Kernel Rebalance Proposal
May 2026 — Based on verified fund data from kernelwealth.co.nz
Fund Performance (as at 30 April 2026)
| Fund | 1 Year | 3 Year p.a. | 5 Year p.a. | $10K → (5yr) | Fee |
|---|---|---|---|---|---|
| Global 100 | 43.2% | 26.7% | 20.8% | $26,251 | 0.25% |
| S&P 500 (Unhedged) | 31.9% | — | — | $22,593* | 0.25% |
| Emerging Markets | 34.4% | — | — | $15,902* | 0.45% |
| Global Infrastructure | 19.1% | 15.1% | 13.8% | $19,371 | 0.25% |
| Dividend Aristocrats | 23.3% | 15.8% | 11.2% | $17,518 | 0.25% |
| World ex-US | — | — | — | $19,102* | 0.25% |
*Benchmark (gross) returns where fund-level not yet available.
Fund Composition
Global 100
- Top 6 holdings = 48.5%: Nvidia (12.6%), Apple (10.4%), Microsoft (7.9%), Amazon (6.7%), Alphabet (5.8%), Broadcom (5.1%)
- Geographic: 80% US, 4% UK, 3% Switzerland, 3% Germany
- Sector: 44% Information Technology, 12% Communications
- Essentially a concentrated Magnificent 7 bet with some international mega-caps
S&P 500 (Unhedged)
- Top 6 holdings = 30.3%: Nvidia (7.9%), Apple (6.5%), Microsoft (4.9%), Amazon (4.2%), Alphabet (3.6%), Broadcom (3.2%)
- Geographic: 100% US
- Sector: 35% IT, 12% Financials, 11% Communications, 10% Consumer Discretionary
- Mag 7 heavy but diluted by 494 other companies. Healthcare, financials, industrials provide genuine diversification.
World ex-US
- Top holdings: ASML (2.3%), HSBC (1.3%), AstraZeneca (1.2%), Roche (1.2%), Novartis (1.2%), Nestlé (1.1%)
- Geographic: Japan 24%, Canada 12%, UK 12%, Switzerland 8%, Germany 7%, France 7%, Australia 7%
- Sector: 27% Financials, 17% Industrials, 10% IT, 9% Healthcare
- Zero Mag 7. Broad economy exposure. Lower valuations than US markets.
Global Infrastructure
- Top holdings: Enbridge (7.0%), Williams Companies (5.2%), National Grid (5.1%), American Tower (4.8%), Vinci (4.4%)
- Geographic: 50% US, 17% Canada, 7% UK, 6% Spain, 5% France
- Sector: 34% Oil/Gas Storage, 17% Multi-Utilities, 12% Electric Utilities, 9% Gas Utilities, 8% Telecom Towers
- Half US, heavily energy/utility weighted. 3.5% dividend yield.
Dividend Aristocrats
- Top holdings: Verizon (2.1%), Getty Realty (2.0%), Flowers Foods (1.9%), TELUS (1.8%), Pfizer (1.8%)
- Geographic: 61% US, 11% Canada, 6% UK
- Sector: 25% Financials, 18% Utilities, 13% Real Estate, 10% Consumer Staples
- Extremely diversified (no holding >2.1%), defensive sectors. Most stable in downturns.
Emerging Markets
- Structure: 99.8% invested in SPDR Portfolio Emerging Markets ETF
- Geographic: ~35% China, ~20% India, ~15% Taiwan
- Highest risk fund (risk indicator 5/7). Cheapest valuations globally.
