Milford Investment Funds Monthly Review February 2021
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Milford Investment Funds
Monthly Review February 2021
Market and Economic Review
After two months of strong gains, market and New Zealand funds dealt with opposing forces. On
fund performance was mixed in January. Milford’s the positive side, an encouraging update from
Australian funds performed well whilst volatility in Fisher & Paykel Healthcare was rewarded with a
global stocks saw Milford's global funds fall. 5% uplift in the month. Elsewhere, the electricity
companies were volatile, reflecting the changing
Market volatility over the last week in January was
investor base as passive US funds buy and
less about fundamentals – these largely remain
fundamental investors reduce exposure.
intact. Vaccination programs will eventually
release a global pent-up demand for Global shares were broadly weaker, high quality
consumption, driving increases in economic companies fell even as they issued strong profit
growth and company profits by year end. updates. Furthermore, companies connected to
the re-opening of economies were weaker due to
However, much of this expectation is already
issues with vaccine rollouts and discovery of new
factored into broad share prices, i.e. valuations are
virus variants.
high. In January, a key pillar of support for share
markets was called into question – namely Looking ahead, we remain confident in the
persistently low interest rates. Last month saw the investment backdrop. Our funds are balancing
US Democratic party win control of the Senate, investments between long term winners and
increasing the likelihood of more aggressive recovery plays whilst maintaining vigilance against
support for the US economy. If this is forthcoming, the risk of rising interest rates.
a potential outcome is higher interest rates as the
economy booms. For more information, see individual fund
January saw a rise in long-term market interest performance details.
rates as this scenario unfolded, sending bond
prices lower. We have mitigated against this
outcome by reducing exposure to long term
interest rates, helping to cushion our bond funds
from larger losses.
On the share side, some global hedge funds have
been roiled by volatility in stocks, causing them to
reduce positions and creating broader volatility in
shares. For Milford, this has been a sideshow and
we have focused on investing in companies that
might benefit from expanding economies and
rising interest rates – namely banks and resource
companies. Our Australian funds’ exposures to
these companies helped deliver positive
performance this month.
Milford Asset Management
Level 28, 48 Shortland Street, Auckland, 1010
Phone: 0800 662 345
Email: Info@milfordasset.com
milfordasset.com
Milford Investment Funds Monthly Review as at 31 January 2021
Conservative Fund Actual investment mix 1
Portfolio Manager: Paul Morris
January saw the Fund post its first down month since March, albeit just -0.1%. It has
returned 4.8% over 1-year.
After recent strength there was close to zero return over the month from the Fund’s (~73%)
exposure to bonds as higher market interest rates/bond yields pushed bond prices lower.
Performance across the Fund’s (~19%) exposure to shares was mixed. Its global shares were
generally weaker but performance across its Australasian shares was diverse, even among
the same market sector as illustrated by the divergent performance between Contact Effective Cash# 7.73% Australian Equities
Energy (-8.3%) and Mercury Energy (+9.1%). New Zealand Fixed
5.03%
International Equities
Interest 22.54%
The Fund’s exposure to shares remains close to unchanged over the month which we International Fixed
7.71%
Listed Property 3.09%
reiterate is higher than its long run neutral. We are closely monitoring the downside risks to Interest 50.55%
New Zealand Equities Other* 0.42%
shares, such as a disorderly move higher in market interest rates or a delay in effective 2.93%
vaccine deployment, given some share valuations are arguably elevated under certain # The actual cash held by the Fund is 6.64%.
Effective Cash reported above is adjusted to reflect
scenarios. Nevertheless, our near-term base case remains constructive; a drift higher in the Fund's notional positions (e.g. derivatives used
longer-dated market interest rates (manageable for share valuations) and an eventual to increase or reduce market exposure).
vaccine deployment supportive for increased economic activity and share valuations.
We believe Fund positioning in this context remains consistent with the Fund’s conservative
risk profile and objective of delivering moderate returns. Given we are wary of higher bond
yields, we have continued to limit the Fund’s interest rate exposure. Looking forward, the
Fund’s share exposure, complemented by its corporate bond exposure, should support
moderate returns but we reiterate these may be lower than in previous years.
Diversified Income Fund
Portfolio Manager: David Lewis
The Fund fell 0.3% in January and is up by 3.3% in the past year.
