Extremely favourable investment and economic conditions have led to a second consecutive quarter of strong funds flows into managed funds.
Figures from IPAC Securities show that the first half of 1998 was a shocker for managed funds, in terms of funds flows, but the second half was positive.
IPAC general manager David van Schaardenburg says the current economic conditions, including historically low interest rates, are good for funds flow, and he is predicting these good times will continue well into 1999.
In the quarter to December 31 overall fund inflow was, at $573 million, well above the $428 million net inflow recorded in the previous quarter.
"This recent trend is in sharp contrast to that of six months previous where stubbornly high interest rates and the abolition of surtax saw the largest one quarter decline in net funds flow this decade," IPAC general manager David van Schaardenburg says.
In that June quarter $102 million went out of the managed funds industry.
Van Schaardenburg says that investors are increasingly moving into diversified and equity funds.
While the quarter produced strong funds flows, many managers note that December was a particularly strong month. One manager commented that Christmas Eve was that firm's biggest day ever.
Unit trusts continued their trend of strong inflows ($282 million), while insurance bonds continue to haemorrhage, losing another $33 million last quarter. Super funds and group investment funds returned to positive growth recording inflows of $139 million and $185 million respectively.
IPAC says that retail banks clearly won the distribution game in 1998. It says banks accounted for 62.9 per cent of net new funds flow last year compared to 21.4 per cent in 1997.
"Insurers, as a group, had a dramatic collapse in favour gathering only 8.4 per cent market share in 1998 versus 24 per cent in 1997."
This trend has meant that net funds under management of banks has risen from 23.2 per cent to 25.6 per cent during 1998 and for insurers has fallen from 43.1 per cent to 41.3 per cent.
"Clearly the banks are winning the distribution battle over insurers," van Schaardenburg says.
Extremely favourable investment and economic conditions have led to a second consecutive quarter of strong funds flows into managed funds.