New Zealand domiciled managed funds investing in Australian and New Zealand equities have filled the majority of Morningstar’s list of top ten performers for the quarter to March 31 1999.
Half of the ten best performing retail unit trusts and group investment funds and six of the top ten retail superannuation trusts for the quarter were products investing in Australian and New Zealand equities.
“The New Zealand equity products which performed strongly over the first quarter of 1999 were on the whole actively-managed products with a propensity to invest at the smaller end of the market, rather than in the large capitalisation stocks which dominate the New Zealand equity market,” Morningstar says.
The Morningstar research also found no managed investment company was represented twice in the top ten list of unit trust products.
However, products investing in emerging markets or currency funds returned the highest quarterly yield for both retail unit trusts and retail superannuation trusts.
The best performing unit trust for the quarter was the FCMI Toronto Currency Fund, a relatively small fund that returned 24.89 per cent net of fees and tax for the March quarter.
The New Zealand Funds Management Global Emerging Markets Fund (12.26 per cent net return) and the Colonial First State Pru – Japanese Opportunities Fund (11.32 per cent) filled the second and third spots respectively for the quarter.
Sovereign’s Super Far East Fund (10.89 per cent net return) and the Tower FreedomPlan – Asia Emerging Markets (10.47 per cent) were the top performing superannuation trusts over the quarter.
Results over the year to March 31, 1999 found the National Mutual New Zealand Selected Equities the best performing unit trust/group investment fund with a net return of 28.57 per cent.
The Cigna Nest Egg International Share Fund (32.19 per cent) was the best performing superannuation trust for the year.
Tower leads steady growth
The retail funds management industry experienced steady growth in the last quarter according to the latest IPAC Research survey.
Positive net funds inflows combined with buoyant local and international sharemarkets saw net funds under management expand by 5.5 per cent from $14.65 billion at December 31 to $15.5 billion by the end of March this year.
For the year to March 31, the managed funds industry grew by more than 15 per cent.
The total fund inflow for the quarter was $584 million; far exceeding the figure for the March 1998 quarter which stood at $9 million.
“This new investment level continues the trend of the latter half of 1998 which appeared initially driven by a sharp decline in bank deposit rates,” the IPAC report says.
Despite the overall growth in the industry, insurance bond products continued to lose ground in the quarter with $15 million (-$249 million for the year) flowing out of this area.
Unit trusts continued to perform well, gaining $324 million in the March quarter, super funds attracted $159 million and group investment funds experienced positive inflows of $115 million.
“Insurance bonds and low risk super funds remain vulnerable to investor outflows derived from the two recent paradigm shifts to lower interest rates and the removal of the (NZ Superannuation) surtax,” IPAC says.
Tower headed the list for funds inflows with $103 million for the March quarter followed by three banks; WestpacTrust ($99.3 million), BNZ ($79.3 million) and ASB Bank ($72.7 million).
Most managers had positive inflows in the quarter but Colonial ($-3.8 million), UDC ($-4.9 million), Forsyth Barr ($-2 million) and Equitable ($-3.4 million) were the major exceptions.
Tower also retained the top market share with $1746.6 million net funds under management as at March 31 followed by AMP ($1500.3 million) and Armstrong Jones ($1412.9 million).
Colonial builds on property trust
Colonial has announced plans to float a new property trust on the New Zealand Stock Exchange.
The new listed property trust, the Colonial First State Property Trust, is rumoured to be looking to raise around $150 million to purchase a diversified portfolio of quality New Zealand properties.
Property investment company, Symphony Group, is reported to be ready to sell three of its Auckland CBD buildings, worth close to $65 million, to the Colonial First State Property Trust.
Deflated CPI despite a ballooning house market
Inflationary pressures still exist in the New Zealand economy despite new statistics showing a drop in the consumer price index (CPI) according to Richard Flinn, head of Equitilink Investment Management.
The CPI figure for the March 1999 quarter was 0.1 per cent lower than in the March 1998 quarter, the first time in more than 50 years since New Zealand has experienced deflation.
“The indications seem to be that these latest figures are something of an aberration. They don’t incorporate the recent rise in house prices.
The next quarterly figures should take account of those and we should see a rise,” Flinn says.
He says house prices have started to rise again after the decline last year of property values with low interest rates encouraging greater home mortgage borrowing.
“It’s still an open question in my mind whether the housing market is just catching up or ready to take off again,” Flinn says.
Positive performance from AMPAM
AMP Asset Management (AMPAM) managed funds have performed extremely positively over the last year according to New Zealand managing director Murray Gribben.
He says the best result came from AMPAM’s passive global equities superannuation trust which returned 24.3 per cent after tax for the year to March 31.
“The icing on the cake is that many of our superannuation trust investors did not have to pay tax on very good capital gains, because of the tax efficiencies of their passive investments through our WiNZ product,” Gribben says.
However, AMPAM’s New Zealand equities passive fund showed a negative return of 4.5 per cent for the year despite positive growth of more than 6 per cent in the March quarter.
The New Zealand equities active fund achieved better results returning 12.3 per cent for the year before tax, outperforming the NZSE 40 Gross Index by 12.4 per cent.
“This reflects the success of AMPAMÕs equities team in selecting many of the best performing stocks over the year,” Gribben says.