Shares prices across the NZ electricity sector surged in early January, as offshore investor
support for clean energy investments jumped following the Democratic party's win in US
Senate elections. We used this strength as an opportunity to reduce two of the Fund's
larger holdings, Contact Energy and Meridian, locking in gains from earlier purchases when Effective Cash# 4.89% Australian Equities
the closure of the Tiwai smelter was initially announced. Prices fell back later in the month 12.60%
New Zealand Fixed International Equities
as offshore buying moderated. Looking ahead we anticipate further price volatility in these Interest 9.16% 8.33%
companies as ETF holdings change, and this may provide an opportunity to increase the International Fixed Listed Property
Interest 42.73% 10.88%
Fund's exposure again - from a fundamental and valuation perspective we believe they New Zealand Equities
Other* 0.76%
remain attractive medium term income investments. 10.65%
# The actual cash held by the Fund is 3.60%.
Elsewhere in our share portfolio, we saw strong gains from consumer stocks in Australia Effective Cash reported above is adjusted to reflect
the Fund's notional positions (e.g. derivatives used
(Wesfarmers +8.4%), while Australian property companies were weak given market to increase or reduce market exposure).
concerns on the virus and interest rates (Mirvac -9.8% and Goodman Group -6.5%).
In fixed income, Fund returns were cushioned by a strategy we implemented late last year
to benefit from potential interest rate increases, while key additions included a Westpac
subordinated bond (in Australian dollars) and Verisure, a European high yield issuer which
sells home alarm systems. We remain optimistic about prospects for economic growth this
year as both fiscal and monetary policy support, and vaccines, should drive a rebound in
activity globally. Alongside generally fair valuations for our holdings this suggests a
reasonably positive outlook for shares, while fixed income returns will be muted by very low
interest rates.
*Other includes currency derivatives used to manage foreign exchange risk.
1The actual investment mix incorporates the notional exposure value of equity derivatives and credit default swaps, where applicable.
Milford Investment Funds Monthly Review as at 31 January 2021
Balanced Fund Actual investment mix 1
Portfolio Manager: Mark Riggall
The Fund returned -0.5% in January, with a 1-year return of 7.5%.
Financial market headlines in January focused on the trading frenzy in some small US
companies. This masked the real story of the month, namely the US Democrats gaining
control of the Senate. This increases the prospect of further economic stimulus, which
coupled with a successful vaccine rollout should deliver a meaningful economic boost. This
is positive for company profits, but also raises the prospect of higher interest rates - a
potentially concerning development for investors given low interest rates have underpinned Effective Cash# 8.52% Australian Equities
share and bond prices in recent years. New Zealand Fixed
14.83%
International Equities
Interest 4.52%
The Funds flexibility allows us to position to mitigate against rising interest rates. On the International Fixed
28.30%
Listed Property 6.65%
bond side, the Fund has reduced (hedged) explicit exposure to interest rates, helping Interest 22.81%
New Zealand Other* 0.77%
cushion against any rises. On the stock side, we have invested in companies that benefit Equities† 13.60%
from higher rates and a booming economy, In January, our Australian Fund’s investments in # The actual cash held by the Fund is 6.86%.
Effective Cash reported above is adjusted to reflect
banks and resource companies delivered positive returns, even as the broader market was the Fund's notional positions (e.g. derivatives used
lower. Our global exposure is a balance between quality growth companies such as Amazon to increase or reduce market exposure).
and Microsoft, and more cyclical companies such as US railroads or Spanish airport
operator Aena. Finally, with a constructive backdrop, the Fund has tilted towards holding
more shares and less bonds.
Active Growth Fund
Portfolio Manager: Jonathan Windust
The Fund had a flat return in January. Share markets started the month strongly however
ended largely muted with New Zealand up 0.3%, Australia up 0.3% and global down 0.8%.
Volatility across shares remains high as investors continue to look for the next winner; for
example, Contact Energy was up 21% during the month but finished the month down 8.3%.
