on the positive performances of other investments in the Harbour portfolios.

    The relative performance of the NZX50, (which includes dividends) fell around 10% over the two years 31-03-2022 to 31-03-2024. Compare that to the ASX200 which rose about 10% (not including dividends) over the same two years. Then we can see that the decision to have more of your investments on the ASX was, in itself, a decision that would likely improve returns, compared to those Australasian funds that retained a more solid NZX constituent fund entity presence.

    The price earnings ratios (PERs) and price to sales ratios (PSRs) quoted in the following paragraph are on the date of this post, market close on 31-01-2025.

    Meanwhile the only company to be held by all four protagonists in their 'top ten', Australian drug maker CSL (PER32, PSR5.69) , rose by around 10% over the comparative period. Turning our attention to Fishers, Wisetech Global (WTC, PER157, PSR40), a developer of cloud based solutions for the logistics industry, by 80%. and CAR group limited (PER61, PSR14), online classified advertising, 50%. It is clear that 'tech' has been driving the Fisher portfolio, and I include the acceleration of online banking via Fisher holdings in CBA (PER28,PSR9.8) and ANZ (PER14, PSR4.2) banks in that. However we should not assume such shareholdings can only go one way indefinitely. The performance of global job seeking portal 'Seek' limited (SEK, PER -137, PSR7.6) fell by around 20% in the period under consideration. The fall in the percentage constituency of Seek in the Harbour portfolio is consistent with this, indicating they have not sold any SEK shares. IOW, Fishers have retained their long term conviction holding SEK. Simplistically we could say that Fishers Australian Growth Fund has been riding the tech wave in Australia, very successfully.

    Milford Asset management, with the most widely diverse portfolio of the four, was, -once again-, the second best performing fund of our quadrio. Milford have made more adjustments over two years than the other active managers. They have significantly reduced their holding in BHP (not in the top ten holdings of the other funds) and CBA bank. CBA have for a long time been the most highly priced on the Australian banks. But with the hindsight of today, the CBA share price has rocketed by 50% since early 2024, and the end of this comparison period. That reduction in Milford's shareholding level would subsequently reflect negatively on Milford going forwards for the remainder of 2024. Taking the NZX50 index holdings as a base level, Milford have chosen to be underweight in A2 milk, AIA, and MFT (which I like) but also underweight in the big 3 gentailers CEN, MEL and MCY as well as SPK (which I don't like). Of course history has shown that holding an underweight position in Spark at the start of 2024 was actually a good idea. Meanwhile Xero has re-emerged as a top ten holding.

    Considering this Milford 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 remains very creditable. It has a slightly lower base fee than the other funds too (1.05% verses 1.45% at Fishers and 1.07% for Harbour), which always helps. Although we should note that Harbour are the only one of our three managers not to charge a performance fee. The target 'split' between NZX and ASX investments at Milford is 47.5% each. The actual split on the 31-03-2024 date of scrutiny is 42%/49% NZX/ASX

    Decision time Which of the above four funds to choose? In 2022, my preferred choice of the 'Harbour Australasian Equity Focus Fund' was closed to new investors (it has now reopened). I suggested both the Milford Trans Tasman Equity Fund or the Fisher Australian Growth fund would be good options. Particularly over the year to 31-03-2024, with the benefit of hindsight, those two have both proven to be inspired choices. However, much as I respect Robbie Urquhart as Fisher's Australian portfolio lead manager, I do recognise tech cannot go up at stellar rates forever. For this reason, and the fact that Milford has a more diverse portfolio and has shown to be agile in uncertain times, I am picking the 'Milford Trans Tasman Equity Fund' as the fund of the four to choose going forwards. I should add that if you did want to invest in Fisher's Australian Growth fund, you might prefer to invest in those same assets through Fisher's listed alternative Barramundi, which is currently trading at a 7% discount to net asset backing.

    For the Harbour Asset Management Australasian Equity fund, I don't like the overweight position in FPH and AIA (both excellent companies but very fully priced). For the Harbour Asset Management Australasian Equity Focus Fund, I don't like the overweight positions in Infratil (data centres have hyped up this company's valuation), Summerset (best in class operator, but in an industry with macro headwinds from stretched cashflow) and Mainfreight (excellent company, but very fully priced). So for me going forwards, the 'Milford Trans Tasman Equity Fund' is the top choice.

    SNOOPY
    Last edited by Snoopy; 03-02-2025 at 09:08 AM.
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  2. #122
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    If i was picking out of the Milford funds i'd go for the Dynamic Fund. There's generally no point for a NZ investor to buy Aussie large cap, as dividend payout is wasted on the NZ investor due to inability to use franking credits.

