High Income Fund
Preserve your capital while earning competitive returns
The Fisher Funds High Income Fund is an extremely flexible investment fund designed to preserve your capital and generate better than bank returns.
The Fund does this by investing in a diversified portfolio of high quality government and corporate bonds in New Zealand and around the world. The portfolio has a weighted average credit quality; equivalent to a Standard & Poor's rating, of A+.
Consistency and reliability
Rather than closely tracking the returns of a largely irrelevant benchmark, which could go down as well as up over periods of time, we aim to produce positive returns regardless of the economic environment.
All investments are handpicked and must meet our strict criteria before inclusion in the Fund.
Genuine diversification
Through active diversification across countries and industries our senior portfolio manager, David McLeish, and his team aim to deliver a lower risk proposition than is achievable by investing in New Zealand alone.
How will you benefit from the Fisher Funds High Income Fund
| Cost effective | No entry or exit fees |
| Low minimum investment | Lump sum investments from $2,000 or regular saving from $100 per month |
| Instant access | You are not locked into a fixed term and you can move your money in and out whenever you need without penalty |
| Tax effective | The Fund is a Portfolio Investment Entitiy (PIE) - for 30% and 33% tax payers tax is capped at 28% and is only paid once a year. |
| Diversification | By diversifying our investments we ensure all of your eggs are not in one basket |
| Online account access | Yes |
The High Income Fund takes away the hassle of wondering how long to fix for and with what bank. As interest rates rise the Fund is able to adjust its investments, meaning you move with the rising interest rate tide and are not constrained by the currently low fixed rate offers available.
Distribution policy
Investors are given the option of either receiving the income generated by the Fund in regular monthly instalments or reinvesting that money.
It is for this reason the Fund is suited to both those seeking a stable income from their investment and those who would like to see that income compound within the Fund over time.
What does the Fund invest in?
We do not compromise investment safety for return. The Fund solely invests in fixed income securities and aims to consistently deliver capital protection and reliable returns.
At the manager's discretion, the Fund invests across the fixed income universe, comprising of government, local authority, corporate, and asset-backed securities.
It does not take any exposure to equities (shares). This is a deliberate strategy to reduce volatility and lessen the impact on distributions over time.
How does the Fund compare to bank deposits?
| Bank deposits | High Income Fund | |
Income returns are fixed? |
Yes. | No - will vary according to our distribution policy and the income generated by the underlying investments. |
| Fixed investment term? | Yes - generally. Early withdrawal penalties are common. | No - you can access your funds at any time without penalty. |
| Accounting for tax? | Tax is paid on each interest payment and needs to be accounted for in yearly tax returns. | The Fund is a PIE. Distributions are tax paid under current tax laws and investors do not need to include them in their personal tax returns. |
Who is the Fund suitable for?
- Are looking to invest within the relative safety of fixed income
- Would like to receive a regular and stable income from their investments
- Or may be looking to see their income compound over time
- Like the idea of professional investors actively managing their investments for them
The High Income Fund is actively managed. Our hands-on investment approach ensures that each investment meets our strict investment criteria.
Simply put, we believe the safety of fixed interest investments can be measured by the ability of a borrower to meet all of its future obligations. This ability should be measured in good times and bad so that we can have a reasonable level of certainty as to a future repayment.
A thorough and structured investment approach is key to achieving our goals
As discussed in more detail in 'Our Investment Approach' below, we combine macro and microeconomic analysis in our selection process. Essentially this means we take account of both economic and country risks as well as the risks, and potential rewards of individual securities. By standardising the way we make our investment decisions we aim to produce consistency and accountability over a long period of time.
Risk management is paramount
A set of strict parameters shape the composition of the Fund at all times. However, we don't stop there. We complement this set of rules with advanced risk analysis that helps us understand and plan for all kinds of possible market events. We believe this helps us prepare for the worst.
A global reach will bear fruit
Investing globally has many advantages. Today's increasingly connected world offers a wealth of opportunities, but finding them takes time, effort and expertise that many investors simply do not have. The Fund gives investors access to the debt securities of companies and governments in both developed and emerging market countries, thereby capturing investment opportunities that a solely New Zealand-focused investor might miss.
Our Investment Approach
We take our responsibility in investing your money seriously. We demonstrate this best through the process we have in place to ensure we make well-informed and thorough investment decisions. This selection process works by approaching our investment analysis from two directions.
