1. The Research Portfolio
Putting it all Together: A Model Portfolio Framework
March 2019

2. Heathcote Fund Manager Roster

3. Heathcote Fund Line-up
Name
Currency Exposure
Category
Defensive Assets:
Daintree Core Income Trust NZD
NZD
Global Fixed Income
Daintree High Income Trust NZD
Premium Asian Income
Asian Basket
Asian Fixed Income

4. Heathcote Fund Line-up
Name
Currency Exposure
Category
Defensive Assets:
Daintree Core Income Trust NZD
NZD
Global Fixed Income
Daintree High Income Trust NZD
Premium Asian Income
Asian Basket
Asian Fixed Income
Real Assets:
APN AREIT PIE
Australian REITs
APN Asian REIT
Asian REITs
MBA Global Listed Infrastructure-Hedge
AUD Hedged
Global Listed Infrastructure

5. Heathcote Fund Line-up
Name
Currency Exposure
Category
Defensive Assets:
Daintree Core Income Trust NZD
NZD
Global Fixed Income
Daintree High Income Trust NZD
Premium Asian Income
Asian Basket
Asian Fixed Income
Real Assets:
APN AREIT PIE
Australian REITs
APN Asian REIT
Asian REITs
MBA Global Listed Infrastructure-Hedge
AUD Hedged
Global Listed Infrastructure
Growth Assets:
Allan Gray Australia Equity
AUD
Australian Equities
Allan Gray Australia Stable
Multi-asset
Apostle Dundas Global Equity
Global Basket
Global Equities - Large Cap
Capital Group New Perspective (AU)
Capital Group New World (AU)
Emerging Markets
Castle Point 5 Oceans
Castle Point Ranger Fund
New Zealand/Australian Equities
Castle Point Trans-Tasman
Fiducian India
Indian Rupee
Indian Equities
Fiducian Technology
Global Technology
Premium Asia
Asian Equities
Premium China
Renminbi
China Equities

6. Heathcote Fund Line-up
Name
Currency Exposure
Category
Role in Portfolio
Defensive Assets:
Daintree Core Income Trust NZD
NZD
Global Fixed Income
Core
Daintree High Income Trust NZD
Satellite
Premium Asian Income
Asian Basket
Asian Fixed Income
Real Assets:
APN AREIT PIE
Australian REITs
APN Asian REIT
Asian REITs
MBA Global Listed Infrastructure-Hedge
AUD Hedged
Global Listed Infrastructure
Growth Assets:
Allan Gray Australia Equity
AUD
Australian Equities
Allan Gray Australia Stable
Multi-asset
Apostle Dundas Global Equity
Global Basket
Global Equities - Large Cap
Capital Group New Perspective (AU)
Capital Group New World (AU)
Emerging Markets
Castle Point 5 Oceans
Castle Point Ranger Fund
New Zealand/Australian Equities
Castle Point Trans-Tasman
Fiducian India
Indian Rupee
Indian Equities
Fiducian Technology
Global Technology
Premium Asia
Asian Equities
Premium China
Renminbi
China Equities

7. Proven Research Process
Deep Dive
For new funds under our coverage we carry out a thorough Qualitative Manager Due Diligence.
This includes a detailed set of questions covering; staff & organisation, risk & investment management, and client servicing
Fund Monitoring
Quarterly Fund Fiduciary Scores
Extended analysis of funds which are on the "Watch List"
Annual onsite meetings with fund managers
Research Reports
Quarterly Fund Dashboard Reports
Long-form Research reports on a select list of funds
Thematic research

8. Heathcote Fund Fiduciary Score
The due diligence applied includes the following screens:
Risk-adjusted performance (Alpha and/or Sharpe Ratio) is evaluated against the three-year performance of the fund’s peer group
Performance relative to a passive market alternative; should exceed this over a +three-year horizon
One, three and five-year performance; should be above median value relative to peers
Track record; the product’s inception date must be greater than three years
Assets in the fund; the product should have at least $75million under management (total across all share classes)
Style consistency; the product is required to consistently hold the intended asset classes and/or be consistent with its documented strategy
Composition consistent with asset class; the product should have no more than 20% of its portfolio invested in unrelated asset class securities (for asset class funds)
Expense ratio/fees relative to peers; the product’s fees should not be in the bottom quartile (most expensive) of its peer group
Stability of the organization; there should be no perceived organizational problems – the portfolio manager should have at least a two-year tenure

9. Heathcote Fund Fiduciary Score

10. Heathcote Fund Fiduciary Scores
Daintree Core Income Trust
Daintree High Income Trust
APN AREIT PIE Fund
MBA Global Listed Infra
Castle Point Ranger
Castle Point Trans-Tasman
Allan Gray Australia Equity
Capital Group New Perspective
Dundas Global Equity
Capital Group New World
Premium Asia
Risk-adjusted performance
Performance relative to a passive market alternative
One, three and five-year performance
Track record
Assets in the fund
Style consistency
Composition consistent with asset class
Expense ratio/fees relative to peers
Stability of the organization

