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Managed Fund Returns Continue Strong Run


18th July 2005


Managed Fund Returns Continue Strong Run

NZ managed fund investors were rewarded with strong returns across all sectors for a second consecutive month in June. The latest managed fund performance figures, released today by investment research company FundSource, show that both NZ and international sharemarkets performed well over June, and this carried through to pleasing fund returns both in those funds that focus on these sectors and the Diversified funds with exposures to equities markets

Continued positive returns from NZ and international sharemarkets in June are great news for those investors who have stayed invested during the volatile period we have seen this year rather than withdrawing to invest in income assets, and also for those who investors who rode out the bear market and are now recovering their losses steadily

The further decline in the NZ dollar over June from this year’s record highs has also boosted the returns of many funds relative to their exposure to foreign currencies, which have been impeded while the currency was strong over an extended period

The strongest performances for June were recorded in NZ and Australian Equities. Actively managed NZ Equity funds returned 4.82% on average in June alone, bringing one year performances to an average of 13.15%. Australian Equity funds returned an exceptional 5.14% for the month, while International Equity (Global) funds returned 2.59%

Following is a summary of the main investment sector performances:

New Zealand Equity (Active) Unit Trusts

The average performance for NZ Equity active funds in June was 4.82%, up from 1.63% in May. Over the last two years these funds have delivered an average annual return of 13.47% to their investors. The top performing fund in this sector over the last year was the ING Equity Selection Fund with a return of 20.72%, closely followed by the Fisher Funds NZ Growth fund with 18.04% for the year. Active funds outperformed the market over June, with the NZSX50 Gross (33%) index returning 4.68%, the funds in the sector delivered 4.82%

"The NZ sharemarket continued to surprise in June with further upward momentum largely supported by merger and restructuring activity. While investors should not be too concerned about a hard landing, they should be aware that such high returns from domestic equities are not likely to be maintained as a slowdown in domestic activity is widely anticipated” says Binu Paul, Research Manager at FundSource

International Equity (Global) Unit Trust

A combination of adequate global sharemarket performance and a weakening NZ dollar resulted in an average performance for the sector of 2.59% in June, down from 4.61% in May. Top performing funds in June included the ING International Share Fund with 4.49%, and the AXA Global Equities Trust, which returned 3.47%

Sharemarket returns across June were satisfactory, with the MSCI World Free Gross (33%) growing 1.65% in NZ dollar terms. Part of this return is accounted for by a 1.51% depreciation in the NZ dollar against the US

Funds with higher exposure to foreign currencies outperform when the NZ dollar depreciates, and the currency exposure often provides the explanation for the diversity of funds performances in this sector

With a sector average of 2.59%, Global Equity funds also outperformed their benchmark index, the MSCI World Free Gross (33%) at 1.65%, again showing the value added by professional management

“Currency management policies have been a big issue for investors over the last couple of years, and have had a substantial impact on performances” says Binu Paul, Research Manager at FundSource. “Hedged funds outperformed while the currency was rising, and now that the dollar has come off the record highs those with a higher exposure to foreign currency are reaping the benefits.”

Diversified Funds

The combination of domestic and international sharemarket performances and the weakening NZ dollar meant Diversified funds also performed well in June. Diversified Balanced funds returned 1.79% for the month, while Defensive funds returned 1.10% and Growth funds, with their higher allocation to equities, returned 2.22%. These returns are only slightly lower than those in May, and over the last 12 months results are also very good. This is particularly pleasing for those investors who stayed invested through the bear market and are now reaping the benefits

FundSource’s managed fund returns are provided net of all relevant fees and taxes, reflecting the returns received by an investor in the fund



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