Asset allocation is foundational to building diversified portfolios. The term ‘asset allocation’ refers to the mix of various asset classes in an investment portfolio. The available asset classes typically include stocks, bonds, alternatives, and cash equivalents, with each having a long-term target percentage or range in the portfolio. To identify a suitable asset allocation, an…

The New Zealand dollar is one of the most volatile currencies in the world. Movements in its value relative to other currencies can have a significant impact (in either a positive or negative way) on the cost of everyday items like petrol, food and a new pair of shoes. Currency fluctuations can also add to,…

An interest rate swap is an agreement between two parties to swap cashflows (fixed vs floating) at set future points in time. The party wanting fixed-rate obligations will be the fixed-rate payer and pay the agreed-upon swap rate at a semi-annual frequency throughout the contract term. The other counterparty, the floating rate payer, receives the…

What is private equity? Private equity is as simple as the name suggests – it comprises investment into a company that is not publicly listed and traded. As an asset class, private equity typically encompasses investment funds that will buy companies, or stakes in companies, to generate a return for their investors. One of the…

In this jargon buster we explain the key differences between defensive and cyclical stocks, and when defensive stocks might be preferred to cyclical stocks – or vice versa. What are defensive stocks? These are companies with defensive earnings – meaning earnings are not overly correlated to the economic cycle. These companies typically provide necessities that…

In this jargon buster we look at the role interest rates play in helping to determine the value a company. How interest rates affect valuations The prospect of rising interest rates has implications for the valuations of companies. Higher interest rates reduce the relative appeal of companies paying a big dividend. All of a sudden,…

Those who follow fixed income or bond markets closely will often talk about the ‘yield curve’. In short, this is the relationship between short and long-term interest rates. It tells us a lot about where financial markets see an economy going in the future, and in recent months we have seen some significant changes in…

If you have owned shares directly in a company, you may have been offered a chance to purchase additional shares at a discounted price. This is known as a capital raise. In this jargon buster we explain why companies may look to raise additional funds from shareholders, and the different ways they go about it….