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Investment News

Adding value depends on local performance

Melville Jessup Weaver says the ability of managers to add value in their diversified portfolios depends on their success in NZ equity sector.

Wednesday, January 24th 2001, 4:57PM

The main features of the December quarter were:

  • The local share market lost ground, largely influenced by Telecom's decline,
  • Overseas share markets performed poorly amid fears of economic weakness in the US, down 7.0% in local currency terms,
  • Fixed interest markets performed well, with the local and overseas markets returning 4.2% and 3.9% respectively,
  • The NZ$ rebounded from its record lows, notably strengthening 8.9% against the US$, and
  • The CPI rose 1.2% with price increases widespread.

The average return for the fund managers surveyed was -3.6%

Do Managers add value?

The evidence suggests yes they do but the results are very dependent on their success in the local share portfolio.

Proposed merger of the NZSE with the ASX

Of the nine managers surveyed, six were against (three strongly against), two were in favour but had reservations and one wanted more information.

Manager results for the last 12 months

  • Alliance Capital (formerly AXA) - Their performance seems to have stumbled and the progress they were making earlier in the year has dissipated. Their income sectors have stronger performance than their growth sectors.
  • AMP Henderson Global Investors - They added value in all sectors excluding the property sector and in their tactical asset allocation decisions. Their growth-oriented benchmark with its high exposure to passive funds saw a poor absolute return.
  • Arcus Investment Management - They added good value compared to benchmark for the period with a particularly strong local share performance.
  • Armstrong Jones - They produced the bottom return for the 12 month period due to poor performance from a growth oriented overseas shares manager. The market will watch with interest their response to this highly unusual ranking.
  • ANZ Asset Management - Their passive asset allocation stance combined with good sector returns continues to deliver strong overall added value.
  • BNZ Investment Management - Their local share performance is improving along with their tactical asset allocation decisions. The good return on active overseas shares had little impact on the fund monitored as most overseas share exposure was in passive shares.
  • BT Funds Management - They have continued to add value as a manager. Their above average returns for local shares and asset allocation decisions helped offset the poor overseas shares result.
  • Colonial First State - They achieved the best absolute performance for the period due to good performance in all the asset classes and their defensive strategy.
  • GRT - Their performance has suffered due to their decision that all their share investments will be in passive funds.
  • Guardian Trusts Funds Management - Their performance is still lagging behind the average.
  • NZ Funds Management - They added the greatest value for the period, although their results in the last 2 quarters have been average.
  • Tower Asset Management - They were the top absolute performing manager for the last quarter and third for the last 12 months. Their improved results are principally on the back of a change in fortunes for their value oriented overseas shares portfolio.

The objectives of the survey are:

  • to provide a comprehensive review of each manager’s overall performance,
  • to provide details of the value added by each manager, and
  • to make observations on the performance of each manager.

The survey is aimed at sponsors and trustees of employer superannuation schemes, and trusts

generally.

Total Fund

               

Asset Allocation

           

Manager

3 mths (%)

1 yr (%)

3 yr (%)

5 yr (%)

 

Manager

3 mths (%)

1 yr (%)

3 yr (%)

5 yr (%)

ACM

-1.4

(8)

-1.0

(8)

0.4

(6)

0.1

(5)

 

ACM

0.0

(7)

-0.4

(7)

0.2

(5)

0.3

(4)

AHGI

-1.6

(9)

-4.0

(10)

-2.0

(11)

-1.3

(9)

 

AHGI

0.2

(4)

-0.6

(8)

-0.2

(6)

-0.3

(7)

AIM

1.7

(1)

3.0

(2)

2.3

(4)

n.a

   

AIM

n.a

 

n.a

 

n.a

 

n.a

 

AJ

-2.4

(10)

-3.0

(9)

1.9

(5)

2.2

(1)

 

AJ

-0.3

(8)

-0.1

(6)

0.2

(4)

0.6

(1)

ANZAM

0.9

(4)

2.8

(5)

2.5

(3)

1.8

(4)

 

ANZAM

0.2

(5)

0.3

(4)

0.6

(3)

0.5

(2)

BNZIM

-0.2

(6)

-0.7

(7)

-0.6

(10)

-0.3

(6)

 

BNZIM

0.5

(2)

0.4

(3)

0.8

(1)

0.5

(3)

BTFM

0.0

(5)

2.9

(4)

3.3

(1)

2.0

(3)

 

BTFM

0.0

(6)

1.0

(1)

0.7

(2)

