The latest fund flow figures paint a gloomy picture for the funds management and advisory industries. While many thought the March quarter was bad with funds flow of just $4 million, the June quarter figures show that there was a outflow of $124 million for the three month period.
IPAC Securities general manager David van Schaardenburg says this is the weakest quarterly fund flow figure this decade.
While the figure is poor and of great concern to the managed fund industry, it is tempered by the fact that money has gone into investments which aren't captured by the retail funds flow report. Also the decision by advisory firms to move money from retail funds to masterfunds has meant that this money is no longer captured in the survey.
In the June quarter the New Zealand Financial Planning group moved significant volumes of money from retail to wholesale funds.
Van Schaardenburg says the other key feature during the quarter has been the continuing demise of the insurance bond and superannuation sectors. Both recorded outflows and they were joined during this period by group investment funds. The only positive was the $98 million inflow into unit trusts.
IPAC says the removal of the superannuation surcharge is the main reason insurance bonds, and to some degree superannuation funds, have experienced outflows.
"This trend we expect to continue in future quarters as investors continue to redeem from investments originally made to avoid surtax.
"The insurance bond and super sectors have a total of $1.914 billion invested in New Zealand cash and New Zealand mortgage funds which are attractive to superannuitants prior to April 1, due to their surcharge effectiveness. This sum risks declining by 30 to 50 per cent over the next two years as investors move to investments which provide regular income flow," van Schaardenburg says.
The other interesting trend to come out of the IPAC survey is that New Zealand investors tend to have the bulk of their portfolios tied up in local assets. If more money was invested in offshore markets, particularly the booming United States and European sharemarkets, then the total net funds under management would have been more positive.
IPAC says 79 per cent of total managed fund investments are held in local assets. It says net funds under management shrank by $205 million to $13.16 billion in the three months to June 30.
The latest fund flow figures paint a gloomy picture for the funds management and advisory industries. While many thought the March quarter was bad with funds flow of just $4 million, the June quarter figures show that there was a outflow of $124 million for the three month period.