by Rob Hosking
The weak equity markets meant AMP’s divided superannuation gross performance was “not that high relative to the cash returns”, says chief strategist Tore Hayward.
The fund’s low equity fund produced only a 0.98% return; the medium 0.64%; and the high equity fund 0.44%. A year ago the comparable gross balanced fund’s performance produced returns of 2.5% (low equity); 2.8% (balanced) and 3.5% (high) respectively.
Cash returns for the quarter were 1.7%. AMP is pulling more of its funds home, with local property and bonds being the big winners. It is reducing its global bonds investments by 5%, and upping the investment in local property and bonds by 2% each.
It is also upping its hedge global equities by 2%, partially at the expense of local equities, which it is dropping by 1%.
Global equities are still having a better valuation compared to local equities or global property, says Hayward.
And long term he is extremely bullish about property.
“We expect property to continue to provide equity-like returns,” he says.
AMP’s local property investments – which are in office, development and retail sector – made a 4% return for the three months to March 31.
New Zealand equities – both passive and strategic – made negative returns of 1.2% and 1.4 % respectively. Hayward says the local economy is definitely slowing compared to the global economy, and says it is a case of “stronger no longer”.
Long-term constraints on business expansion such as the skills shortage, the Reserve Bank’s lifting of interest rates, and rising oil prices are playing their part, he says.
The New Zealand dollar is also now over-valued and it will fall – “so hedging will lose money,” he says. Hayward signalled two quarters ago that AMP was starting to cut back its hedging in expectation of a shift.
However, the local property market will hold up, he says.
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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