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Managed funds experience turnaround

Wednesday 26th April 2006

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After two years of net outflows from the managed funds industry in New Zealand the trend now appears to be on the verge of a turnaround.

FundSource's latest quarterly report shows net fund flows remained relatively flat with $2.2 million of outflows for the quarter ending March 31, compared to net outflows of $35.8 million and $170.30 million in the two previous quarters.

Total net funds under management grew to a record high of $21.8 billion, growing by 4.5% during the March quarter, the largest quarter-on-quarter increase since December 2001.

This was largely on the basis of fund managers delivering excellent performances after tax and fees, over the quarter as well as over the 12 months to March this year. Especially notable were funds in the international equity sector, returning on average around 30% after tax and fees in the 12 months to March 31.

"A likely reversal in managed fund investor trends from recent years of negative flows is very encouraging. With the Government's proposed tax regime targeted to remove the current disincentives of investing in managed funds the scene is set to further popularise the managed funds industry over the next two to five years. We are certainly hoping to see a much larger and more vibrant future for the industry here in New Zealand," FundSource general manager Binu Paul says.

International fixed interest, global shares and cash all experienced inflows over the quarter while Australasian equities, diversified, and property all saw money exit funds.

International fixed interest funds experienced the largest positive flows of $53.9 million for the quarter while the mortgage sector saw the biggest quarter-on-quarter swing in fund flows, going from negative $79.5m last quarter to positive $1.4m this quarter.

The Australasian equity sector saw the largest outflows of all the sectors, losing $44.3m during the quarter while the diversified sector lost $28.3m.

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