Colonial First State pulls out of NZ

Colonial First State Investmentshas pulled out of New Zealand and transferred responsibility for distributing its funds to fellowCommonwealth Banksubsidiary, Sovereign.

A year ago Colonial First State shifted its retail operations to Sovereign, and last month it announced its wholesale work was following the same track.

Head of Colonial First State New Zealand, Greg La Peyre, says that the decision to shift the business is "the final chapter in a journey which started a couple of years ago."

The idea is that instead of Colonial First State building its own distribution base in New Zealand it can leverage off Sovereign's very powerful distribution platform, La Peyre says.

One of the biggest risks in the move is that Sovereign is seen in the market as a risk house, rather than an investment one.

Colonial First State general manager distribution Michael Cant acknowledges this issue and says one of the challenges is changing the attitudes inside the insurer.

Although Colonial First State is closing its New Zealand business it will continue to support Sovereign with material and fund manager visits.

La Peyre says the decision to move the retail money to Sovereign has worked well.

"We think we can raise substantial assets through (the Sovereign) channel," he says. "We are looking for substantial flows in the next 12 months."

Going forward, he expects Colonial First State, which manages more than $2.5 billion in New Zealand, will be able to build on its presence by using Sovereign.