NZ News, Onward and Upward

Net inflows into the New Zealand retail funds industry during the March quarter were up almost $NZ60 million on the last quarter, according to the latest IPAC market share survey.

Net inflows into the New Zealand retail funds industry during the March quarter were up almost $NZ60 million on the last quarter, according to the latest IPAC market share survey.

The March quarter IPAC report measured an overall net inflow of $257 million in contrast to the $NZ199 million net inflow in the December 1999 quarter.

“Post Y2K relief and buoyant equity markets have been the main features of the March 2000 quarter, with the retail fund management industry growth picking up from the December 1999 quarter,” IPAC says.

However, despite the strong inflows net funds under management grew by only 1.7 per cent this quarter compared to a growth of 7.4 per cent in the December period.

“Modest fund returns over the quarter meant that the net funds under management growth in the industry was primarily driven from net funds flow,” IPAC says.

The survey also confirmed the trend towards diversified and international equity funds. Diversified super funds captured the highest inflow during the quarter of $NZ123 million followed by global equity unit trusts ($NZ92 million) and diversified unit trusts ($NZ77 million).

“Of the top 10 fund managers by net funds under management, most have a large per-centage of their assets under management invested in New Zealand diversified funds,” IPAC says.

“The most glaring exception to this is Armstrong Jones, who through the management of SIL and MFL [major superannuation funds] hold 38 per cent of its assets in New Zealand property.”

While unit trusts and super funds continue to benefit from positive flows, both insur-ance bonds and group investment funds suffered further outflows this quarter.

“Once again group investment funds also had a net funds outflow of $NZ12 million (last 12 months $NZ45 million outflow) due mostly to product rationalisation at AXA and investors moving out of what were Guardian Trust’s funds after its acquisition by Royal and SunAlliance,” IPAC says.

The top 5 placings both in terms of net funds flows and net funds under management remain unchanged since the last quarter. ASB Banks tops the list ($NZ69.1 million) and Tower still holds the most funds under management ($NZ2067 million).

“At the other end of the spectrum Royal and SunAlliance (including Guardian Trust) again experienced net fund outflows, its outflows totalling $10.6 million,” IPAC says.

“Both ANZ and BNZ again registered negative total net funds flow. This is mostly due to negative flows out of BNZ’s unit trust products and ANZ’s superannuation and insurance bond products.”

Top Five Managers - Net fund flows during March quarter

ASB Bank $69.1m

NZ Funds $61.7m

AMP $37.3m

WestpacTrust $34.4m

Tower $28.9m

Top Five Managers - Net funds under management

Tower $2067.3m

AMP $1761.6m

Royal and SunAlliance $1672.1m

Armstrong Jones $1634.3m

BNZ $1268.0m

March quarter fund flows by product type

Unit trusts $221.3m

Group investment trusts $-12.2m

Insurance bonds $-53.3m

Superannuation funds $101.3m

The move towards more stringent regulation of the financial planning industry ap-pears to be gathering momentum following an offer by a Government MP to support legislation and the possibility that the Securities Commission will also consider the issue.

Securities Commission head John Farrell says the Commission may soon start looking at ways the financial advisory industry could be more tightly controlled.

“The Commission’s recent experience of the investment advisory industry has raised questions about the effectiveness of the existing rules,” Farrell says.

“We do have it in mind to look at these rules but if we do decide to take further steps in this area we will be consulting closely with all interested parties.”

At the same time, a request by the Financial Planners and Insurance Advisers Asso-ciation (FPIA) to the Minister of Commerce to consider legislating the advisory in-dustry has received a surprising response from Rick Barker, Labour MP for Tuki Tuki.

At a recent meeting of the Hawke’s Bay chapter of the FPIA, Barker promised to sponsor a bill into Parliament creating legal registration of the planning industry pro-vided a number of conditions were met.

“Firstly the industry would have to get itself together and decide what the objectives of the regulations are and under what principals they would operate,” Barker says.

“If a broad agreement can be reached, the industry would then have to prepare a draft bill themselves.”

Barker says the considerable expense of drafting the bill would have to be met by the planning industry.

If the industry can agree and produce a draft bill, Barker says he will introduce it into Parliament.

“I’m reasonably confident that such a bill would pass the first reading at least. How-ever, the matter is not a high priority for the Government and time is very scarce in Parliament,” Barker says.

“The financial planning industry asked the way forward and I think they were sur-prised when I told them how. I batted the ball back over the fence and now it’s up to them.”

President of the Hawke’s Bay FPIA, Jeremy Cole, says Barker’s offer is interesting and the challenge should be taken up by the industry.

Cole, an insurance adviser, says support for adviser registration is growing and the Barker suggestion may galvanise the industry into action.

“Momentum is gathering nationwide in the industry supporting a system of registra-tion for advisers that ensures product providers can only distribute through members of a professional body that has a strong policing code,” Cole says.

He says registration will lift education levels and build up the long-term public credi-bility of the industry.

However, investment adviser Murray Weatherston has cast doubt on the ability of both the advisory industry and the product providers to agree on regulation.

“Product manufacturers won’t agree to allowing a secret society to be the only ones to distribute their products,” Weatherston says.

“I can’t see any company turning down business from a big business writer.”

He says advisers would also be unlikely to agree on a licensing body with many op-posed to the FPIA being the sole registry organisation.

“Anyway, in effect the Investment Advisers Disclosure Act has already created a form of registration where everybody is deemed registered until they are struck off,” Weatherston says.

A diversified investment portfolio approach has proven to be the safest and most con-sistent way to “beat the bank”, according to Aaron Hing, head of financial advice at Spicers Portfolio Management.

Hing says the latest Spicers Personal Investors Index shows returns from a diversified portfolio have remained positive despite recent volatility in the markets.

“Returns for a diversified investment portfolio were 2.7 per cent for the month and 12.4 per cent per annum since the inception of the index in June 1985,” Hing says.

“The latest result confirms earlier trends and shows that for people saving for retire-ment or some other goal a diversified portfolio is the best method.”

He says the index clearly shows the benefits for most people of operating in the risk controlled environment that a diversified portfolio provides.

“The index operates as a yardstick and confirms the gut-feeling that a long term pas-sive approach is the best way to invest,” Hing says.

“Many advisers use the index as a simple tool to show their clients the benefits of a diversified portfolio versus returns from bank deposits.”

Hing says the index is also useful for educating clients about return and volatility, highlighting the need of more risk to gain more over time.

Spicers is also in the process of bedding down its partnership with Australian plan-ning group Monitor Money.

Hing says the process is still in its early stages and both companies are working out how to best fit their businesses together.

“We are still learning from each other. However, there are a number of synergies wi