    After-tax comparisons for the top PIE rate would be useful for funds that have long track records. Tax efficiency adds up over time.

    Going outside NZ, you want genuine growth companies that reinvest into their business, rather than pay a lot out as cash.

  3. #123
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    Quote Originally Posted by Lego_Man View Post
    If i was picking out of the Milford funds i'd go for the Dynamic Fund.
    Hi Lego man. Thanks for your recommendation of the Milford Dynamic Fund. There are so many funds out there, that it would be a hopeless task trying to line everything up against each other. So I was looking for exposure to the ASX with this comparison, and got the recommendation of the four I looked at from a stockbroker I know. Ostensibly the 'Milford Dynamic Fund' also fits the bill. The December 2024 monthly report shows a 'neutral' target position of 90% Australian equity investment (with a bias towards small and mid cap) and 10% cash. But then, the graphical breakdown shows 65.05% Australian, 12.05% International and 10.95% New Zealand, with 12.31% in Cash. I don't really understand this, as I would not have thought you could 'accidentally' invest in NZ and International shares when their are not within your target investment brief. Perhaps they are dual listings with a presence on the ASX? Certainly Contact Energy CEN.NZX, the funds largest individual holding, fits that bill.

    Anyway it is all moot at the moment, because the Milford website advises that the 'Milford Dynamic Fund' is currently closed to new investors. Hopefully it will open up again at a future date?

    SNOOPY

    P.S. I had forgotten that I had looked at this fund nearly three years ago. https://www.sharetrader.co.nz/showth...l=1#post953757
    And I see it was closed back then to new investors! So it now looks as if it may never again open to new investors.
    Last edited by Snoopy; 03-02-2025 at 02:56 PM.
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  4. #124
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    Quote Originally Posted by Lego_Man View Post
    There's generally no point for a NZ investor to buy Aussie large cap, as dividend payout is wasted on the NZ investor due to inability to use franking credits.

    Going outside NZ, you want genuine growth companies that reinvest into their business, rather than pay a lot out as cash.
    The inability to be able to utilise tax credits from other countries when NZ tax domiciled investors invest overseas, is a long standing bug bear. I wouldn't say Aussie dividends are entirely 'wasted' though. There are still good dividends to be had for NZers investing in Oz, notwithstanding the fact that we end up paying a higher tax rate on those dividends, because the NZ government does not give us credit for tax deducted by the Australian government (the franking credits).

    You are right in that if earnings are retained within a business, that can be utilised to effectively grow that business, then that is a better way to get a 'tax efficient return' from you ASX investment from a New Zealand shareholder perspective. As unlike Aussies's investing in the ASX, we do not get charged capital gains tax on any capital profits we take out (unless the shares were bought with the intention of doing that).

    Large caps tend to pay higher dividends, simply because they tend to be more mature businesses that don't have the expansion plans that could utilise more retained earnings. But there are 'smaller caps' that pay good dividends as well. So I would not avoid investing in larger caps in Australia simply because they are large. Furthermore, from personal experience, although tax is a factor to be considered, making investment decisions largely based on tax concerns usually ends up delivering sub optimal investment returns. The most important factor is always the underlying investment. And if you have to pay a bit more tax to participate that right underlying investment, it is best just to 'wear it'.

    SNOOPY
    Last edited by Snoopy; 03-02-2025 at 11:20 AM.
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  5. #125
    Senior Member Lego_Man's Avatar
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    Quote Originally Posted by Snoopy View Post
    The inability to be able to utilise tax credits from other countries when NZ tax domiciled investors invest overseas, is a long standing bug bear. I wouldn't say Aussie dividends are entirely 'wasted' though. There are still good dividends to be had for NZers investing in Oz, notwithstanding the fact that we end up paying a higher tax rate on those dividends, because the NZ government does not give us credit for tax deducted by the Australian government (the franking credits).

    You are right in that if earnings are retained within a business, that can be utilised to effectively grow that business, then that is a better way to get a 'tax efficient return' from you ASX investment from a New Zealand shareholder perspective. As unlike Aussies's investing in the ASX, we do not get charged capital gains tax on any capital profits we take out (unless the shares were bought with the intention of doing that).

