Melville Jessup Weaver's investment survey looks at how fund managers performed over the September quarter.
Wednesday, October 22nd 2003, 12:04PM
September quarter features
Inflation as measured by the CPI was 0.5%,
Shares performed well after a poor July,
Fixed interest markets performed poorly, and
The NZ$ ended at US 59.4 cents.
Overview of total fund results
The average net of fees and tax result for the quarter was just 1.9%, and for the total year it was a respectable 7.0%.
There was some variability in the results with AIM and GTFM returning 13.1% and 11.1% respectively, while BNZIM achieved only 4.5% due in part to their high exposure to foreign currency. In contrast ACM’s result was improved due to the low currency exposure. Over the year the NZ dollar rose from US 47.0 cents to US 59.4 cents.
While the dollar has continued to bounce around the US 60 cents level, trustees and asset pool managers need to consider their response if the dollar continues to rise over the next year. If it does, then the question of whether to increase currency exposure will arise.
From a value added perspective, 8 of the 11 funds added value against their benchmark for the one year period. Over the longer five year period, results are more mixed.
The impact of differing tax rates is shown when comparing the gross and net results. Despite the tax neutrality of the New Zealand regime this is an increasingly important issue for superannuation scheme trustees.
Sector results over the last year
New Zealand shares The index rose an impressive 16.4%. The best performing manager was the young team at GTFM. Interestingly, the range between top and bottom was not significant. Over the 5 year period both AMPH and BAM did well which helps to explain their success in being appointed by the NZSF Guardians. The AMPH results are those of their ‘Active’ fund, not their ‘Strategic’ Fund.
Overseas shares Despite the rise in the last 6 months, the index has actually fallen by 0.5% over the year. While influenced by the impact of currency, the range of results was large with GTFM achieving 13.6% versus AMPH passive –2.6%.
Property The indices rose 12.7% and 12.3% for direct and listed respectively. TAM did well with a significant 16.5% return driven by the large revaluation of their Bayfair property in Mount Maunganui. All the other managers, both direct and listed, produced similar results. We have started to include the results for the AMP Global fund.
New Zealand fixed interest The index was up 7.1% and AIM has continued to achieve good results. AMPH seem to have settled down and have returned to producing better numbers than was the case 12-18 months ago. TAM had a better quarter but still lags in this sector.
Overseas fixed interest The index rose 7.8%. TAM has as ever had good results from PIMCO. Of interest are the numbers from AMPH who now rate with good results in this sector. Their London team changed some 2 years ago. Note also the surprising variability in the results over the 12 months.
Cash The index was up 5.8% and ING achieved the best results followed closely by GTFM. Comparing the 1 year ING result with their 5 year numbers suggests that they have changed their approach in the last 2 years.
Hedge/absolute return funds
There is a high level of interest in hedge funds and we will in time include regular results in our survey. The results for two of the funds currently available, namely NZAM and GTFM, are 11.4% and 7.9% gross for the 12 month period.
Comments on the managers’ sector results over the past 12 months
Alliance Capital Management: Overall their results are good. Their best sectors have been overseas shares and property. Longer term they were ranked first for New Zealand fixed interest.
AMP Henderson: Again their results look good with the best sectors fixed interest both New Zealand and overseas. Longer term their best sector is New Zealand fixed interest. When assessing AMPH’s performance there may sometimes be too much emphasis on their passive funds.
BAM Simon Botherway has done well with New Zealand shares.
BNZ Investment Management: Overall their results are weak but they do have a good result for overseas shares with Templeton. Longer term their best New Zealand asset class is cash.
BT Funds Management On average, their numbers are good for the period, in particular for the fixed interest and overseas shares sectors. Long term their results for New Zealand shares are best.
Colonial First State: Overall the results are slightly below average. The best sector is New Zealand shares which does include some Australian share exposure. Longer term their overseas share result is good.
Guardian Trust Funds Management: Their numbers are strong overall. Their best sector is overseas shares. In the longer term their cash result is best.
GRT As a manager of other fund managers we do not produce sector numbers for them. For the fund shown, their numbers are good.
ING: Overall their numbers are around the average. Their best short-term result is in cash and longer term, property and New Zealand fixed interest.
Tower Asset M Their sector results are again around average. Longer term they are best at overseas fixed interest.
MSIT As a manager of managers we do not include sector results. Their total fund returns are slightly below average.
Table 1 – Actual Gross Returns (before fees and tax)