11. Model Portfolio Allocations
Asset Class
Core
Satellite
New Zealand Cash
New Zealand Bonds
Global Bonds
Real Assets
Trans Tasman Equities
Developed Market Equities
Emerging Market Equities

12. Model Portfolio Allocations
Asset Class
Core
Satellite
New Zealand Cash
New Zealand Bonds
Global Bonds
Daintree Core Income Trust NZD
Daintree High Income Trust NZD
Real Assets
APN AREIT PIE Fund
MBA Global Listed Infrastructure AUD Hdg
Trans Tasman Equities
Castle Point Trans-Tasman
Allan Gray Australia Equity
Developed Market Equities
Capital Group New Perspective
Apostle Dundas Global Equity
Emerging Market Equities
Capital Group New World
Premium Asia

13. Model Portfolio Allocations
Asset Class
Core
Satellite
New Zealand Cash
New Zealand Bonds
Global Bonds
Daintree Core Income Trust NZD
Daintree High Income Trust NZD
Real Assets
APN AREIT PIE Fund
MBA Global Listed Infrastructure AUD Hdg
Trans Tasman Equities
Castle Point Trans-Tasman
Allan Gray Australia Equity
Developed Market Equities
Capital Group New Perspective
Apostle Dundas Global Equity
Emerging Market Equities
Capital Group New World
Premium Asia

14. Model Portfolio Allocations
Asset Class
Core
Satellite
New Zealand Cash
Smartshares NZ Cash (Nikko)
New Zealand Bonds
Smartshares NZ Bond (Nikko)
Global Bonds
Daintree Core Income Trust NZD
Vanguard Ethiclly Conc Gbl Agg Bond NZD Hdg
Daintree High Income Trust NZD
Real Assets
APN AREIT PIE Fund
Vanguard Int Property Secs Index AUD Hdg
MBA Global Listed Infrastructure AUD Hdg
Trans Tasman Equities
Castle Point Trans-Tasman
Allan Gray Australia Equity
Smartshares NZ Top 50
Developed Market Equities
Capital Group New Perspective
Apostle Dundas Global Equity
Vanguard Ethically Cons Intl Shares Index NZDH
iShares MSCI EAFE Small ETF
Emerging Market Equities
Capital Group New World
Premium Asia

15. Fixed Income Allocation
Ave Credit Quality: BBB+
Ave Credit Quality: A
Ave Credit Quality: A
Source: Morningstar Direct

16. Fixed Income Allocation
Portfolio Rules
Investment Universe
Government Bonds Exposure (%)
Credit Quality
Duration (yrs.)
Nikko AM NZ Cash
10.0
New Zealand
13.5 AA
0.3
Nikko NZ Corporate Bond
30.0
12.7 A
3.9
Daintree Core Income
17.5
Global
3.0
0.8
Daintree High Income
12.5
---
BBB+
0.7
Vanguard Global Bond
51.3
AA-
6.9
Total Portfolio
100
NZ/Global
19.1
2.9

17. Some key AA issues in the current environment….
Rates are low and duration risk remains very elevated, deal by:
Tilting to lower duration bonds c/f Barclay’s Global Aggregate
Increasing exposure to IG credit vs. Sovereigns
Increasing exposure to fixed income fund with absolute return (cash plus) objectives.

18. Real Assets Allocation
Asset Class
Core
Satellite
Real Assets
APN AREIT PIE Fund
Vanguard Int Property Secs Index AUD Hdg
APN Asian REIT
MBA Global Listed Infrastructure AUD Hdg

19. Real Assets Allocation
Source: Morningstar Direct

20. Trans Tasman Equities Asset Class Core Satellite Trans Tasman Equities
Castle Point Trans-Tasman
Allan Gray Australia Equity
Smartshares NZ Top 50

24. Allan Gray Top 10 Holdings
Source: Morningstar Direct

25. Allan Gray Performance
Source: Morningstar Direct

26. Model Portfolio Allocations
Asset Class
Core
Satellite
Developed Market Equities
Capital Group New Perspective
Apostle Dundas Global Equity
Vanguard Ethically Cons Intl Shares Index NZDH
iShares MSCI Small ETF
Emerging Market Equities
Capital Group New World
Premium Asia

29. US Equity Exposure
Source: Morningstar Direct

30. Emerging Markets Exposure
Source: Morningstar Direct

31. Capital Group New World
Source: Morningstar Direct

32. Some key AA issues in the current environment….
US equities expensive, only value and EM equities appears materially ‘cheap’, deal by:
Ensuring EM equity exposures at least in line with global MSCI ACWI benchmark weights.
Selecting ex-US developed market funds and/or managers with more global view.
Selecting value focussed funds and/or managers
NZ interest rate carry very low (still positive on MSCI basis):
Hedging of offshore growth exposures less important (for now)

33. HIP Portfolios

34. HIP Portfolios

35. HIP Portfolios

36. Annex: Adviser Support Tools

37. MyFiduciary Adviser Support Services

38. Further Information MyFiduciary & fi360 Pacific
CEFEX registered firms
and
AIF registered individuals
search.html#action=AdvancedSearch&cid=1118&did=101