    Large caps tend to pay higher dividends, simply because they tend to be more mature businesses that don't have the expansion plans that could utilise more retained earnings. But there are 'smaller caps' that pay good dividends as well. So I would not avoid investing in larger caps in Australia simply because they are large. Furthermore, from personal experience, although tax is a factor to be considered, making investment decisions largely based on tax concerns usually ends up delivering sub optimal investment returns. The most important factor is always the underlying investment. And if you have to pay a bit more tax to participate that right underlying investment, it is best just to 'wear it'.

    SNOOPY
    Agree completely, but many investors ignore it completely to their detriment.

    MyFiduciary published the following guide comparing PIE fund investments versus direct for different jurisdictions - worth a read:

    https://www.myfiduciary.com/uploads/...digital-v2.pdf

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    Quote Originally Posted by Lego_Man View Post
    After-tax comparisons for the top PIE rate would be useful for funds that have long track records. Tax efficiency adds up over time.
    All the funds that I am reporting on are PIE entities for tax purposes. So as far as inter fund comparisons are concerned, all of the earnings figures I have presented are 'like with like'. The different funds have their own reporting protocols. Generally all report performance 'after fees', and some report 'after tax' as well. Of course all unit holders have to pay the fees. But not all unit holders are on the same PIE tax rate. So I guess the thinking is, if the returns were reported 'after tax', using the maximum PIE tax rate of 28%, then that would mislead investors who were below the 33% income tax band as to their tax obligations. For NZ domiciled and operated funds, there is no capital gains tax on Australian or New Zealand investments held within those PIE funds. Any tax obligation comes from the dividends earned from the entities held within those funds. This is what is taxed at a maximum PIE rate of 28%.

    Any 'after tax return' quoted 'percentage return' you would get is the minimum return you would have got as a unit holder. Those who qualify for a lower PIE rate would get more. But for the purposes of comparing returns between funds, the relative return you would get is not influenced by whatever PIE tax rate you qualify for. IOW the comparisons in my tables should be equally valid, no matter what PIE tax rate you are on.

    However, if you are in a higher tax bracket and want to mimic these funds with your own investment capital, then that means your self constructed portfolio could incur a tax on dividend income of up to 39%. Compare that with a maximum of 28% you would pay, regardless of your income, if you put that same money into an equivalent PIE fund. And of course, if you elect to reinvest all returns from your PIE fund back into that same fund, then the tax money difference you save from being a PIE fund investor, compounds each year.

    SNOOPY
    Last edited by Snoopy; 03-02-2025 at 01:20 PM.
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  7. #127
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    Default Webinar Presentations from our NZ Fund managers (2024 perspective)

    Quote Originally Posted by Snoopy View Post
    My notes on this webinar are below

    https://www.youtube.com/watch?v=QWtLt6sIodE
    I have been casting around for some more recent NZ fund manager video content. Fisher Funds used to be good at this, with webinars giving a flavour of how the Fisher investment team thinks. The person who co-ordinated such seminars, Cath Lomax, Chief Client Officer, has left the employment of Fishers, to become Chief People and Strategy Officer at Southern Cross. Sadly, whoever has taken over her mantle has chosen not to continue with these on-line seminars (none at all were run in 2024). I believe they were useful, and gave investors real insight. According to 'youtube', there have only ever been 566 'watches' of the video that I have referenced above. Although I believe that number may not include the number of times that 'said video' was viewed directly through the Fisher's website, rather than via youtube. But given you don't even have to be a Fishers customer to benefit from some of the wisdom in those webcasts, it still seems like less eyeballs than such a webinar deserved.

    Over 2024, the 'fisher channel' video content seems to have regressed to a monthly three minute interview on Breakfast TV at TVNZ.
    https://www.youtube.com/@fisherfunds/videos

    I watched the latest December 2024 interview with Chief Investment Officer Ashley Gardyne. Now I know Ashley is a competent analyst, who knows his stuff. But this interview struck me as a featherweight stocking filler for Christmas eve. He basically said you should decouple your investment strategies from political fears, how great it was that so many investors left their investment decision making to Fishers, and that was about it. I won't be wasting my time replaying any more of these TVNZ three minute Fisher interviews, that is for sure.

    Meanwhile Milford have teamed up with NewstalkZB host Ryan Bridge for a series of 10-15 minutes talks entitled 'Bridge talks Business with Milford'.
    https://www.youtube.com/@milfordassetchannel

    I have listened to a couple. When composing this post, I thought those were three minute interviews as well. I suppose that is because the worthwhile cotents in these interviews condenses to about three minutes? These videos are no recasts of television interviews, and so far are attracting between 50 and 150 views each. NewstalkZB is by definition a news organisation. So it is understandable that these 'roughly weekly' Bridge broadcasts expand on what made the headlines 'this week'. But such information is actually not that useful to understanding how Milford works, which is really what long term fund investors need to know about.

