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Monthly Report July 2020


Return  volatility

All returns are in NZ$ 31 July 20 3 months 12 months Since
inception pai

inception pai

Aspiring Fund

2.03% 6.33%  5.30%   10.66%

New Zealand Equitiesii

2.42% 11.35% 8.01%     9.02%

Australian Equitiesiii

1.61% 10.08%  -6.21%     5.66%

World Equitiesiv

1.26% 4.42%  6.04%    6.25%
i February 2006, ii NZX50 Gross, iii ASX All Ordinaries Accumulated, iv MSCI World Equities Total Return

Unit Price


Asset Allocation

New Zealand Equities


Australian Equities


International Equities




Total Cash


Short Equities

Net Fund Value $406.9m

The Fund's main direct currency exposures at month end were - NZD 50%
, AUD 15% , USD 28%

The Fund returned 2.03% in July.

Once again in-phase with the rally in Global risk assets, the NZD appreciated for a fourth consecutive month and was up 2.7% in July. Running unhedged, currency was a return headwind for the Fund. However, this was more than offset by exceptionally strong performance of the Fund’s investments in global technology/growth companies.

With a bull market rally at full throttle, investors are reacting quickly to positive news, and discounting deteriorating coronavirus contagion across the globe, growing US/China tensions, and threats of government policy shifts (including corporate tax hikes under a potential Biden presidency in the US).  

The Chinese market rallied (H shares +9% in USD) as a state-owned news publication noted the fostering of a healthy share-market was more important to the China economy now than ever. In the US, equities rallied on more optimistic news on vaccine progress. Notably, the normally restrained White House Health Advisor, Anthony Fauci, said that he is hopeful the US will have an effective vaccine by year end.

The Fund maintained a conservative (+20%) allocation to cash during July. We remain cognisant of risk, with economies and investment markets far from normal.

Headline economic activity in New Zealand is proving better than initially feared. However, these results are being fuelled by unsustainable levels of Fiscal and Monetary stimulus. Generational increases in Government debt will create negative long-term consequences for policy decisions and sustainable growth. In a recent meeting with investors, Green Party co-leader James Shaw expressed his concern over the current NZ Government ambitions to pull forward 10yrs of discretionary spend. 

In a low interest rate environment where equities present as the only game in town for medium-term investors, we are sympathetic to valuations seemingly reflecting a premium for the security/survivorship of mega-cap technology growth companies. However, given the size of gains over the month, we have trimmed a number of our core platform/technology company positions (Amazon, Alibaba, Google, Tencent, Visa/Mastercard) to be reviewed following the bedding down of updated expectations post quarterly reporting.

Pleasingly the number and size of the Fund’s winners in July far exceeded stocks that negatively contributed.

The performance of the NZ portfolio (+2.5%) was particularly pleasing as it weathered Rio Tinto’s decision to close the Tiwai Aluminium Smelter in 13-months.

Rio’s announcement took a further $1b off the value of the listed gentailer sector which was already down $3b from highs before Rio announced its strategic review. This reaction implies a ~$250m structural decline in annual sector cashflow, which we view as too pessimistic. At an individual stock level, we estimate key Fund holding Contact Energy (-6.7%) is valued on the basis it will take around 20 years for the dividend to return to FY19 levels of 39 cents per share.

Mainfreight (+19%) and Summerset (+21.5%) were key NZ large company contributors to Fund performance. Summerset provided a positive update, noting strong sales of its units post the lockdown period. At their Annual Shareholders Meeting Mainfreight proved doubting forecasters wrong with a solid trading update and evidence of a step-change in return performance from Mainfreight Australia (with revenues and profits exceeding that of their NZ business).

We also made good gains in the small cap space with our tail of positions in the NZ portfolio. After lagging year to date, NZ small caps finally caught a bid, up over 10% in July. Some of the best performers in our portfolio included Ike GPS (24.5%), AFT Pharmaceuticals (18.6%), Comvita (16.5%), Turners (7.6%), Serko (6.7%) and Foley Family Wines (5.9%). Another winner was Pacific Edge following the announcement that they had finally cracked commercialisation of their product suite in the US. These stocks collectively contributed ~0.4% to Fund performance.

The Australian portfolio had a solid month, with Fortescue (25.7%) the biggest gainer, and Telstra also having a strong month (+7%), while Cleanaway was the main headwind (-5%), falling on no specific news.

Fortescue has been a stellar performer over the past 18 months on the back of a steadily rising iron ore price, with the stock up 345% since the beginning of 2019. The company provided a market update with quarterly iron ore shipments exceeding guidance and forecasts for 2021 ahead of market expectations. We have taken profits in the name.

We have been accumulating shares in Telstra since the end of April on the basis of what we viewed as an undemanding valuation and a dividend yield which would increasingly appeal to Australian income investors against more economically exposed high yield alternatives including the Banks.

The International portfolio had a particularly strong month, led by e-commerce platform giants, Alibaba (+16.4%) and Amazon (+14.7%).

In a shareholder letter, Alibaba reiterated its goal to serve 1b consumers in China and facilitate Rmb10t of value on its platform in the next 5 years. Buoyed by Chinese equities strength, Baba's share price was further spurred on by media reports that 33% owned Ant Financial (home to Alipay) is preparing for a Hong Kong IPO later this year.

Amazon smashed their own and analyst expectations with Q2 revenues up 40% (their guidance was for 18-27% growth) and provided 3rd quarter revenue guidance of 24-33% vs Q3 in 2019. It was a truly remarkable result from one of the world’s largest companies, which now has a market cap surpassing US$1.5t. On the result call, management stated they are running out of network space, so have deferred their Prime Day to Q4. When adjusting for the absence of Prime Day, company Q3 guidance implies a revenue growth rate more consistent with Q2. Amazingly, Amazon plans to overcome its bottleneck constraints by year end with total logistics/storage space expected to finish the year 50% higher than 2019.

The main detractor in our International Portfolio was the UK homebuilder Taylor Wimpey (-17%). The stock had drifted lower through the month before falling -8% on announcing revenue had halved during the half year to June due to coronavirus lockdowns. The business is trading on an undemanding FY21 price/earnings ratio of 9x, cash dividend yield of 8%, and following an equity raise in June has a strong balance sheet with net cash of GBP500m.

We continue to favour high levels of country, industry and company diversification, and remain optimistic that the August reporting season may open-up new investment opportunities for the Fund.

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Disclaimer :  The information contained in this newsletter reflects the views and opinions of the issuer of the Aspiring Fund, Aspiring Asset Management Limited.  The content of this newsletter is not intended as a substitute for specific professional advice on investments, financial planning or any other matter, and does not take into account any particular investor’s objectives, financial situation or needs.  Investors should seek the advice of an authorised financial adviser before making any investment decisions. Although the information provided in the newsletter is, to the best of our knowledge and belief correct, Aspiring Asset Management, its directors, employees and related parties accept no liability or responsibility for any loss, damage, claim or expense suffered or incurred by any party as a result of reliance on the information provided and opinions expressed in this newsletter, except as required by law.  Please also note that past performance is not necessarily an indication of future returns.

For further information please read/request a copy of the Product Disclosure Statement for the Aspiring Fund (available at or contact Aspiring Asset Management..