Many, if not all, of Prudential's equity unit trusts are likely to disappear following Colonial's recent purchase of the business.
Colonial officially took over Prudential on October 1, and it is now working through a major process of integrating the two funds management businesses.
It is a major exercise as the two firms have a vastly different range of funds, and the investment styles and philosophies are different too.
The combined group, which will be the fourth largest funds management group in New Zealand and Australia, will be managed under the "truly active" philosophy used by Colonial First State Investments.
One of the curious ironies of the integration process is that Prudential's funds management business, which moved to Sydney last year, will be brought back to New Zealand.
Colonial First State Investments chief executive Bruce Abraham says this will provide advisers and investors with more accessible local management and service.
He says the three New Zealand unit trusts run by Prudential (Emerging Companies Trust, NZ Equity Trust and Equity Income Trust) will be closed.
The process of rationalising the funds is major and will require selling a significant number of stocks. Because of the way Prudential managed the portfolios it held, in total, about 55 stocks. Colonial with its "truly active" style holds just seven stocks.
Abraham says it is a big job and that "it will be reasonably difficult to exit some positions".
While the market knows Colonial wants to exit a number of stocks, he doesn't believe this creates an overhang for these stocks in the market.
He says the process will be handled carefully. "We're not going to go out there and be slaughtered."
Abraham hopes to have unwound these holdings by the end of the year.
The future looks bleak for Prudential's regional international equity funds. Abraham says Colonial is going ask the market whether they want these funds. His feeling is that they will say no and prefer instead to use global equity funds.