Key positive companies during the month included healthcare companies Fisher & Paykel Effective Cash# 9.93% Australian Equities
Healthcare (+5.1%) and Thermo Fisher (+9.4%), and US home builder DR Horton (+11.4%). 14.50%
New Zealand Fixed International Equities
All three reported strong earnings updates. During the month, the Fund added to holdings Interest 0.88% 35.15%
in US bank JP Morgan and UK Bank Virgin Money. We believe banks are attractively valued International Fixed Listed Property 6.28%
Interest 9.43%
and earnings will benefit from a combination of lower bad debts, more loans and higher New Zealand Other* 0.16%
interest rates on their investments. We also added to our holding in Microsoft which Equities‡ 23.67%
# The actual cash held by the Fund is 5.28%.
delivered a very strong result with quarterly profits rising 34% over the year. Microsoft Effective Cash reported above is adjusted to reflect
continues to benefit from increased technology spend and, in particular, cloud spending the Fund's notional positions (e.g. derivatives used
to increase or reduce market exposure).
where it has a strong competitive position.
The outlook for share markets is supported by the expectation of an economic rebound in
2021, an improvement in company earnings (as COVID headwinds subside), ultra-low
interest rates and high levels of liquidity. Low interest rates continue to drive investors to
shares. The key headwind for markets is relatively high market valuations and generally
optimistic investor sentiment. On balance, we retain a positive outlook for shares over 2021
for which the Fund currently holds a higher-than-average allocation. We remain active to
isolate those shares which we believe will provide strong risk-adjusted returns.
Please note this Fund is closed to new investors.
†Includes unlisted equity holdings of 0.19% ‡Includes unlisted equity holdings of 1.34% *Other includes currency derivatives used to manage foreign exchange
risk. 1The actual investment mix incorporates the notional exposure value of equity derivatives and credit default swaps, where applicable.Milford Investment Funds Monthly Review as at 31 January 2021
Australian Absolute Growth Fund Actual investment mix 1
Portfolio Manager: William Curtayne & Wayne Gentle
The Australian Absolute Growth Fund finished January with a 1.3% return compared to a
0.3% return by the ASX 200 Index.
Our best performer was Australian Ethical Investments (+39.2%) which rallied on a strong
investment flow update. SmartPay (+25.4%) was another notable performer that released a
positive update on new terminal sales and anticipated new business following issues at key
competitor Tyro. We used a later month sell-off in miners to add copper miner Oz Minerals
and increase our position in lithium and nickel miner IGO. All these metals are benefitting Effective Cash# International Equities
16.02% 0.88%
from the electrification of vehicles and renewable energy developments and we expect to Listed Property 8.00%
New Zealand Equities
see sustained commodity strength. 4.20% Other* 0%
Australian Equities
The portfolio is skewed towards more cyclicals than normal as we believe they will continue 70.90%
to outperform as the vaccine distribution allows a global economic recovery to occur later # The actual cash held by the Fund is 9.73%.
Effective Cash reported above is adjusted to reflect
this year. Our key exposures are miners, financials, and home builders among other select the Fund's notional positions (e.g. derivatives used
to increase or reduce market exposure).
positions. Delays in vaccine distribution may set back the economic recovery, but
importantly won’t prevent it from occurring. A setback in vaccine effectiveness occurring
due to the new virus mutations, is a key risk that we are monitoring closely. Early
indications are that the mutation is a minor rather than critical setback.
Reporting season gets underway this month and will be the key focus over the next month.
Trans-Tasman Bond Fund
Portfolio Manager: Paul Morris
Australasian government bond prices took another leg lower in January (yields higher),
driven as much by offshore weakness than local developments. The Fund return in the
month was however close to flat, thanks in large part to (i) its higher proportion of
corporate bonds which outperformed government bonds and (ii) a reduced interest rate
exposure which cushioned the Fund from the increase in yields. This combination also
Effective Cash# 8.45%
delivered another month of outperformance relative to the benchmark. Other* 0.45%
New Zealand Fixed
January is generally a quiet month for Australasian markets but the Fund still participated Interest 44.96%
in a new Westpac subordinated Australian dollar bond issue. This was funded by selling NZ International Fixed
Interest 46.14%
dollar subordinated bank and non-financial corporate bonds, where we think valuations are # The actual cash held by the Fund is 4.16%.
becoming elevated. We also reduced NZ dollar interest rate exposure further through Effective Cash reported above is adjusted to reflect
the Fund's notional positions (e.g. derivatives used
selling World Bank NZ dollar bonds. to increase or reduce market exposure).
