This is a significant improvement in funds flow after five consecutive quarters of outflows, the most recent being negative $2.5 million recorded in the June quarter.
The quarter’s inflow was largely attributable to the $205.8 million net inflow to the mortgage sector, with smaller contributions from international fixed interest and international equity (global) of $46.5 million and $23.3 million respectively.
Since the end of 2000 the mortgage sector has had the largest inflows in all but one quarter.
"The general turnaround in net funds flow is not surprising given the strong performance of both international and domestic equities in the second and third quarters of this year,” FundSource says.
Cash experienced the largest outflow of $88 million as investors continue to chase higher yields in the currently low interest rate environment, followed interestingly by the New Zealand equity sector, which lost $36.5 million.
Also, the diversified sector had modest outflows of $22.9 million this quarter as redemption rates fell.
Industry net funds under management rose by more than $400 million to $18.4 billion over the quarter representing a 2.3% increase. This brings the total increase in net funds under management over the past six months to $1.1 billion due to the positive performance in equity markets and this quarter’s positive funds flow.
Net funds under management have grown 6.6% from the low point of two quarters ago. However, this is still 8.2% below the peak reached in the fourth quarter of 2001, representing about a $1.6 billion in net funds under management.
With equity markets performing well in October, FundSource anticipates a continuation in the fourth quarter of an improving trend in industry net funds flow and net funds under management.
ASB Bank topped the table once again with a $102 million inflow, which was again attributable to $86.4 million flowing into its residential mortgage fund.
New Zealand Funds Management was second and received almost $60 million into its diversified funds.
The third ranked manager, ING (NZ), received $75 million into its newly launched Diversified Yield Fund.
Out of the 26 fund managers surveyed, 16 recorded net outflows, which is three less than last quarter. Excluding the three managers above, the remaining five of the eight that recorded net inflows had a combined inflow of $75 million.
On the negative side, BT had the largest outflow totalling $24.5 million along with Forsyth Barr and Macquarie recording $21 million and $14 million of outflows respectively.
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