NZ News - Investment a safe as houses

New Zealand’s retail funds management industry suffered a slowdown in growth during the December 1999 quarter according to the latest IPAC market share report.

New Zealand’s retail funds management industry suffered a slowdown in growth during the December 1999 quarter according to the latest IPAC market share report.

Net funds inflow during the final quarter of 1999 was $182 million down more than $100 million dollars on the previous quarter.

However, despite the decline in funds inflow, net funds under management grew sub-stantially over the period.

“Net funds under management (NFUM) expanded by 7.4 per cent in the December quar-ter and grew 17 per cent over the last year, this quarter’s rise mostly due to strong under-lying markets,” IPAC says.

“Weak fund flows over the quarter meant that the NFUM growth in the industry was well above that of the net funds flow.”

Net fund flows by sector type continued previous trends with unit trusts ($191 million) and super funds ($104 million) experiencing positive inflows for the December quarter contrasting with an outflow of $74 million from insurance bonds.

“Surprisingly, group investment funds also had a net funds outflow of $40 (compared to last year’s $82 million net inflow) due mostly to product rationalisation at AXA (for-merly National Mutual), and investors moving out of what were Guardian Trust’s (GT) funds post GT’s acquisition by Royal and SunAlliance,” IPAC says.

ASB Bank topped the funds inflow list for the quarter at $69 million with almost all of this directed to a single mortgage fund.

IPAC also noted a return by Colonial to a solid net fund inflow ($19 million this quarter versus $40 million outflow last quarter) following a fund rationalisation process while Royal and SunAlliance continued to lose ground with net fund outflows of $41 million, compared to $6 in the previous quarter.

Top five managers by net funds flow -

December quarter September quarter

$M $M

ASB Bank 68.7 50.70

NZ Funds 51.5 71.4

AMP 38.5 43.8

WestpacTrust 32.9 45.4

Armstrong Jones 28.6 37.8

Top five managers by net funds under management

$M % market share

Tower Group 2026.0 11.8

AMP 1722.5 10

Royal SunAlliance 1710.6 9.9

Armstrong Jones 1634.0 9.5

BNZ 1262.4 7.3

The financial planning and investment industry must face up to the issue of adviser reg-istration sooner or later, according to Vance Arkinstall, head of the Investment Savings and Insurance Association (ISI).

Debate about compulsory registration of financial planners has died down since flaring up last year when the New Zealand First party made an issue of it, claiming the industry was rife with malpractice.

At the time, New Zealand First chief Winston Peters promised to make adviser registra-tion an election issue but the subject failed to capture the public imagination.

Following New Zealand First’s abysmal election result (the party polled less than five per cent nationally and only scraped into Parliament on the back of Winston Peters’ slender victory in his own seat), the registration debate has completely fizzled out.

However, Arkinstall says it is only a matter of time before someone else raises the regis-tration matter and the industry should get in first.

“The industry will do itself a service if it addresses the registration issue and takes the high ground,” Arkinstall says.

“If we don’t, we leave ourselves open to challenge and criticism.”

The ISI is also working closely with the Financial Planning and Investment Advisers As-sociation (FPIA) to develop better education and training standards for the industry.

Arkinstall says a joint ISI/FPIA group has been set up to examine the best ways to achieve improvements in educational standards and quality of advice.

“The working group is mainly looking at the Development Trust and how this funding can benefit the education and training of advisers,” he says.

The ISI and the FPIA are also cooperating on plans for this year’s FPIA conference to bolster the quality of the event.

New Zealanders have made a good call by favouring residential property as an invest-ment, according to a recent WestpacTrust Investment Management survey.

The survey of different investment types over the past nine years has found that managed funds (weighted towards equities) had only showed better returns than housing in the previous nine months.

WestpacTrust Investment chief investment officer, David Beattie, says over the nine year period residential property investors also suffered less volatility in wealth than other in-vestment types.

“The above result seems to vindicate the often questioned rationality of New Zealand households in holding higher exposures to housing assets than their global counterparts,” Beattie says.

He says housing assets still come out ahead despite the fact that shares significantly out-perform residential property in gross returns.

“This often reported finding tends to be used as the justification for encouraging house-holds to hold a better balance between housing assets and managed funds,” Beattie says.

He says by factoring in the tax-free capital gains on housing and the long-term advantage of leverage provided by mortgages residential property has provided better returns.

Another survey released by the ASB Bank confirms residential property remains the in-vestment of choice for most New Zealanders.

In the ASB Bank quarterly investor confidence survey 21 per cent of respondents voted residential property as the most likely to give the best return.

The result was three per cent up on the last quarter and marked the highest level of sup-port any investment type had achieved in the two year history of the survey.

“The results are in contrast to recent property market data showing low turnover and a fall in values, although much of this can be attributed to the market stalling at the time of the election,” ASB says.

As the select committee hearing into the de-privatisation of the workplace accident insur-ance industry continues the Government has indicated some private insurers could con-tinue to operate in that market.

Despite vowing to return the vast majority of the workplace accident insurance business back to the state-owned Accident Compensation Corporation (ACC), the Government may allow exemptions through the accredited employer scheme.

The scheme has exempted about 100 big employers from ACC letting them manage their own work-related injuries for a two year period.

The Government is currently considering expanding this scheme leaving the door, if not open at least slightly ajar, for the private insurance industry to re-enter the market.