Looking forward, we continue to believe corporate bond returns will outperform
government bonds but absolute returns may face a headwind of rising yields. Both
Australasian central banks retain accommodative policy stances but face better economic
outlooks than previously feared. Our base case sees shorter dated bond yields anchored by
on hold policy/cash rates but we remain wary longer dated bond yields may increase as
economic conditions continue to improve and/or offshore yields rise. Therefore, the Fund
will retain an interest rate exposure below neutral/benchmark to cushion against this.
*Other includes currency derivatives used to manage foreign exchange risk.
1The actual investment mix incorporates the notional exposure value of equity derivatives and credit default swaps, where applicable.Milford Investment Funds Monthly Review as at 31 January 2021
Global Corporate Bond Fund Actual investment mix 1
Portfolio Manager: Paul Morris
Rising government bond yields continue to weigh on Fund returns. In recent months
outperformance of corporate bonds relative to government bonds had more than offset
this. In January however many corporate bond sectors saw outperformance pause given
yields relative to government bonds are back to pre-Covid levels. Some of the negative
impact was offset by reduced Fund interest rate exposure (less than benchmark) but it still
resulted in a close to flat monthly return. That was still a little behind the benchmark’s
return due to ongoing lower Fund exposure to riskier parts of the high yield (HY) market Effective Cash# 5.54%
Other* 0.11%
which had another stronger month than both higher rated HY sectors and subordinated New Zealand Fixed
bonds of investment grade corporates (including banks), where the Fund holds more Interest 1.29%
International Fixed
exposure. Interest 93.06%
# The actual cash held by the Fund is 3.50%.
Nevertheless, we retain this positioning as (i) we believe its medium-term risk return is Effective Cash reported above is adjusted to reflect
appropriate for the Fund’s objective and (ii) should outperform over time. The Fund was the Fund's notional positions (e.g. derivatives used
to increase or reduce market exposure).
positioned to benefit from a busy start to offshore bond issuance, participating in several
new issues including from United Utilities (UK utility) and SBA Communications (US telco
towers).
Looking forward, we are monitoring central banks for any change in accommodative
stance. A rise in government bond yields is a risk to returns. We retain interest rate
exposure below benchmark to mitigate the impacts from our expectation for a drift higher
in government bond yields. Over time such positioning should still deliver moderate Fund
returns, albeit likely lower than in recent years.
Cash Fund
Portfolio Manager: Paul Morris
Short-dated NZ dollar market interest rates have moved higher since the lows in October.
With the focus offshore moving away from increasing monetary stimulus and the domestic
NZ economic picture better than previously feared, the market is attaching less probability
to another Reserve Bank of New Zealand (RBNZ) Official Cash Rate (OCR) cut this year.
Our base expectation remains that irrespective of these better-than-expected local Effective Cash#
economic outcomes (including some inflation risks due to housing and consumption) the 22.69% Other* 0%
New Zealand Fixed
RBNZ will hold the OCR unchanged through this year. If realised that should protect the Interest 77.31%
Fund’s absolute return, however, we continue to observe that excess liquidity in the # The actual cash held by the Fund is 22.69%.
financial system (exacerbated by the RBNZ Funding for Lending Programme or FLP) still Effective Cash reported above is adjusted to reflect
the Fund's notional positions (e.g. derivatives used
means a lot of money will be chasing short-dated assets. That will cap the yield/interest to increase or reduce market exposure).
rate available and as we previously discussed likely diminish the excess return over the OCR
the Fund can generate over the near and medium term.
We would however reiterate that these developments have not changed the portfolio
management of the Fund which remains focused on maintaining a low-risk strategy, built
on a diversified portfolio of cash, short-dated debt securities and term deposits, to protect
capital.
*Other includes currency derivatives used to manage foreign exchange risk.
1The actual investment mix incorporates the notional exposure value of equity derivatives and credit default swaps, where applicable.Milford Investment Funds Monthly Review as at 31 January 2021
Global Equity Fund Actual investment mix 1
Portfolio Manager: Felix Fok
Global Equity fell 1.8% in January, which was 0.9% behind the market index. In the past year,
the Fund returned 13.8% compared to the market index which was up 7.2%.
