FREQUENTLY ASKED QUESTIONS

 
 

What investment philosophy will be adopted to manage our funds?

We adhere to an asset class investment philosophy. This style is contrary to the traditional ‘active management approach’ employed by brokers and most other financial planners whereby individual securities and investment managers are selected to outperform the market.

Since the early 1980s a significant body of academic research has amassed to consistently show that approximately 80% of all fund managers deliver below market performance once the effect of their fees and expenses are taken into account. Furthermore, the top 20% of fund managers vary from year to year. This makes trying to pick next year’s top performers a risky strategy and in our view likely to lead to below par returns.

An asset class strategy aims to deliver the returns from each asset class with minimal costs. If executed correctly it ensures investors are appropriately rewarded for the investment risks they take. The benefits of this approach are broad diversification – you will own approximately 8,000 different companies and assets; reduced volatility; lower risk; lower fees, and enhanced returns.

What type of investments do you use to build portfolios?

Depending on the client’s risk tolerance, objectives, and timeframes, we structure our clients’ portfolios with a differing ratio of debt (cash and fixed interest) to equity (property and shares).

To implement this strategy, a mix of low-cost managed funds are used for most client portfolios.

Other asset classes including Hedge Funds, Commodities, and Private Equity have thus far been rejected based on concerns around liquidity, transparency, costs, and a track record that lacks sufficient length for us to review their performance through different business cycles and to understand their behaviour.

How can I be sure that my money is safe and secure?

Through our relationship with the FNZ investment custodial system, you can rest assured that any funds you invest are securely held on trust on your behalf by a reputable custodian.

Bradley Nuttall Otago Limited does not hold any client assets at any stage of the investment process. We are your adviser, and we entrust custody of your assets to FNZ, a multinational company that administers custody platforms worldwide and holds on trust more than $100 billion in client assets.

All payments you make when investing are made directly to FNZ rather than to Bradley Nuttall Otago Limited. When you make a withdrawal, FNZ transfers the funds directly into your nominated bank account.

FNZ’s clients include two of the big four New Zealand banks, along with other large institutions.  No custodial platform based in New Zealand has more assets under administration globally.

The chart below explains the structure of the custodial relationship:

Custodian relationship.jpg

FNZ holds assets on the Consilium Platform on your behalf.  The Consilium Platform tracks your investments, collects income and provides up to date portfolio and taxation reporting.  The reporting is accurate and transparent, enabling you to see the net return from each of your assets.

The Consilium Platform is only available through selected institutions which have customised access.  Bradley Nuttall Otago Limited is part of a national network of independent financial advisers utilising the research and investment support services of Consilium, and FNZ is the custodian appointed by Consilium.

Click here to view the FNZ Disclosure Statement – Consilium.

HOW ACCESSIBLE ARE MY INVESTMENTS?

Should you need funds at any time, the amount you require will be paid into your nominated bank account within 10 business days of orders being placed. This is the period required to sell the number of investment units required to meet your withdrawal request.

If you would like to make portfolio withdrawals on a regular basis, such as monthly or quarterly, we can set this up for you. We can also adjust your withdrawals at any time according to your instructions. All withdrawals are paid by FNZ (our custodian - see above) directly into your nominated bank account.

How do you manage fixed interest in terms of credit and maximum exposures?
 

Bradley Nuttall Otago Limited’s fixed interest strategy is designed to:

  • Reduce portfolio volatility

  • Enhance certainty of income

To help minimise risk within a portfolio it is necessary to diversify within the fixed interest strategy. Different types of fixed interest securities can be used, e.g. bonds, capital notes, fixed interest trusts, etc.

Each type of investment has its own advantages and disadvantages and will perform differently in different market conditions.

Fixed Interest Risk

The returns from fixed interest are determined principally by:

  • Term to maturity

  • Credit quality – this reflects the financial strength of the organisation or institution that has issued the fixed interest investment

Higher returns are generally associated with longer maturity and lower credit quality.

Additional Guidelines for Pooled Investments

Where fund managers are used they must have a minimum average investment grade rating of A (Standard & Poors) and a maximum exposure to any non-government issuer of 10%.

Unrated investments may be considered subject to being approved by the Trustee and Bradley Nuttall Otago Limited investment committee. Maximum exposure to any unrated investments will not exceed 10% of the fund and 3% exposure for any issuer.

Offshore Fixed Interest

We believe it is prudent to have a portion of the portfolio held in offshore fixed interest, principally due to the relative size and lack of liquidity of the New Zealand debt market. When investing in offshore fixed interest we only use funds that are fully hedged to the New Zealand dollar, in order to avoid unnecessary exchange rate risk.

The currency hedge typically provides income that helps neutralise the difference between New Zealand’s relatively high short term interest rates and lower foreign interest rates.

General Guidelines for Investing in Fixed Interest

  • Duration should generally be less than five years

  • A laddered approach is best applied to ensure that investments mature at different times

  • The maximum investment default risk should be limited to 1.5%

  • Investments of lower quality (and therefore higher risk) should be limited to 3% of the portfolio

Please note that Bradley Nuttall Otago Limited does not engage in tactical asset allocation (sometimes termed “market timing”). We employ a buy and hold approach, and where individual securities (investments) are chosen, Bradley Nuttall Otago Limited will select them in an effort to track the overall return of the asset class from which they are selected. We do not necessarily expect to achieve better returns than those provided by the New Zealand debt (fixed interest) market as a whole.

 

if i’m dissatisfied with bradley nuttall otago’s services, how can i complain?

Your client experience is important to us. If you think our service isn’t up to scratch, we’d like to hear about it and try to fix it.

To find out how your complaint will be handled, read this summary of our complaints handling process.