Market Context (May 2026)
US Valuations at Historic Extremes
- S&P 500 Shiller CAPE ratio: ~40 — 3rd highest sustained level in 145 years
- Trailing P/E: 27-32 — well above 5-year average of 23
- Expected forward 10-year returns from US equities are historically LOW from CAPE >35
Global Outlook
- International/EM equities offer better relative value (consensus: JP Morgan, Goldman, Vanguard, Morgan Stanley)
- Recession risk: ~35% (elevated but not dominant)
- Major houses recommend diversifying away from US concentration
NZD/USD Forecast
- Expected range: 0.58-0.61 through 2026-2027 (roughly flat)
- Longer term (2030): potentially lower (0.53-0.59), which would BENEFIT unhedged foreign holdings in NZD terms
Proposed Allocation
| Fund | Current | Target | Rationale |
|---|---|---|---|
| World ex-US | 20% ($763K) | 37% ($1,409K) | Best risk-adjusted play: reasonable valuations, zero Mag 7, diversified |
| S&P 500 (Unhedged) | 5% ($198K) | 21% ($800K) | Core US growth, broader than Global 100, capped given CAPE ~40 |
| Emerging Markets | 22% ($817K) | 16% ($609K) | Cheapest valuations, trim overweight |
| Global 100 | 7% ($251K) | 11% ($419K) | Satellite for mega-cap growth; capped due to 48% concentration in 6 stocks |
| Global Infrastructure | 24% ($919K) | 10% ($381K) | Decent returns (13.8% pa) but overweight; reduce significantly |
| Dividend Aristocrats | 18% ($689K) | 5% ($190K) | Weakest grower; keep small position for downside protection |
| Cash Plus | 5% ($172K) | 0% (sell all) | No cash buffer — sell from overweight fund when tax due |
Why World ex-US at 37% is the Key Move
- Valuation gap: International developed markets trade at 14-16x earnings vs US at 27-32x
- Mean reversion: US outperformance over international is cyclical. The current 10-year gap is the widest in modern history.
- Employment diversification: Income, RSUs, and career are all USD/US-dependent via Microsoft. World ex-US diversifies away from human capital.
- Sector diversification: 27% Financials, 17% Industrials, 10% IT, 9% Healthcare — the real economy
- AI correction hedge: Zero Mag 7 means World ex-US outperforms significantly if US tech corrects
Why S&P 500 Over Global 100 as Primary US Fund
| Factor | S&P 500 | Global 100 |
|---|---|---|
| Diversification | 500 stocks | 100 stocks |
| Mag 7 concentration | 30% | 49% |
| Sector breadth | 11 sectors | 44% in IT alone |
| AI bubble risk | Moderate | HIGH |
| Forward expected return (CAPE 40) | Moderate | Lower (more concentrated in overvalued stocks) |
S&P 500 at 21% (core) + Global 100 at 11% (satellite) = 32% combined US/growth allocation without betting the farm on 6 stocks at extreme valuations.
Execution Plan
Sells (in units — enter these into Kernel)
| Fund | Units to Sell | ≈ Dollar Value | Remaining Units |
|---|---|---|---|
| Global Infrastructure | 71,069 | ~$538K | 50,356 |
| Dividend Aristocrats | 167,782 | ~$499K | 63,871 |
| Emerging Markets | 162,199 | ~$208K | 474,731 |
| Cash Plus | 55,402 (all) | ~$172K | 0 |
Buys (in dollars — Kernel converts to units)
| Fund | Buy Amount |
|---|---|
| S&P 500 (Unhedged) | ~$602K |
| World ex-US | ~$646K |
| Global 100 | ~$168K |
Total sells: $1,417K | Total buys: $1,416K ✓
~$1.4M turnover (37% of Kernel). Kernel processes within 2-3 business days. No tax events. All within PIE.
Note: Unit prices fluctuate daily. These unit counts are based on May 2026 prices. If executing days later, check the current unit price and adjust slightly. The dollar targets are what matter — unit counts are approximate.
Expected Impact
| Metric | Current | After Rebalance |
|---|---|---|
| Weighted avg 5yr return | ~12.5% pa | ~14% pa |
| Annual $ growth (Kernel) | ~$476K | ~$533K |
| Mag 7 exposure (Kernel) | ~14% | ~18% (diversified across S&P 500 + Global 100) |
| US exposure (Kernel) | ~32% | ~40% (through broader S&P 500) |
| Dividend yield | ~2.5% | ~1.5% (income not needed) |
Expected improvement: ~$57K/year in additional growth.
Summary
World ex-US is the core holding (37%) — reasonable valuations, zero Mag 7, genuine diversification from Microsoft employment. S&P 500 (21%) provides broad US growth without extreme concentration. Infrastructure and Dividend Aristocrats are trimmed from 42% combined to 15% — they're respectable performers but not optimal for a growth-oriented portfolio with a 15-25 year horizon. Cash Plus eliminated entirely.