Key positive contributors included Tencent (+20.8%), NetEase (+20.1%) and Alibaba (+6.1%)
which rebounded as concerns over broader Chinese regulations of large internet companies
eased somewhat. China has managed COVID-19 relatively well and saw its economy grow
2% in 2020. This optimism is also affirmed by the ~35% rise of its local share market index in
the past year. Effective Cash# 0.99% Listed Property 1.71%
Other* 1.60%
Elsewhere, Taiwan Semiconductor Manufacturing Company (TSMC, +11.4%) lifted its International Equities
95.70%
projected investment spend significantly as it expects strong sustainable demand for high
# The actual cash held by the Fund is 2.12%.
performance processors. Also, US homebuilder DR Horton (+11.4%) reported strong Effective Cash reported above is adjusted to reflect
the Fund's notional positions (e.g. derivatives used
demand for new homes helped by historic low mortgage rates. to increase or reduce market exposure).
Detractors included holdings geared towards the reopening of economies and travel.
Companies making plane parts, Transdigm (-10.6%) and Safran (-10.2%), retraced some of
the bump from positive vaccine news in November as infections rose, particularly in Europe.
These recovery plays offer attractive medium-term risk-reward and should do well when the
pandemic eases. TransUnion (-12.3%), which profiles consumers for creditworthiness, was
out of favour as investors in the financial sector rotated into banks to try benefit from
potentially higher interest rates.
We are optimistic on the outlook given the positive vaccine developments provide light at
the end of the tunnel. The portfolio remains focused on our key investment themes and
dominant companies.
Trans-Tasman Equity Fund
Portfolio Manager: Sam Trethewey & Wayne Gentle
January was a mixed month for the Fund as local markets took a breather following a very
strong finish to 2020. The Trans-Tasman Equity Fund returned -0.4% in January compared
to a -0.3% return for the NZX 50 index and 0.3% return for the ASX 200 index.
Fisher & Paykel Healthcare (+5.1%), Afterpay (+14.5%) and wealth management platform
Hub24 (+14.6%) were standout performers for the Fund. Fisher & Paykel provided a strong
Effective Cash# 3.96% Listed Property 4.02%
trading update with group revenue from the past nine months up 73% vs the prior financial
New Zealand Equities Other* 0%
year. The company continues to see significant demand for its products due to the elevated 42.78%
rates of hospitalisations across the northern hemisphere. The Fund was hurt by its position Australian Equities
49.24%
in Xero (-11.5%). The company's share price was impacted by hedge funds reducing risk
# The actual cash held by the Fund is 5.43%.
across global markets in response to increased volatility. We retain conviction in Xero's Effective Cash reported above is adjusted to reflect
the Fund's notional positions (e.g. derivatives used
medium-term outlook and expect business creations to be strong in the current economic to increase or reduce market exposure).
environment. Elsewhere, we substantially reduced our exposure to the NZ electricity
companies over the month. This sector has been heavily sought after in recent months by
passive investors seeking exposure to renewable energy.
It is clear that the virus will continue to have an impact on company earnings in 2021. This
could result in big winners and losers in the coming months as pent-up consumer demand
results in elevated profits for some, while others still trapped in the eye of the COVID-19
storm, like Auckland Airport and Air New Zealand, suffer. Irrespective of short-term market
performance, long term returns will be heavily influenced by our stock selection. That is our
ability to position the Fund in companies that can sustain earnings growth at above
average rates (like Mainfreight, Xero and Fisher & Paykel Healthcare) and avoid those where
we see stretched balance sheets, earnings or valuation risk.
*Other includes currency derivatives used to manage foreign exchange risk.
1The actual investment mix incorporates the notional exposure value of equity derivatives and credit default swaps, where applicable.Milford Investment Funds Monthly Review as at 31 January 2021
Dynamic Fund Actual investment mix 1
Portfolio Manager: William Curtayne & Michael Higgins
The Dynamic Fund returned 1.4% in January, outperforming the S&P/ASX Small Ordinaries
benchmark by 1.6%. The first two weeks of January saw the Fund reach an intra-month high
of 4.2% before retracing gains as global uncertainties from new strains of COVID-19 and
speculative retail activity in US markets dragged on confidence.
