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Fund rations

Moves by several fund managers recently to close funds shows that they are becoming more focussed on product management, rather than just product proliferation.

Tuesday, October 21st 1997, 12:00AM

by Philip Macalister

Moves by several fund managers recently to close funds shows that they are becoming more focussed on product management, rather than just product proliferation.
Rothschild Asset Management has announced it is to close three of its Five Arrow funds promoted in New Zealand due to lack of investor support.
This move comes several weeks after Bank of New Zealand Financial Services decided to close several of its funds for similar reasons.
Rothschild is closing the $9.4 million Five Arrows International Bond fund and $5.8 million Asian Opportunties Fund, both which had been heavily promoted in New Zealand, plus it is closing the Five Arrows Monthly Income Fund which has $15.8 million under management.

It says the funds have failed to draw adequate support in the New Zealand market.
Likewise BNZ Financial Services earlier announced it was closing two of its Australian equities trusts as they are not considered to be part of the group's core competencies.
Management of these types of funds was better done by other members of BNZ's parent company National Australia Bank.
BNZ says the Australian Equity Resources Trust and the Australian Blue Chip Equity Trust, which have fund sizes of $857,000 and $2.6 million respectively, are considered to be uneconomic sizes.
A third fund, the $2.6 million New Zealand Gilt Edged Bond Trust, is also being closed as there has been a lack of market support for the product.
IPAC Securities general manager David van Schaardenburg says these moves show that product management is becoming more important to fund managers.
One of the characteristics of the New Zealand industry, as was pointed out by a number of speakers at a recent AIC-organised fund management conference in Wellington, was the relatively large number of funds in the New Zealand market and their uneconomic size.
Van Schaardenburg says at the end of 1996 there were 575 retail funds in New Zealand and the average size was $19.6 million. By comparison there were 1589 retail funds in Australia and the average size was A$67.9 million, while in the United States the average fund size, of its 6200 retail funds, was US$395 million.
Van Schaardenburg says fund choices have grown faster than fund sizes, consequently there will be ones that never reach an economical size.
From an investor viewpoint it is important that they go into funds which are going to stay around for some time and are going to get critical mass, he says.
Fund rationalisation will continue, that won't stop new style funds being developed.
Funds do have a life cycle and the ones that are more likely to be closed are the older products, particularly the "legacy" funds insurance companies have.
Currently there are moves to shift investors from these legacy funds into new generation versions of the same type of product.
"We will continue to see more rationalisation," he says.
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