Aligned Long Term Focused - Heathcote...

• Aligned

• Long Term

• Focused

Meet the Managers - March 2017

Stephen Bennie, Partner

Disclaimer

• This information is intended solely for the use of wholesale investors, as defined in the Financial Markets Conduct Act 2013

(New Zealand) and wholesale clients as defined in the Financial Advisers Act 2008. It is not for general public distribution. By

receiving this information you represent that you are a wholesale client.

• Past performance is not indicative of future performance. The value of an investment and the income from it can fall as well

as rise and you may not get back the amount originally invested. This information does not purport to be a comprehensive

statement or description of any markets or securities referred to within. Tax assumptions and reliefs depend upon an

investor’s particular circumstances and may change if those circumstances or the law change. Prospective investors should

not rely on this information and should make their own enquiries and evaluations they consider to be appropriate to

determine the suitability of any investment (including regarding their investment objectives, financial situation, and particular

needs) and should seek all necessary financial, legal, tax and investment advice. If you invest through a third party provider

you are advised to consult them directly as charges, performance and terms and conditions may differ materially.

• This information is not intended to be nor should it be construed as advice. This information is not a recommendation to sell

or purchase any investment. It does not form part of any contract for the sale or purchase of any investment. Any investment

application will be made solely on the basis of the information contained in the relevant fund's offer document (including all

relevant covering documents), which may contain investment restrictions. This information is intended as a summary only

and (if applicable) potential investors must read the relevant fund's offer document before investing.

• This information has been prepared using information from a variety of sources. The information is believed by Castle Point

to be correct but no warranty is made with respect to its completeness or accuracy. All opinions and estimates in this

information are subject to change without notice. Castle Point is not under any obligation to update this information to the

extent that it is or becomes out of date or incorrect. This information is confidential and must not be made available,

published or distributed to any third party without the prior written consent of Castle Point.

Castle Point Team

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Richard Stubbs Stephen Bennie Jamie Young Gordon Sims

RolePortfolio Manager

(equities) & Analyst

Portfolio Manager

(equities) & Analyst

Portfolio Manager

(5 Oceans) & AnalystAnalyst

EducationM.Com (Hons 1st)

B.Sci (Auckland)

B.Com (Hons)

CFA

MMath (1st Oxford)

CFA

M.Finance

CFA

Industry

Experience23 years 23 years 9 years 6 years

• One of longest standing and experienced teams in NZ

• Combined over 50 years investment experience

• Multiple degrees from around the world and three CFA Charterholders

Castle Point – a different boutique manager

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• Established in 2013

– clients trust us to manage over $200m

• Aligned

– invest in our funds alongside clients

• Long term

– many claim this but few truly are

• Focused

– all we do is manage money for our clients

“You have to be different to outperform the market”

Castle Point

5

Outlook for New Zealand Equities

We’re looking at the other side of the world……..

The Great 30 Year Bond Bull Market

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US 10 Year Treasury Index

Who has been buying NZ equities?

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• New Zealand share registers have changed dramatically

• Off shore investors have come to town and they’ve had a great time

• “Equities for Income, Bonds for Gains”

Exactly who has been buying our companies?

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• Artemis Global Equity Income Funds

• Own 57 million shares (9%) of Sky City Entertainment Group

• Newtown Investments Global Equity Income Funds

• Own 131 million shares (7%) of Spark New Zealand

• Blackrock Global Dividend Select Funds

• Own 42 million shares (6%) of Fletcher Building

• And 40 million shares (10%) of Sky Network Television

• And 116 million shares (6%) of Spark New Zealand

What will make them sellers?

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Two triggers to sell:-

1. Investors can once again get income from bonds

• Interest rates rise and actually offer some return

• Watch 10 year Treasuries

2. Dividend yield of a company disappears

• Share price rises to an extreme level

• The company cuts its dividend

What happens when you cut your dividend

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The Great 30 Year Bond Bull Market

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US 10 Year Treasury Index

Has the canary just keeled over?

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Market pricing of a March OCR rise

Has the canary just keeled over?

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Market pricing of a March OCR rise

Outlook for New Zealand Equities

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• Concerned for the NZ equity share market outlook

• Lack of valuation support for the bulk of NZ shares

• Off shore investor flight risk

• What equities should investors own?

• Companies trading at a significant discount to their intrinsic value

• Companies with pricing power

Ranger Fund

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Ranger Fund Since Inception

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Past

Year

Past

3 Years

Ranger Fund 19.52% 8.84% 8.53%

NZ Official Cash Rate plus 5% 7.04% 7.78% 7.60%

Over/Under Performance +12.48% +1.06% +0.93%

*Fund inception 24th January 2014

Since

Inception

(p.a.)*

Ranger Fund Holdings as at 28th February 2017

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Largest Holdings

MacMahon Holdings AUD 6.9%

Vista Group International NZD 5.9%

IVE Group Limited AUD 5.8%

Swick Mining Services AUD 5.7%

Boom Logistics AUD 5.6%

Wellcom Group AUD 5.6%

Australian Vintage AUD 4.7%

Corporate Travel Management AUD 4.5%

Michael Hill International NZD 4.5%

Millennium and Copthorne Hotels NZD 3.1%

Other Australasian Listed Holdings 10.9%

Cash & Debt Instruments 37.0%

Macmahon Holdings

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Macmahon Holdings

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Macmahon Holdings

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Ranger Buys

2.5% at 7c

Ranger Buys

to 5% at 5c

Net Tangible Assets = 16.5c

Macmahon Holdings

21

Summary

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• Get ready for a different world if US 10 year Treasuries yield +3%

• Investors will no longer own equities for income

• Be ahead of $20-30 billion of selling in NZ equities

• What manager should you be with

• Aligned

• Long term

• Focused

“You have to be different to outperform the market”

Phone: +64 9 300 6060

Level 4, General Buildings,

29-33 Shortland St,

PO Box 105889, Auckland 1143

Email: info@castlepointfunds.com

www.castlepointfunds.com