Managed Funds Back in Favour With Investors

28 July 2006

MEDIA RELEASE

Managed Funds Back in Favour With Investors

FundSource Research’s latest quarterly Industry Trends and Market Composition report highlights that investors are showing an increasing appetite for managed funds. In the three months to June, the managed funds industry saw net fund inflows of $22 million, the first positive flow in any quarter since Dec 2003.

Binu Paul, general manager at FundSource says “This is a trend that we have seen developing from mid-2005 and it is very encouraging to see fund flows finally turn up to positive territory. It is also typical of investor behaviour as it comes after a sustained and prolonged period of strong performance especially from international shares. Anecdotal evidence also points to stresses in the finance company debenture sector that have caused concern to those investors, encouraging them to shift their preference to managed fund products, which typically have materially lower risks”.

The report which tracks trends in the New Zealand retail managed fund industry across unit trusts, group investment funds, superannuation funds, insurance bonds and Australian unit trusts promoted by all NZ based fund managers, now shows Total Net Funds under Management (NFUM) sitting just shy of $22 billion, a record high. This comes even as international shares suffered from a month of poor performance in May.

In very broad terms, investors preferred NZ and Australian unit trusts which saw net inflows of around $75 million for the three months to June, at the expense of Insurance bonds and Superannuation products. In terms of asset classes diversified funds, property funds and international fixed interest funds were the biggest gainers.

While NZ Funds continued to dominate the Unit Trust sector with over 20% share of total funds under management, the Superannuation sector continues to be dominated by ING (including National Bank and ANZ) with a 23% share of that sector.

Following are some of the highlights from the report.

NET FUND FLOWS

The table below highlights some of the key trends in fund flows across sectors, relative to the previous quarter:

Net Fund Flows in $Million

Sector Jun-06 Quarter Mar-06 Quarter

Int'l Fixed Interest 107.1 53.9
NZ Diversified 20.2 -28.3
NZ Property 10.6 -6.2
NZ Mortgage 3.3 1.4
Global Int'l Equity -1.7 15.7
Australasian Equity -12.2 -43.1
NZ Cash -95.3 12

International Fixed Interest funds experienced the largest positive flows of $107.1m for the quarter while the NZ Cash sector saw the biggest quarter-on-quarter swing in fund flows, going from positive $12.0m last quarter to negative $95.3m this quarter.

In terms of legal structure, Australian Unit Trusts (AUTs) and Unit Trusts (UTs) were the most popular with inflows of $42.1m and $32.3m respectively. Group Investment Funds (GIFs) were less popular this quarter, with flows going from positive $80.5m last quarter to negative $4.1m.

NET FUNDS UNDER MANAGEMENT

Total Net Funds Under Management (NFUM) grew by a mild 0.5%, or $116.6m over the June quarter, compared to 4.3% ($907.7m) for the March quarter, despite positive fund flows in to the industry.

Total NFUM now stands at a record high of $ $21.9 billion.

Sectors adding to the growth in NFUM included the NZ Property and International Fixed Interest sectors, at $135.5m and $121.8m respectively. NZ Property was the strongest performing domestic sector over the June quarter, while the International Fixed Interest sector benefited from strong positive fund flows.

ING (NZ) Ltd, which also manages the National Bank and ANZ range of funds, retained the top spot, in terms of net funds under management.

TOP 5 RETAIL FUND MANAGERS (as at June ’06)

Manager Funds Under Management $ Billon

ING (incl. ANZ & NBNZ) 4.7
NZ Funds Mgmt. 2.01
AMP 1.9
ASB Bank 1.86
AXA (incl. BNZ) 1.74

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

ENDS

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