Asset allocation
The percentage split of a fund's portfolio across asset classes: equities, fixed interest, listed property, cash, alternatives. Drives the fund's risk and return profile more than security selection.
Asset allocation is the percentage split of a fund's portfolio across major asset classes — typically NZ shares, international shares, NZ fixed interest, international fixed interest, listed property, cash, and sometimes alternatives. NZ Quarterly Fund Updates report a standardised target allocation and the actual allocation as at quarter-end.
Asset allocation is the dominant driver of a diversified fund's long-run risk and return profile — the academic research (Brinson, Hood, Beebower 1986 and successors) consistently finds asset allocation explains the large majority of return variability across funds within a category.
Asset allocation labels in NZ tend to follow a "growth-vs-income" split: growth assets are equities and listed property; income assets are fixed interest and cash. Common diversified-fund labels are: Conservative (around 20% growth / 80% income), Balanced (around 50/50), Growth (around 75/25), Aggressive (around 90/10) — but exact ranges differ by manager.
Related terms
-
FMA risk indicator
Risk indicator (1–7 scale)
A standardised 1–7 risk score every NZ retail managed fund must publish, calculated from the fund's price volatility (standard deviation of weekly returns) over the past five years.
-
QFU · Fund Update
Quarterly Fund Update (QFU)
A standardised FMA-mandated quarterly report each NZ retail managed fund publishes, summarising fees, returns, risk indicator, asset mix, top-10 holdings and fund size.
-
SIPO
Statement of Investment Policy and Objectives (SIPO)
The fund-manager document setting out the fund's investment objectives, strategy, asset allocation ranges, and investment-policy constraints (including any responsible-investment screens).