Pooled funds lose $4 billion

Australia’s pooled fund managers had more than $4 billion wiped off their bottom line in the first quarter of this financial year as the September 11 tragedy in the US played havoc with equity markets around the world.

The median pooled fund in the InTech Growth Funds survey returned a meagre negative three per cent in September, stripping the total assets of managers in the survey down from $38.4 billion as at 30 June to $34 billion as at 30 September 2001.

The performance of the Australian share market in the wake of the terrorist attacks in the US was the biggest contributor to the downturn for most managers, with the S&P/ASX 200 falling by 6.4 per cent in September alone.

Overseas equity markets delivered an even worse result in aggregate terms, falling by 8.9 per cent on a local currency basis, but were buffeted by a sharply depreciating Australian dollar as events unfolded in the US. On an unhedged basis, international shares fell by only 2.8 per cent.

The poor performance of both international and domestic equity markets post September 11 comes on top of equity markets that have been struggling for some time.

The median returns of managers in the InTech survey for July and August were —1.8 per cent and —1.3 per cent respectively, taking the total for the first three months of the financial year down to —5.8 per cent.

“Markets were already falling in July and August and a lot of economists thought the US was falling into recession anyway,” InTech chief investment officer Ron Liling says.

The best performing pooled fund manager over the quarter was Maple-Brown Abbott, with the strong value bias manager returning —1.7 per cent over one month and —3.2 per cent over three months.

Maple-Brown’s performance was boosted by an exposure to international equities of only 11 per cent, an above benchmark return from its resource heavy Australian equities portfolio and a high allocation to listed property trusts, which returned 4.0 per cent for the quarter.

“The events in the US have made this a tough time for earnings and we think it is a time for caution,” Maple-Brown managing director John Kightley says.

Merrill Lynch, Rothschild and BNP, all with a high allocation to both domestic and international equities, performed badly, returning —5.2 per cent, -4.6 per cent and —4.5 per cent respectively.

The disappointing first quarter result for pooled funds was the worst start to a financial year recorded by InTech since the September quarter in 1981, casting a serious cloud over investment returns for the rest of the year, despite early signs of an improvement in the world’s equity markets over the first half of October.

“Over the next 3 to 6 months anything can happen,” InTech’s Liling says. “Sentiment and reaction to political and military developments is driving the market from this point.”