As this is the eighth consecutive quarter showing net outflows, any reduction in the rate of outflows is positive, but such a substantial drop is even more pleasing. For the 2005 calendar year outflows totalled $647.54m, only slightly greater than 2004 when outflows totalled $614.8m.
Despite these outflows retail funds under management in New Zealand continue to climb, backed by good overall performance across the sectors, reaching a new record high of $20.86 billion at year end.
FundSource says that investors continue to shy away from growth-type assets in favour of income.
The exception being the mortgage sector, which several years back was the king of funds flow. Several managers have experienced large outflows from funds investing in this asset class, most notably ASB with outflows from its mortgage funds totalling $108.1m
FundSource says there has been a shift away from managed funds in general.
“There is also a move towards fixed-term, interest-bearing products such as finance company debentures and bank term deposits, especially with such high market interest rates.”
Investments continue to shift out of funds in the New Zealand diversified, New Zealand equity and International equity sectors. This is contrasted by flows into cash and international fixed interest funds with investors still driven by the allure of the yields on offer.
The two popular types of funds in the quarter were Australian unit trusts (AUT) and group investment funds.
The latter recorded positive flows of $103.91m and AUTs were positive at $39.56 million.
Recent and proposed changes to the taxation of investment funds are likely to remove the tax benefit within these structures and in consequence alter the current investor preferences.
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