OneAnswer KiwiSaver Scheme New Zealand Fixed Interest Fund

• New Zealand bonds finished the quarter modestly higher, helped in part by the Reserve Bank of New Zealand’s interest rate cut. The central bank cut the Official Cash Rate by 50 basis points, taking it to 3.75% and marking its third-consecutive 50 basis point cut. Moreover, the central bank signalled that further rate cuts were likely before the end of the year. 
• Bonds did face some headwinds though, which were largely driven by offshore markets – notably concerns around trade tariffs. Investors were worried that tariffs could lead to a reacceleration of inflation, a scenario that generally sees bonds underperform.
• Economic data in New Zealand was mixed over the quarter, but didn’t sway bond markets either way. The unemployment rate jumped to 5.1% from 4.8%, while annual inflation remained steady at 2.2%. There was some good news for the broader economy, with GDP growth rising 0.7% over the final quarter of 2024, which helped lift the economy out of recession.
• In March, Property for Industry (PFI) issued a five-year $150 million secured bond at 5.43%. This gives us exposure to the industrial zoned land sector, which has a supply/demand mismatch, while the deal underscores PFI’s commitment to investment in the sector.
• At a tactical level, the fund remained overweight to New Zealand Government Bonds, while it maintained its exposure to Australasian credit markets.

The fund invests mainly in New Zealand fixed interest assets. Investments may include:

• Fixed interest assets in New Zealand dollars, or issued by New Zealand located or incorporated entities and hedged back to New Zealand dollars
• Cash and cash equivalents.

This chart show the mix of assets that the fund generally intends to invest in – 100% fixed interest.

See the fund's actual investment mix on page 3 of the fund update.