Performance was led by a recent addition to the Fund – Australian Ethical Investments
(+39.2%). AEF are the fastest growing superannuation fund in Australia over the last 5 years
by members and assets under management. SmartPay (+25.4%) was a notable performer Effective Cash# 9.45% Listed Property 9.42%
that released a strong update on new terminal sales and anticipated new business following
New Zealand Equities Other* 0.92%
operational issues at key competitor Tyro. SmartPay is a small terminal operator growing 8.06%
rapidly in a large addressable market. Other top performers include PointsBet (+31.5%) Australian Equities
72.15%
which rallied on strong quarterly results. PointsBet continues to benefit from the # The actual cash held by the Fund is 9.49%.
progressive opening of sports wagering across the US. Detractors included Polynovo Effective Cash reported above is adjusted to reflect
the Fund's notional positions (e.g. derivatives used
(-32.2%) on slower sales into US hospitals given COVID-19 and EML Payments (-7.9%) on to increase or reduce market exposure).
earnings uncertainty given rolling global shutdowns.
As a potential vaccine reduces the tail risk of a severe economic outcome, we continue to
increase our exposure to cyclical companies where we can identify relative value. Our
target is to achieve a better-balanced portfolio which will benefit from a vaccine-led
economic recovery later this year.
Upcoming Distributions Target Payment Date
Conservative Fund 0.5 cents (Quarterly) 22/04/2021
Diversified Income Fund 1.1 cents (Quarterly) 18/02/2021
Trans-Tasman Bond Fund 0.45 cents (Quarterly) 18/03/2021
Global Corporate Bond Fund 0.45 cents (Quarterly) 18/03/2021
Trans-Tasman Equity Fund 1.5 cents (Biannually) 18/03/2021
*Other includes currency derivatives used to manage foreign exchange risk.
1The actual investment mix incorporates the notional exposure value of equity derivatives and credit default swaps, where applicable.Milford Investment Funds Monthly Review as at 31 January 2021
Fund Performance
Since Fund
Past month 1 year 3 years (p.a.) 5 years (p.a.) Unit price $ Fund size $
inception (p.a.)
Multi-Asset Funds
Conservative Fund* -0.09% 4.81% 5.77% 6.68% 6.51% 1.2306 553.5 M
Diversified Income Fund* -0.32% 3.25% 7.25% 8.80% 10.73% 1.8585 2,479.9 M
Balanced Fund -0.48% 7.54% 8.56% 9.50% 9.96% 2.6913 1,134.7 M
Active Growth Fund# -0.02% 8.70% 10.05% 11.03% 12.46% 4.4625 1,389.8 M
Australian Absolute Growth Fund 1.28% 8.25% — — 8.76% 1.2730 250.8 M
Cash and Fixed Income Funds
Trans-Tasman Bond Fund*^ -0.12% 4.44% 5.02% 5.01% 5.50% 1.2123 848.9 M
Global Corporate Bond Fund*^ -0.14% 4.21% 4.52% — 5.18% 1.1094 828.7 M
Cash Fund 0.02% 0.54% — — 1.15% 1.0222 99.1 M
Equity Funds
Global Equity Fund† -1.82% 13.78% 10.61% 10.51% 9.63% 2.0286 1,023.3 M
Trans-Tasman Equity Fund* -0.35% 12.38% 14.89% 16.28% 12.14% 3.7155 714.6 M
Dynamic Fund 1.37% 16.74% 13.86% 14.41% 14.07% 2.5973 545.4 M
For details of how investment performance is calculated, and returns at each PIR please see www.milfordasset.com/funds-performance/view-performance#tab-
performance.
Performance figures are after total Fund charges have been deducted and at 0% PIR.
Please note past performance is not a guarantee of future returns.
Inception dates for the Funds: Active Growth Fund: 1 October 2007, Trans-Tasman Equity Fund: 1 October 2007, Balanced Fund: 1 April 2010, Diversified Income Fund:
1 April 2010, Global Equity Fund: 12 April 2013, Dynamic Fund: 1 October 2013, Trans-Tasman Bond Fund: 2 December 2013, Conservative Fund: 1 September 2015,
Global Corporate Bond Fund: 1 February 2017, Australian Absolute Growth Fund: 1 March 2018, Cash Fund: 1 March 2019.
*Performance figures include the reinvestment of the Funds' distribution.
^Returns prior to 1 March 2018 are from when the Fund was previously offered to wholesale investors only and have been adjusted for current Fund charges.
†Returns prior to 1 October 2018 are from when the Fund was structured to achieve an absolute return.
#The Active Growth Fund is closed to new investors.