-0.1

(5)

CFS

1.5

(3)

3.0

(3)

-0.6

(9)

n.a

   

CFS

1.7

(1)

0.7

(2)

-1.6

(8)

n.a

 

GRT

-3.9

(11)

-5.0

(11)

0.1

(7)

-0.5

(7)

 

GRT

n.a

 

n.a

 

n.a

 

n.a

 

GTFM

n.a

 

n.a

 

n.a

 

n.a

   

GTFM

n.a

 

n.a

 

n.a

 

n.a

 

NZFM

-0.6

(7)

4.1

(1)

2.6

(2)

2.2

(2)

 

NZFM

n.a

 

n.a

 

n.a

 

n.a

 

TAM

1.7

(2)

2.4

(6)

-0.5

(8)

-0.5

(8)

 

TAM

0.4

(3)

0.1

(5)

-0.4

(7)

-0.3

(6)

Average

-0.4

 

0.4

 

0.9

 

0.6

   

Average

0.3

 

0.2

 

0.0

 

0.2

 

 

Notes: 1. The value added by a manager is shown for both the individual asset sectors and for tactical asset allocation decisions.

2. No figures are shown for GTFM as no benchmark asset allocations are available.

3. The asset allocation figures are the difference between the value added in total and that added for stock selection.

Table 3 - Actual Asset Allocation as at 31 December 2000

Manager

NZ Shares

Aus

O'seas Shares

Property

Growth

NZ

O'Seas

Cash

Income

Currency

Currency

 

Active

Passive

Shares

active

Passive

 

Assets

Fixed Int

Fixed Int

 

Assets

Exposure

Outlook

ACM

13.0

7.1

0.7

13.3

16.9

7.6

58.3

21.0

9.6

11.1

41.7

18.4

Positive

AHGI

0.0

17.2

0.0

0.0

37.9

5.4

60.6

26.1

10.6

2.7

39.4

22.8

Positive

AIM

10.2

0.0

5.0

43.1

0.0

4.2

62.5

14.5

5.4

17.6

37.5

21.5

Neutral

AJ

18.7

0.0

0.0

35.7

0.0

9.7

64.1

12.6

14.3

9.0

35.9

21.1

Positive

ANZAM

5.5

9.5

2.8

36.8

0.0

5.0

59.6

22.7

12.2

5.5

40.4

18.5

Neutral

BNZIM

1.1

18.6

0.0

5.6

21.7

0.0

47.1

14.8

34.2

4.0

52.9

28.4

Neutral

BTFM

20.3

0.0

0.0

32.3

0.0

5.1

57.7

20.5

15.4

6.4

42.3

16.2

Positive

CFS

3.2

0.0

14.8

27.0

0.0

0.0

45.0

0.0

55.0

0.0

55.0

12.3

Positive

GRT

0.0

13.0

0.0

0.0

32.0

7.4

52.4

22.9

15.2

9.5

47.6

16.0

Neutral

GTFM

14.6

0.0

3.5

34.4

0.0

4.2

56.7

19.6

15.4

8.4

43.3

n.a

Positive

NZFM

10.8

0.0

n.a

35.4

0.0

3.2

49.4

22.2

13.7

14.7

50.6

18.4

Neutral

TAM

10.8

0.0

0.0

31.4

0.0

10.2

52.4

20.5

10.2

17.0

47.6

18.4

Positive

Average

9.3

5.4

5.9

24.6

9.0

5.2

55.5

18.1

17.6

8.8

44.5

19.3

 

Notes: 1. Shaded figures indicate an increased asset allocation since the previous quarter.

2. Growth Assets are the subtotal of shares and property.

3. Income Assets are the subtotal of fixed interest and cash.

4. Currency exposure is the percentage of total assets exposed to movements in the NZ dollar.

5.Currency Outlook represents the manager’s attitude to future movements in the NZ dollar.

Notes: 1. The value added by a manager is shown for both the individual asset sectors and for tactical asset allocation decisions.

