Funds show negative return

Friday 9th February 2001

Positive returns eluded all of the managed funds in the Mercer survey for the December quarter. The median manager produced minus 3.5% before tax and fees.

Tower Asset Management (TAM) achieved the highest return for the quarter of -0.8% thanks to its relatively high proportion of stocks with value characteristics.

Mercer said the fixed interest market was the beneficiary of the global sharemarket weakness. Government bond yields fell in all major markets on a "flight to quality" with yields on products denominated in US dollars falling the most. As the New Zealand dollar appreciated against most major currencies over the quarter, unhedged investors in overseas assets saw their returns significantly reduced.

Returns for the 12 months ranged between a gross 7.6% for Colonial First State and -0.8% for Armstrong Jones. The median was 3.7%.

Asset allocations of the discretionary balanced funds showed the average exposure to growth assets was 56.6% at the end of the quarter.

Only two managers had less than 30% invested in overseas equities, while the highest exposure to domestic equities was from Axa New Zealand, now known as Alliance Capital Management New Zealand, with 20.6%.

Three years ago, only two managers had overseas equity allocations over 30% (TAM and Arcus).

Today, TAM has 31.4% allocated to overseas equities (the fourth lowest relative allocation). Also, TAM has only a 0.4% higher exposure to overseas equities compared with three years ago, while other managers have all increased their exposure to this asset class and by 9.1% on average.

Armstrong Jones was the highest-performing manager in 1997 but is fifth today. In contrast, Colonial First State was the lowest-performing manager in September 1997 but is now fourth and above median. The most consistent managers, having above-median three-year results in both surveys, are Armstrong Jones, BTFM and Guardian Trust Funds Management.

Comments from our readers

No comments yet