Waving flag for offshore managed funds
By Graeme Kennedy
Burned and largely ignored, investors are overcoming their nervousness and are again seeking international equities managed funds for portfolio diversity, Macquarie Bank New Zealand Financial Services Group head Craig Swanger says.
Mr Swanger, who has returned home to the new job after four years with Macquarie in Sydney, said New Zealand investors had had a rough time with offshore managed funds.
"They have not been getting their fair share of international investment opportunities," he said. "New Zealand has been overlooked by investment banks and other financial product suppliers that do not have offices here and do not appreciate the high demand for quality product.
"There was a huge rush into international equities managed funds when New Zealanders invested about $2 billion in 1999 but that market collapsed and is down 33% from its peak including 18% in the past three months.
"The timing was not great and since then New Zealanders have been much less inclined to go into international investments than they have ever been."
Mr Swanger said the losses had been a major deterrent to offshore investment and pushed New Zealand further into a defensive mode with portfolios heavily weighted to property and fixed-interest investments.
He said New Zealanders would typically have 61% in defensive investments compared with Australia's 43% as they were less risky and capital was less likely to be lost. However, they were not benefiting from diversification or opportunities available only in offshore markets.
"New Zealanders are further disadvantaged as many of the international opportunities they do have access to are simply imported from Australia with Australian dollars and under the Australian tax system," he said.
"They are then exposed to foreign exchange risks. In the past two years the Australian dollar has been down 7% a year so that is a good reason not to invest in Australian-denominated funds.
"New Zealanders are becoming more keen, however, as they understand the need to go into international markets to diversify their portfolios and find opportunities such as biotechnology which are mostly in the US and Europe."
Mr Swanger was a senior adviser in property, tourism, economics and infrastructure with Coopers & Lybrand and KPMG before joining Macquarie where he held senior positions including head of e-commerce and alliances for retail sales, business manager of the bank's retail funds managements operation and chief executive of Trading Room Pty, its online joint venture with Fairfax Newspapers.
He said investors could reduce risk by investing in other than Australian-denominated product that was capital-protected and ensuring the offshore investment itself was well-diversified.
This week Macquarie launched its latest New Zealand-denominated six-year international fund Titan 2, which followed Titan 1 in February, raising $70 million in six weeks.
Mr Swanger said Titan 1 had a projected return of 15% while its successor expected 13.8% with investments mainly in the US and Europe.
"Both are overcoming New Zealanders' nervousness about international fund investments while they fear they might be missing out on something."
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