    The alternative regular podcast by Milford called 'Month in a Minute' doesn't provide useful fund investment understanding either.

    Overall from a fund investors perspective, I would be more interested in finding out just what were the rules in a fund's strategy playbook, and how the particular fund managers were reacting to the market (including doing nothing where appropriate). in following their own strategies. I didn't get that from following any of these 2024 podcasts I have reviewed. Disappointing!

    Are there other NZ fund manager linked videopodcasts out there that I have missed?

    SNOOPY
    Last edited by Snoopy; 04-02-2025 at 01:11 PM.
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    Default Index Reference for NZX50 Portfolios: 30-09-2024

    NZX50 free float capitalisation (30-09-2024) NZX50 Top Ten relative percentage (30-09-2024) Smart S&P/NZX 50 ETF (30-09-2024)
    Fisher & Paykel Healthcare $20,368m 22.6% 16.24%
    Infratil $13,761m 15.2% 9.44%
    Auckland International Airport $12,563m 13.9% 8.86%
    Meridian Energy (1) $7,740m 8.6% 6.01%
    Mainfreight Limited $7,186m 8.0% 4.87%
    Ebos $7,036m 7.8% 4.57%
    Contact Energy $6,524m 7.2% 5.14%
    Spark $5,586m 6.2% 4.38%
    A2 Milk Company $4,959m 5.5% 3.99%
    Mercury Energy (1) $4,513m 5.0% 3.44%
    Total $90,286m 100% 66.94%

    Notes

    1/ Capitalisation reduced by 50% to allow for Government half ownership share.

    SNOOPY
    Last edited by Snoopy; 07-02-2025 at 08:29 AM.

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    Default NZX 'Index Plus' fund investing (30-09-2024 reference date)

    Listed below are the top ten contents of eight actively managed funds that target the NZ sharemarket. I am listing the top ten contents because that is the level of detail commonly disclosed in such funds. Each fund claims to be independently and actively managed. However, as you can see, overviewing the contents of each fund, there seems to be a certain amount of 'groupthink' in fund content.

    As a comparative benchmark, I have included the NZX10 contents, and their proportions on how they rank by market capitalisation in the NZX50. You would not expect an active fund with an Australasian share mandate (as many of these funds do), to rigidly follow the NZX50 weightings. Nevertheless it is a 'brave' (if that is the word) fund manager that ignores the constituents of the NZX10 and their constituent proportions. The summed proportion of the NZX50 by capitalisation made up from the NZX10 looks like 66.94%.

    NZX50 free float capitalisation (30-09-2024) NZX50 Top Ten relative percentage (30-09-2024) ANZ OneAnswer New Zealand Share Fund (30-09-2024) top ten Castle Point Trans Tasman Fund (30-09-2024) top ten
    Fisher & Paykel Healthcare $20,368m 16.24% 14.48% (-1.8%) 15.52% (-0.7%)
    Infratil $13,761m 9.44% 7.80% (-1.6%) 11.45% (+2.0%)
    Auckland International Airport $12,563m 8.86% 7.04% (-1.8%) 8.13% (-0.9%)
    Meridian Energy (1) $7,740m 6.01% 5.57% (-0.2%) 6.06% (0.0%)
    Mainfreight Limited $7,186m 4.87% 7.29% (+2.4%) 5.88% (+1.0%)
    Ebos $7,036m 4.57% 5.75% (+1.2%) 3.81% (+0.8%)
    Contact Energy $6,524m 5.14% 7.34% (+2.1%) 7.31% (+2.2%)
    Spark $5,586m 4.38% 4.03% (-0.4%) 3.66% (-0.7%)
    A2 Milk Company $4,959m 3.99% 3.86% (-0.1%) 3.10% (-0.9%)
    Mercury Energy (1) $4,513m 3.44% N/A% 3.45% (0.0%)%
    Summerset $3,402m N/A% 3.63% (N/A%) N/A%
    Ryman $2,956m N/A% N/A% N/A%
    Sky City $1,079m N/A% N/A% N/A%
    Chorus $3,784m N/A% N/A% N/A%
    Total Top Ten Held $90,286m 66.94% 63.2% 68.4%
    Annual Fund Fees N/A N/A 1.09% 1.07%