Key Market Indices
Past month 1 year 3 years (p.a.) 5 years (p.a.) 7 years (p.a.)
S&P/NZX 50 Gross Index (with imputation credits) 0.28% 12.72% 16.86% 17.48% 16.48%
S&P/ASX 200 Accumulation Index (AUD) 0.31% -3.11% 7.00% 10.03% 7.90%
S&P/ASX 200 Accumulation Index (NZD) -0.31% -0.24% 6.04% 9.45% 7.70%
MSCI World Index (local currency)* -0.77% 12.89% 8.57% 12.64% 10.31%
MSCI World Index (NZD)* -1.09% 3.67% 9.27% 10.94% 11.43%
S&P/NZX 90-Day Bank Bill Rate 0.02% 0.56% 1.38% 1.72% 2.19%
Bloomberg Barclays Global Agg. Bond (USD-Hedged) -0.54% 3.15% 5.22% 4.07% 4.13%
S&P/NZX NZ Government Bond Index -0.50% 2.86% 5.00% 4.33% 5.10%
*With net dividends reinvestedMilford Investment Funds Monthly Review as at 31 January 2021
Top Security Holdings (as a percentage of the Fund’s Net Asset Value)
Multi-Asset Funds
Australian Absolute
Conservative Fund Diversified Income Fund Balanced Fund Active Growth Fund
Growth Fund
Scentre Group 5.125% Spark 2.23% Fisher & Paykel 2.10% Fisher & Paykel 4.57% NAB 6.40%
2080 1.17%
NZLGFA 1.5% 2029 1.10% Contact Energy 2.03% Spark 1.75% Spark 3.68% ANZ 4.94%
Housing NZ 3.36% 2025 Scentre Group 5.125% Contact Energy 1.24% Summerset 2.91% BHP 4.92%
1.06% 2080 2.02%
Westpac 2.22% 2024 Woolworths 1.75% Microsoft 1.14% Dr Horton 2.13% IGO 3.79%
1.00%
NZLGFA 3.5% 2033 0.99% Wesfarmers 1.73% Scentre Group 5.125% Microsoft 1.94% Woolworths 3.49%
2080 1.10%
Westpac Float 2031 0.91% Telstra 1.52% Summerset 0.97% Virgin Money 1.93% IAG 3.46%
Transpower 1.735% 2025 Transurban 1.49% Telstra 0.96% EBOS Group 1.68% Rio Tinto 3.40%
0.88%
NAB Float 2030 0.87% Goodman 1.48% Woolworths 0.95% BHP 1.67% Telstra 3.29%
ASB Bank 1.83% 2024 Coles 1.35% Mainfreight 0.92% Kiwi Property 1.65% Virgin Money 3.08%
0.86%
ANZ Bank Float 2024 Meridian 1.22% Amazon 0.91% Scentre Group 5.125% Charter Hall Retail 2.65%
0.83% 2080 1.45%
Note: Fixed interest securities are reported in the following format: Issuer name, interest (coupon) rate, maturity year, size of fund holding (as % of total portfolio).
Cash and Fixed Income Funds
Trans-Tasman Bond Fund Global Corporate Bond Fund Cash Fund
Housing NZ 3.36% 2025 2.42% Kerry Group 0.625% 2029 1.58% Westpac 32 Day CMD 2020 15.13%
NZLGFA 1.5% 2029 2.40% Westpac Float 2031 1.56% Meridian CD 2021 8.26%
Westpac 2.22% 2024 2.28% American Tower 3.8% 2029 1.55% SBS CD 2021 7.55%
NZLGFA 3.5% 2033 2.26% Seagate 4.091% 2029 1.53% Port of Tauranga CD 2021 5.04%
Transpower 1.735% 2025 1.99% Danaher Corp 0.45% 2028 1.50% TSB Bank CD 2021 5.04%
ASB Bank 1.83% 2024 1.97% Scentre Group 5.125% 2080 1.48% Auckland Airport CD 2021 5.04%
ANZ Bank Float 2024 1.89% McDonald's 3% 2024 1.45% Port of Tauranga CD 2021 5.03%
Macquarie Float 2025 1.88% NAB Float 2030 1.40% Genesis CD 2021 4.54%
Macquarie Float 2025 1.79% NXP BV 4.3% 2029 1.38% ANZ 0.45% 2021 4.04%
Ausgrid Finance 1.814% 2027 1.64% John Deere 1.75% 2024 1.35% Mercury CD 2021 4.03%
Note: Fixed interest securities are reported in the following format: Issuer name, interest (coupon) rate, maturity year, size of fund holding (as % of total portfolio).Milford Investment Funds Monthly Review as at 31 January 2021 Top Security Holdings (as a percentage of the Fund’s Net Asset Value) Equity Funds Global Equity Fund Trans-Tasman Equity Fund Dynamic Fund Microsoft 3.72% Fisher & Paykel 8.08% Sealink Travel 3.91% Amazon 3.53% Mainfreight 4.28% Collins Foods 3.86% Apple 3.43% Xero 4.03% IGO 3.60% Alphabet 3.08% BHP 3.63% HUB24 3.11% Intercontinental Exchange 2.77% Infratil 3.54% CSR 2.94% TSMC 2.71% CBA 3.46% EML Payments 2.88% HDFC Bank 2.62% a2 Milk 3.45% Seven Group 2.86% Paypal 2.58% CSL 2.83% Lifestyle Communities 2.64% Thermo Fisher 2.40% Ryman Healthcare 2.81% Australian Finance 2.64% Danaher 2.37% Summerset 2.61% Virgin Money 2.60% Note: Fixed interest securities are reported in the following format: Issuer name, interest (coupon) rate, maturity year, size of fund holding (as % of total portfolio). Milford and Milford staff have approximately $30.4 million invested across our Investment Funds as at the end of January 2021.