Get the big picture right first
This first step involves forming a detailed view on the global financial outlook. Here we aim to identify the countries, sectors, and financial markets we think will flourish in the future. As part of this process we utilise a large number of analytical tools. These include forward-looking economic indicators, industry publications, rating agency reports, and economic forecasting. We also factor in our political and geo-political views for each region. This step is designed to highlight the markets where our investments have the best chance of success.
Then comes the detailed analysis of potential investments
When analysing the risks associated with a particular investment we look at information and data in a wide range of areas. Of particular interest to us is a borrower's solvency (ability to meet long-term obligations), liquidity (ability to meet short-term obligations), and overall profitability. It is within these areas of interest that we have developed a set of measures that form the basis for our final investment decision. This process also allows us to compare one borrower with another, helping us select what we believe to be the optimal return for our desired level of risk.
Putting the pieces together
The final step in our selection process is deciding on the best combination of securities to implement our views. This involves overlaying our list of favoured borrowers with the results we achieved from our 'big picture' analysis, that is, finding the best issuers in our preferred geographic regions. These results include our outlook for interest rates, currencies, and credit risk. The aim of combining these two is to give us confidence we are not only investing in the right borrowers but that we are also using the right investment vehicle to optimise our performance.
Current Unit Price (as at Wednesday, 22 May 2013) $1.0432
Fund Inception April 2011
Total Distributions per unit since inception $0.0920
How has the fund performed as at 30 April 2013
| High Income Fund | Benchmark (ANZ NZ Government Stock Index) |
Benchmark (90 Day Bank Bill Rate) |
|
| 1 month | + 1.2% | + 1.4% | + 0.2% |
| 3 months | + 2.2% | + 2.7% | + 0.6% |
| 6 months | + 3.3% | + 2.4% | + 1.3% |
| 12 months | + 7.8% | + 6.3% | + 2.7% |
| 2 years | + 6.5% | + 8.4% | + 2.7% |
| Since Launch* | + 6.3% |
Returns to date include the impact of monthly income distributions and assumes they have been reinvested.
* Annualised
Fund Performance as at 30 April 2013
(after fees and before tax)
The above graph illustrates the impact of $10,000 invested on day one in the High Income Fund (after fees and before tax).
Portfolio Commentary
The High Income Fund generated a very pleasing 1.2% net return in April. While helped by a broad-based rally in fixed income we also achieved some valuable wins in our corporate credit investments. This additional 'alpha' made up for our significantly lower portfolio duration, when compared with the benchmark. In short, we generated similar absolute returns as our benchmark but did this with around 40 percent less interest rate risk.
How does the High Income Fund stack up against bank deposits?
The table below highlights various term deposit rates on offer at the leading banks (as at 9 May 2013).
| ANZ | ASB | BNZ | KiwiBank | Westpac | |
| Online call savings account | 2.75% | 2.75% | 3.00% | 3.15% | 3.00% |
| Minimum deposit | $10,000 | $10,000 | $5,000 | $10,000 | $10,000 |
| 3 months | 3.25% | 3.25% | 3.25% | 3.30% | 3.25% |
| 9 months | 3.85% | 4.00% | 4.00% | 4.00% | 3.85% |
| 1 year | 4.00% | 4.10% | 4.20% | 4.10% | 4.10% |
| 2 years | 4.20% | 4.20% | 4.20% | 4.20% | 4.20% |
Fund Portfolio
This page is updated as changes to the portfolio occur. As you can see from the graphs and the list of companies below the Fund reflects a diversified portfolio of bonds issued by governments and corporates from around the world. Investments are only ever selected once they have passed our strict solvency, liquidity, and efficiency criteria.
Find out more about what the companies in the portfolio do and why we like them.
Sector Allocation as at 30 April 2013
Geographic Allocation as at 30 April 2013
David McLeish, Senior Portfolio Manager
Total Years' Investment Experience 12 years.
David has recently returned from London and joined Fisher Funds in January 2011 to run our fixed interest portfolios. With over a decade of experience trading and specialising in fixed interest securities around the globe, David's skill-set is a rare commodity in New Zealand. During his time in London he worked for Morgan Stanley, UBS and Goldman Sachs. Most recently, whilst at Goldman Sachs, David was charged with responsibility for building a multi-asset class investment team. As a result of his efforts he gained recognition from many of the world's largest investment funds as being a market leader in his field.
Matt Logan, Investment Analyst
Matt joined Fisher Funds after completing his studies at Otago University and initially worked in our middle office with responsibility for compliance and portfolio position keeping. Matt has been a member of the investment team for the last two years, initially assisting with researching companies and industries as part of our international portfolio strategy. Matt has recently joined the fixed interest team to support David McLeish with research. Matt is a CFA Charterholder.
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