    NZX50 Top Ten relative percentage (30-09-2024) Harbour Australasian Equity Fund (30-09-2024) top ten Mercer Ethical Leaders NZ Share Fund (30-09-2024) top ten Mint New Zealand SRI Equity Fund (30-09-2024) top ten
    Fisher & Paykel Healthcare 16.24% 15.18% (-1.1%) 15.52% (-0.7%) 17.18% (+0.9%)
    Infratil 9.44% 8.53% (-0.9%) 8.53% (-0.9%) 13.99% (+4.6%)
    Auckland International Airport 8.86% 6.98% (-1.9%) 6.85% (-2.0%) 8.01% (-0.9%)
    Meridian Energy (1) 6.01% 3.42% (-2.6%) 3.67% (-2.3%) 8.05% (+2.0%)
    Mainfreight Limited 4.87% 7.60% (+2.7%) 7.63% (+2.8%) 7.04% (+2.2%)
    Ebos 4.57% 4.42% (-0.2%) 4.36% (-0.2%) 6.66% (+2.1%)
    Contact Energy 5.14% 5.57% (+0.4%) 5.25% (+0.1%) 8.41% (+3.3%)
    Spark 4.38% 2.91% (-1.5%) N/A% N/A%
    A2 Milk Company 3.99% 5.23% (+1.2%) 5.33% (+1.3%) 3.29% (-0.7%)
    Mercury Energy (1) 3.44% N/A% N/A% N/A%
    Summerset N/A% 4.85% (N/A%) 5.18% (N/A%) N/A%
    Ryman N/A% N/A% 2.95% (N/A%) N/A%
    Sky City N/A% N/A% N/A% N/A%
    Chorus N/A% N/A% N/A% N/A%
    Total Top Ten Held 66.94% 59.8% 57.1% 69.3%
    Annual Fund Fees N/A 1.10% 0.90% 0.95%



    NZX50 Top Ten relative percentage (30-09-2024) Nikko AM Core Equity Fund (30-09-2024) top ten Octagon NZ Equities Fund (30-09-2024) top ten QuayStreet New Zealand Equity Fund (30-09-2024) top ten
    Fisher & Paykel Healthcare 16.24% 15.53% (-0.7%) 12.34% (-3.9%) 16.4% (+0.2%)
    Infratil 9.44% 11.36% (+1.9%) 8.16% (-1.3%) 6.8% (-2.6%)
    Auckland International Airport 8.86% 9.29% (+0.4%) 7.56% (-1.3%) 6.7% (-2.2%)
    Meridian Energy (1) 6.01% 5.97% (0.0%) 4.10% (-1.9%) 6.3% (-0.3%)
    Mainfreight Limited 4.87% 4.87% (0.0%) 4.34% (-0.5%) 6.5% (+1.6%)
    Ebos 4.57% 4.65% (+0.1%) 3.39% (-1.2%) 6.3% (+1.7%)
    Contact Energy 5.14% 7.23% (+2.1%) 6.81% (+1.7%) 7.3% (+2.2%)
    Spark 4.38% 5.39% (+1.0%) 5.45% (+1.1%) 5.9% (+1.5%)
    A2 Milk Company 3.99% 4.49% (0.5%) 3.46% (-0.5%) N/A%
    Mercury Energy (1) 3.44% N/A% N/A% 4.7% (+1.3%)
    Summerset 4.24% 4.85% (N/A%) N/A% N/A%
    Ryman N/A% N/A% N/A% (N/A%) N/A%
    Sky City N/A% N/A% 3.84% (N/A%) N/A%
    Chorus N/A% N/A% N/A% 4.0% (N/A%)
    Total Top Ten Held 66.94% 68.8% 55.6% 62.2%
    Annual Fund Fees N/A 0.95% 1.17% 1.27%


    Notes

    1/ Reference capitalisation reduced by 50% to allow for Government half ownership share.
    2/ Share names in italics not part of NZX10

    ----------------------

    Here we have eight different fund managers, powered no doubt by some of the smartest minds in the funds management industry. Yet as an investor, if, for instance, you believe that Fisher and Paykel Healthcare, great company though it is, has become 'bid out of its fair value price band', then there is not a single one of those eight crack fund management teams that will indulge your thoughts. It seems the 'choice' offered by these eight 'independently' thinking active fund management teams is not as varied as some investors might hope!

    To get an inkling of where the cloak of 'groupthink' may not be all encompassing, for each top ten NZX holding, I have highlighted in bold the associated fund holding that deviates the most (either positively or negatively) from each top ten company's index representation. To use a particular example I have used before, if you want to minimise your investment in Fisher & Paykel Healthcare, then you should choose the Octagon fund (where the F&P constituent percentage is written in bold). Think Auckland Airport is over-rated? Go for the 'Quay Street NZ Equity Fund'.

