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Investors’ Interest in Managed Funds Improves


24 April 2006

Investors’ Interest in Managed Funds Improves

After two years of net outflows from the managed funds industry in New Zealand the trend now appears to be on the verge of a turnaround. FundSource’s latest quarterly report on the managed funds “Industry Trends and Market Composition” report shows net fund flows remained relatively flat with a mere $2.2 m of outflows for the quarter to March ‘06, compared to net outflows of $35.8 m and $170.30 m in the Dec 05 and March ’05 quarters respectively.

Total Net Funds Under Management (NFUM) grew to a record high of $21.8 billion, growing by 4.5% during the March quarter, the largest quarter-on-quarter increase since December 2001.

This was largely on the basis of fund managers delivering excellent performances after tax and fees, over the quarter as well as over the 12 months to March this year. Especially notable were funds in the international equity sector, returning on average around 30% after tax and fees in the 12 months to March this year.

“A likely reversal in managed fund investor trends from recent years of negative flows is very encouraging. With the Government’s proposed tax regime targeted to remove the current disincentives of investing in managed funds the scene is set to further popularise the managed funds industry over the next two to five years. We are certainly hoping to see a much larger and more vibrant future for the industry here in New Zealand.”

NET FUND FLOWS Delving deeper into retail managed fund flows for the March quarter; money flowed into International Fixed Interest, Global International Equity and NZ Cash, and out of Australasian Equity, NZ Diversified, and NZ Property. The remaining sectors ended the quarter relatively flat. The table below highlights some of the key trends in fund flows across sectors, relative to the previous quarter:


Sector Mar ’06 quarter ($mil) Dec ‘05 quarter ($mil) Global Int'l Equity Int'l Fixed Interest NZ Diversified NZ Property NZ Mortgage NZ Fixed Interest Australasian Equity Other $15.7 m $53.9 m -$28.3 m -$6.2 m $1.4 m -$4.8 m -$44.3 m -$2.4 m -$35.4 m $124.8 m -$66.5 m $20.0 m -$79.5 m -$2.1 m -$50.5 m $0.1 m

International Fixed Interest funds experienced the largest positive flows of $53.9m for the quarter while the Mortgage sector saw the biggest quarter-on-quarter swing in fund flows, going from negative $79.5m last quarter to positive $1.4m this quarter.

The Australasian Equity sector saw the largest outflows of all the sectors at -$44.3m this quarter, with the NZ Diversified sector losing -$28.3m. In terms of legal structure, Superannuation Funds , whilst still experiencing net outflows, saw the most improvement; going from -$68.6m in December to just -$2.8m this quarter. As with the previous quarter, Group Investment Funds (GIFs) and Australian Unit Trusts (AUTs) were the only legal structures to see fund inflows this quarter.


Total Net Funds Under Management (NFUM) grew by 4.5%, or $940.4m over the March quarter, despite net fund flows in the industry being relatively flat. Total NFUM now stands at a record high of $21,814.4m. This represents the largest quarter-on-quarter increase since December 2001.

Sectors assisting the growth in NFUM include the Regional International Equity and Global International Equity sectors, which both increased by 13.4% this quarter, resulting in the largest NFUM recorded. All the largest 10 fund managers, in terms of funds under management, experienced an increase in net funds under management. ING (NZ) Ltd, which also manages the National Bank and ANZ range of funds, retained the top spot. Website:

TOP 5 RETAIL FUND MANAGERS (as at March ’06) Manager Funds Under Management ($bil) ING (incl. ANZ & NBNZ) NZ Funds Management AMP ASB Bank AXA (incl. BNZ) 4.67 1.98 1.95 1.79 1.78

FUND PERFORMANCES (as at March ’06) Sector 1 Month Returns 1 Year Returns NZ Equity (Active) Intl. Equity (Global) Intl. Fixed Interest Diversified Balanced NZ Property NZ Mortgage NZ Fixed Interest 7.8% 6.6% -0.1% 3.6% 0.7% 0.4% 0.7% 17.3% 29.1% 3.3% 14.6% 14.1% 5.0% 4.8% 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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