2. No figures are shown for GTFM as no benchmark asset allocations are available.

3. The asset allocation figures are the difference between the value added in total and that added for stock selection.

4. All returns are per annum except those for the 3 month period.

Funds involved in the survey

Manager

Fund

Alliance Capital (formerly AXA)

EFG Managed Fund

AMP Henderson Global Investors

Superannuation Balanced Unit

Armstrong Jones

SIL Balanced Fund

Arcus Investment Management

Balanced Value Fund

ANZAM

Balanced Discretionary Fund

BNZ Investment Management

FLP Balanced Growth Fund

BT Funds Management

BTNZIS Balanced Fund

Colonial First State

Asset Growth Fund

Guardian Trust Funds Management

Composite Fund

GRT

Balanced Fund

New Zealand Funds Management

Low-Medium Growth Portfolio

Tower Asset Management

ILS Fund

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Heartland Bank 3.00  
Heartland Bank 3.00  
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Based on a $50,000 deposit
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Cash PIE Rates

Cash Funds

Institution Rate 33% 39%
ANZ 0.10    0.10    0.11
ASB Bank 0.40    0.41    0.42
ASB Bank 0.55    0.59    0.56
ASB Bank 0.60    0.61    0.64
ASB Bank 0.65    0.66    0.69
ASB Bank 0.70    0.72    0.75
Heartland Bank 2.50    2.59    2.70
Nelson Building Society 3.75    3.90    4.08
RaboDirect 1.50    1.55    1.62
SBS Bank 1.80    1.86    1.94
TSB Bank 1.75    -    1.89
Westpac 0.35    0.36    0.38
Westpac 0.05    0.05    0.05
Westpac 2.60    2.67    2.79

Term Funds

Institution Rate 33% 39%
ANZ Term Fund - 90 days 2.60    2.67    2.79
ANZ Term fund - 12 months 3.35    3.45    3.60
ANZ Term Fund - 120 days 3.00    3.09    3.22
ANZ Term fund - 6 months 3.35    3.45    3.60
ANZ Term Fund - 150 days 3.25    3.34    3.49
ANZ Term Fund - 9 months 3.60    3.70    3.87
ANZ Term Fund - 18 months 3.60    3.70    3.87
ANZ Term Fund - 2 years 3.50    3.60    3.76
ANZ Term Fund - 5 years 3.70    3.81    3.98
ASB Bank Term Fund - 90 days 2.60    2.67    2.79
ASB Bank Term Fund - 6 months 3.20    3.29    3.43
ASB Bank Term Fund - 12 months 3.20    3.33    3.48
ASB Bank Term Fund - 18 months 3.50    3.65    3.81
ASB Bank Term Fund - 2 years 3.65    3.81    3.98
ASB Bank Term Fund - 5 years 4.10    4.28    4.48
ASB Bank Term Fund - 9 months 3.60    3.75    3.92
BNZ Term PIE - 120 days 3.00    -    -
BNZ Term PIE - 150 days 3.30    3.38    3.53
BNZ Term PIE - 5 years 3.70    3.86    4.04
BNZ Term PIE - 2 years 3.35    3.49    3.65
BNZ Term PIE - 18 months 3.50    3.65    3.81
BNZ Term PIE - 12 months 3.25    3.38    3.53
BNZ Term PIE - 9 months 3.60    3.75    3.92
BNZ Term PIE - 6 months 3.15    3.28    3.42
BNZ Term PIE - 90 days 2.75    2.82    2.95
Co-operative Bank PIE Term Fund - 6 months 3.40    -    -
Heartland Bank Term Deposit PIE - 12 months 3.40    3.53    3.69
Heartland Bank Term Deposit PIE - 6 months 3.30    3.43    3.58
Heartland Bank Term Deposit PIE - 9 months 3.70    3.85    4.02
Heartland Bank Term Deposit PIE - 18 months 3.30    -    -
Heartland Bank Term Deposit PIE - 2 years 3.30    3.43    3.58
Heartland Bank Term Deposit PIE - 5 years 3.70    3.85    4.02
Kiwibank Term Deposit Fund - 150 days 3.00    3.08    3.22
RaboDirect Term Advantage Fund - 12 months 3.40    3.50    3.65
RaboDirect Term Advantage Fund - 6 months 3.50    3.60    3.76
RaboDirect Term Advantage Fund - 90 days 2.85    2.93    3.06
Westpac Term PIE Fund - 150 days 2.80    2.88    3.00
Westpac Term PIE Fund - 120 days 3.40    3.49    3.65
Westpac Term PIE Fund - 18 months 3.20    3.29    3.43
Westpac Term PIE Fund - 12 months 3.40    3.49    3.65
Westpac Term PIE Fund - 6 months 3.35    3.44    3.60
Westpac Term PIE Fund - 9 months 3.10    3.17    3.32
Westpac Term PIE Fund - 90 days 2.50    2.56    2.67
Westpac Term PIE Fund - 2 years 3.70    3.79    3.96
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