    I am not sure why Mercury Energy is such an unpopular holding for our eight protagonists. Only three of the eight funds listed have it in their top ten at all! Mercury may of course occupy position number 11 in a number of these funds. But the identity of the number eleven position is never disclosed.

    The fund that shows the most evidence of 'independent thinking' in this admittedly 'snapshot view' is 'Mint New Zealand SRI Equity Fund'. Inside this Mint fund, we see four of the top ten deviate most from the reference portfolio. If you want to maximise your holding in IFT, EBO,CEN -and likely minimise your holding MCY- then buy into that Mint fund. I note that the managers of Mint also charge the second equal lowest annual fee.

    I should point out here that I am not suggesting taking your active fund further away from the index is necessarily the optimum thing to do. I would have to respect the find manager who considered a path more diverse from the index rankings, but then -after careful evaluation- decided against taking such a path. But we, as external fund observers, are not privy to such inside of fund decisions. And such decisions do not show in this 'snapshot fund view'.
    Last edited by Snoopy; Yesterday at 10:53 AM. Reason: WORK IN PROGRESS
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  10. #130
    On the doghouse
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    Default NZ Share Funds 'Top 10 Holding Correlation with index' vs 'One Year Return'

    To get a 'more accurate than eyeball' measure of how close the disclosed share portfolios follow the index rankings, I have found this on-line correlation coefficient calculator.
    https://www.standarddeviationcalcula...ent-calculator

    For each fund manager, I have compared their top ten holding rankings (where MCY, SPK, ATM is not in the managers top ten I have assigned such a share a 'below top ten' ranking of 3%). The correlation coefficient result shows in 'one number', just how closely these fund managers track the top ten index rankings. The input numbers that I have used are from post 129, with a reference date of 30-09-2024.

    Active Fund under consideration Top Ten Percentage Holding Correlation Coefficient
    Smart S&P NZX50 Share Fund 10.84%
    ANZ OneAnswer New Zealand Share Fund 0.9229 9.57%
    Castle Point Trans Tasman Fund 0.9560 11.07%
    Harbour Australasian Equity Fund 0.9165 17.72%
    Mercer Ethical Leaders NZ Share Fund 0.9213 15.75%
    Mint New Zealand SRI Equity Fund 0.9080 9.26%
    Nikko AM Core Equity Fund 0.9714 10.30%
    Octagon NZ Equities Fund 0.9388 9.23%
    QuayStreet New Zealand Equity Fund 0.9001 13.3%

    For those unfamiliar with how to interpret these correlation numbers, the same referenced calculator suggests that a correlation figure of 0.9 (the lowest correlation figure here) represents a 'Very Strong and Positive Correlation' (a figure of 1.0 represents perfect correlation, i.e. the two sets of data being compared are identical). The 'problem' with a fund manager running a fund where around 55% to 70% of the fund constituents are so strongly correlated with the index, is, it puts a lot of pressure on the 'undisclosed portion of the fund' to outperform the index. We have to recognise that, unless a fund can outperform the index in a meaningful way after fees, then one has to question the value of the fees paid to the fund manager to run each of these 'active' funds.

    It is unfair to put a 'binding judgement' on the performance of a fund based on what happens over a single year. Sharemarket fund managers work to be judged over a multi-year time horizon more closely aligned with a 7-10 year timeframe. However, a single year performance figure can be useful when considering fund portfolio composition. That is because over as 7-10 year time horizon, the composition of a fund portfolio is more likely to change, maki][ng any 'snapshot analysis' of a portfolio today over 7-10 years unrepresentative.

    I have used the 'correlation calculator' for a second time, to see if there is a possible relationship between how well the top term index holdings are mimicked and actual fund returns over a year. Using the information from the table above, I get a 'fund composition mimicking the NZX50 top ten' verses a 'one year return' correlation coefficient of -0.3426. A correlation of absolute value 0.3426 is low. This is showing little likely relationship between the 'top ten fund holdings hugging the index' and 'returns.' But the negative sign suggests that 'whatever slight relationship there might be' is negative. IOW the closer a fund hugged the index, the worse the one year return was. Yet given the absolute correlation result of this investigation was so low, it would not be reasonable to suggest that diverging from the index as much as possible is the thing to do.

    SNOOPY
    Last edited by Snoopy; Yesterday at 10:57 AM.
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