2024 brought challenges to both capital markets and the real economy. Central banks stepped in to control inflation, putting significant pressure on sectors with high leverage, like real estate, venture capital, and consumer-focused businesses. These sectors saw substantial drops in valuations and company earnings.
In contrast, sectors such as healthcare, technology, infrastructure, and energy thrived. Our substantial investment in defensive stocks that can handle both inflation and increased financing costs helped our portfolio perform to expectations. This success underscores our key portfolio principles: diversification, inflation protection and strategic asset allocation.
Performance and Strategic Adjustments
Our investments in private equity, fixed income, and both global and domestic public equities saw significant growth. This growth allowed us to rebalance into major real estate assets like Tauranga Crossing Limited and Hamilton Street Panorama Towers, which are crucial for our long-term strategy.
Port of Tauranga
The Port of Tauranga is a cornerstone of our portfolio, representing a significant strategic asset. As New Zealand’s largest port, it plays a crucial role in our investment strategy. However, lower trade volumes and operational cost pressures have impacted the Port’s share price over the past year. In response, we’ve implemented strategies to reduce our single-asset exposure while driving long-term value. This includes diversifying our portfolio by increasing allocations to other high-performing asset classes such as fixed income, real assets, and private equity.
Non-Port Asset Allocation
We aim to balance growth and risk through our asset allocation strategy. The breakdown our our asset allocation is presented in the following pages. Asset allocation is a continual and dynamic process – Quayside is no different as we look to strategically position ourselves to meet our Investment targets.
Equities
- New Zealand Equities: Our New Zealand equities portfolio delivered a return of 2.99%, significantly outperforming the benchmark, which recorded a -1.66% return. Notable investments, such as Infratil Ltd and Meridian, contributed strongly to this growth.
- Australian Equities: Our Australian holdings achieved a return of 11.73%, slightly below the benchmark of 13.10%. Robust returns from ANZ Banking Group and CSL Ltd drove this performance, while detractors like APA Group and Transurban Group held it back from the
benchmark. - International Equities: Global equities returned 21.15%, surpassing the benchmark return of 20.59%. Key return drivers included Alphabet Inc., Amazon.com Inc., and Meta Platforms Inc.
- New Zealand Fixed Interest: Our New Zealand fixed interest investments yielded a return of 8.27%, outperforming the benchmark return of 6.32%.
- Total Equities Portfolio: The total portfolio, after fees, achieved a return of 10.17%, slightly below the benchmark of 10.78%.
Real Estate Portfolio
Our real estate portfolio experienced a drop in valuation due to changes in relative value, aligning with market expectations. However, the performance of underlying assets remained strong, with earnings growth and extended Weighted Average Lease Terms (WALTs). Key milestones included completing the Te Papa Tipu building, ongoing construction at Rangiuru Business Park, and starting Stage 3 at Tauranga Crossing.
Private Equity Performance
Our managed private equity investments showed resilience and growth, achieving a return of 14.3% for the year. This performance was driven by successful exits and favourable revaluations. Notable growth came from Waterman IV, LGT CSSO II and LGT CGO VII. However, our investments into direct private equity remain challenging. Difficulty in securing additional capital has led to pressure on asset valuations.
KEY PERFORMANCE METRICS
Portfolio Return: 7.5%*
Asset Valuation: $570 million
*5 year rolling return rate 2024
