Funds returned 3.0% for Sept. Qr, 11.2% Sept Yr
Wednesday 31 October 2007
Mercer survey of fund managers shows funds returned 3.0% for September quarter, 11.2% for September year.
Superannuation funds delivered positive returns for the third quarter of 2007, recording a median return of 3.0% for New Zealand investors.
Published today, Mercer’s Quarterly Survey of
New Zealand Wholesale Superannuation Fund Managers showed
the highest performing funds for the quarter were AMP
Capital Investors’ Unit Trust and Arcus Investment
Management. Both recorded a return of 3.7% before tax and
fees while the lowest return was from BT Funds Management at
1.7%. Over the full year Arcus also produced the highest
return (at 14.9%) while BT Funds Management again lagged the
group with a return of 7.2%.
Fund managers with a higher than average allocation to overseas equities tended to perform better over the quarter.
“The September quarter was one of the most volatile periods we have seen in both local and offshore markets for quite some time” said David Scobie, Principal of Mercer. A loss of confidence in financial assets of lower credit quality, sparked by troubles in the US sub-prime mortgage sector, initially spread across to other asset classes, including shares. However, by quarter end, domestic and most overseas equity markets had re-couped much of their losses. Government bond markets benefited from a general “flight to quality” over the period at the expense of corporate bonds. Short-term interest rates in New Zealand remained at elevated levels while, in the US, the Federal Reserve moved to lower the official cash rate which served to help restore market confidence and liquidity. The New Zealand dollar was particularly volatile, eventually finishing the period down around 5% in trade-weighted terms. Despite the extreme movements in markets, Balanced Fund returns for the quarter across fund managers surveyed were all positive and in a relatively tight range of 2%. The level of individual Fund exposure to offshore currencies continues to be a notable driver of returns across shorter periods, but ultimately the wide degree of asset exposure diversification has been proving its worth”.
Findings from the survey
include the following:
Global stockmarkets, for hedged and unhedged New Zealand investors recorded positive returns over the quarter, with unhedged investors benefiting from a fall in the NZ dollar. Major international share markets delivered mixed returns in local currency terms, with Australia and the US gaining value over the quarter while the Japanese, UK and European markets fell.
In US dollar terms the Dow Jones Industrial Average rose 8.5% over the quarter while the S&P500 and Nasdaq rose 5.8% and 7.5% respectively. Emerging Markets ended the quarter up 11.8% while the MSCI Small Cap Index fell 7.3% (both in local currency terms).
‘Growth’ as an investment style performed better than 'Value' over the three month period.
During the September quarter the domestic sharemarket rose 1.5%. The NZ dollar was down 5.1% on a trade-weighted basis over the quarter.
AMP Capital Investors (Unit Trust) and Arcus achieved the highest return for the quarter of 3.7%, followed by Tyndall Investment Management who returned 3.2% (returns before tax and fees). The median return for the quarter was 3.0%.
Returns for the past twelve months ranged between a gross return of 14.9% from Arcus to a 7.2% return from BT Funds Management. The median return for the twelve months was 11.2% before tax and fees.
In terms of the asset allocation of discretionary balanced funds, the average exposure to growth assets as at 30 September 2007 was 64.5% (including allocations to alternative assets). The lowest exposure to overseas equities was 33.3% (Mercer Global Investments) with Arcus Investment Management holding the highest exposure at 45.3%. The highest exposure to domestic (or Trans-Tasman) equities was 20.5% (Arcus).
Comparing the asset allocations of the current fund managers with their allocations as at 30 September 2004, the average allocation to overseas equities is slightly higher than that of three years ago (37.2% compared with 35.3% three years ago). Four managers have increased their overseas equity exposure over this time. The average exposure to domestic equities has decreased from 17.5% at 30 September 2004 to 15.1% at the end of September 2007. In September 2004 two funds had exposure to an alternative asset strategy. In September 2007 five funds had allocations to alternative assets, ranging from 2.0% to 7.6% of the overall fund.
Mercer has also compared the current managers’ three-year results from the September 2004 survey with those of the current survey. In September 2004, Arcus was the highest performing manager, with a return of 9.2% per annum. At the end of September 2007 Arcus was also ranked first over three years with a return of 9.2% per annum. The managers with three-year performance at or above median in both surveys were Arcus Investment Management, Tower Asset Management and Tyndall Investment Management.
The median return for the three year period to 30 September 2004 was 5.9% per annum. For the three year period to 30 September 2007 the median return was 14.0% per annum.
Editors Please Note:
Attached is a copy of the Mercer Survey. When quoting material from the Survey, we would appreciate acknowledgement of Mercer.
© 2007, Mercer
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Information contained herein has been obtained from a range of sources. While this information is believed to be reliable, no representations or warranties are made as to the accuracy of the information presented and no responsibility or liability, including for consequential or incidental damages, can be accepted for any error, omission or inaccuracy in this Release.
Opinions on or ratings of investment products, asset classes and asset management styles contained herein are not intended to convey any guarantees as to the future investment performance of these products, asset classes and asset management styles. Past performance cannot be relied on as a guide to future performance. This Release does not contain investment advice and no investment decision should be made in connection with the subject matter of this Release without first obtaining appropriate professional advice.
Source: MSCI. Data provided ‘as is’.
Mercer notes that
some of the fund managers included in this survey are
obtaining, or have obtained, additional returns in their
cash portfolios through strategies aimed at reducing tax
payable. Selection of fund managers should not be based on
a quantitative assessment alone as the mandate represented
in the survey may not be appropriate for your