It's not all bad news: 2011 fixed interest investment performance

While the media have recently focussed on the downturn of equities, fixed interest investments have performed strongly.  Stewart Group currently uses two Fixed Interest strategies with client portfolios: the DFA Five Year Diversified Fixed Interest Trust; and the Harbour NZ Corporate Bond Fund.  Both of these Funds have generated consistent net returns totalling more than 6% for the nine months to 30 September. 
 
The DFA Five Year Diversified Fixed Interest Trust invests in short to medium term, high credit quality global paper of governments, semi-governments, banks and highly rated corporates.  The allocation between countries and maturity dates is carefully managed and foreign currency exposure is hedged back to the New Zealand Dollar.  The Fund currently has zero exposure to the problematic sovereign debt of Iceland, Portugal, Italy, Greece and Spain.
 
The Harbour NZ Corporate Bond Fund predominantly invests in New Zealand corporate bonds of ‘A- Grade’ or higher.  It holds over 100 securities spread across 50 issuers.
 
As well as consistently achieving post-fee returns handsomely above that of major bank term deposits, the benefits for investing in well managed Fixed Interest Funds such as these are:

 
The chart below shows how $100,000 invested in these Funds on 1 January 2011 is now worth over $106,000.  The consistent upwards trend of the chart show that Fixed Interest Funds are certainly worth focussing on, despite the lack of media attention.
 

 
So whilst you will read ‘doom and gloom’ in the press and on the television, with highly rated, well diversified fixed interest funds you can rest easy during these periods of volatility.

To even further diversify the fixed interest component of our client portfolios, we will shortly be introducing the DFA Global Bond Trust.  This Fund invests in highly liquid, investment grade global bonds of governments and corporate.  Again, there is zero exposure to problematic European sovereign debt, and all foreign currency exposure is hedged back to the New Zealand Dollar.  Like our current Fixed Interest Funds, it will not invest in any hybrid securities or complex derivatives and charges low wholesale management fees to Stewart Group clients.