Milford
MilfordInvestment
InvestmentFunds
FundsMonthly
MonthlyReview
Review as at 31 January 2021
Investment Highlight:
Second bite of the Apple?
Apple spends close to US$20bn a year on research and development
and a recent rumour suggests it may finally launch the Apple Car by
2024. The electric vehicle (EV) speculation as well as expected strong
demand for 5G iPhones helped propel the shares to an all-time high, with
the company valuation reaching over US$2.4tn in market capitalisation
Felix Fok
during January 2021.
Portfolio Manager
It is a rumour because Apple is notoriously secretive about its product pipeline, partly for competitive
reasons but also to heighten expectation at product launches. In 2017, CEO Tim Cook indicated that Apple
was interested in autonomous systems. Furthermore, shares of Korean car manufacturers Hyundai and Kia
jumped this year on reports of a manufacturing partnership with Apple.
Talk of Project Titan, as the EV project is known internally, goes back to 2014 but the road has been bumpy
with challenges from novel battery designs and autonomous driving systems. In 2019, Apple changed the
project’s leadership and restructured the staff assigned to the project. Still, the prize for getting its EV
product right seems as enticing as ever given the success of Tesla and NIO (EV leader in China).
For investors, Apple has been an exceptional combination of an aspirational brand with technology
innovation, manifesting in an ecosystem of connected devices, software, and subscription services. Led by
the iPhone it has been able to charge premium prices, sell large volumes, and benefit from incredible
customer loyalty and therefore recurring purchases.
The car is potentially a risk to some of its financial ratios. Carmakers typically do not make 40% margins,
certainly not for mass market vehicles (Tesla after 17 years and 3 commercial models makes 21% gross
margin). It will come down to what is made in-house and what is outsourced. One area to be positive on is
how Apple has over time come to design its own microprocessors for the iPhone, Macbook, Airpods, iPad,
Apple Watch, etc. Semiconductor chips are critical for mobile devices and the dollar value of chip content
will be even higher in autonomous EVs.
There is still a long road ahead, but diehard Apple fans may want to start saving up if you want the Apple
Car for Christmas 2024!
Will the Apple Car be a ‘me too’ product?
Tesla Model S is the benchmark Chinese EV company Nio is also delivering
Disclaimer: This article is intended to provide general information only. It does not take into account your investment needs or personal circumstances. It is not intended to be viewed as
investment or financial advice. Should you require f inancial advice you should always speak to an Authorised Financial Adviser. Past performance is not a guarantee of future performance.Disclaimer: The Milford Monthly Review has been prepared by Milford Funds Limited. It is based on information believed to be accurate and reliable although no guarantee can be given that this is the case. No reproduction of any material either in part or in full is permitted without prior permission. For more information about the Funds please refer to the Product Disclosure Statement or the latest Quarterly Fund Update.
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