US asset manager warns on NZ market's ability to handle Kiwisaver funds

Friday 9th September 2016

Global asset manager Russell Investments has warned New Zealand needs to have more companies listed on the stock market and more equity managers who actively manage their portfolios due to the large flow of Kiwisaver funds seeking local returns.

Russell, which manages $342 billion in assets around the globe and is based in Seattle in the United States, says Kiwisaver assets amounted to $35.6 billion in June 2016, a figure that it believes will double over the next four years.

An active equity manager is someone who picks and chooses which stocks to buy and sell and the time to do it. Such funds usually charges higher fees. A passive fund tracks an index like the NZX 50 Index or the FTSE 100 and charges investors lower fees.

Sam Walker, an investment analyst at Russell, said the New Zealand market was particularly prone to capacity constraints because the local market featured a small number of stocks and a limited number of active equity managers.

"Several active NZ equity managers are already at or close to capacity, and the increasing influx of Kiwisaver money will struggle to find a home in the domestic market," he added.

NZX data shows $1.26 billion has been raised in initial public offerings and compliance listings in the year so far, a figure vastly surpassed by the $4.3 billion of bonds issued by companies seeking to refinance debt to take advantage of falling interest rates.

Russell suggests possible solutions could also include New Zealand investors reducing their exposure to local stocks or adopting a passive approach to investing.

BusinessDesk.co.nz

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