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Managed funds have first positive quarter in years

Concerns about finance companies appear to be helping increase funds flows into managed funds.

Monday, July 31st 2006, 5:53AM
FundSource Research says that investors are showing an increasing appetite for managed funds, with a net inflow of $22 million in the June quarter - the first positive flow in any quarter since December 2003.

FundSource general manager Binu Paul says that it is “very encouraging to see fund flows finally turn up to positive territory.”

“It is also typical of investor behaviour as it comes after a sustained and prolonged period of strong performance especially from international shares.

“Anecdotal evidence also points to stresses in the finance company debenture sector that have caused concern to those investors, encouraging them to shift their preference to managed fund products, which typically have materially lower risks.”

FundSource’s quarterly market share report shows total net funds under management are just shy of $22 billion. This comes even as international shares suffered from a month of poor performance in May.

During the quarter New Zealand and Australian unit trusts saw net inflows of around $75 million, at the expense of insurance bonds and superannuation products. Diversified, property and international fixed interest funds were the biggest winners.

New Zealand Funds Management continues to dominate the unit trust sector with more than 20% share of total funds under management. The superannuation sector continues to be dominated by ING (including National Bank and ANZ) with a 23% share of that sector.

International fixed interest funds experienced the largest positive flows of $107.1 mill for the quarter while the cash sector saw the biggest quarter-on-quarter swing in fund flows, going from positive $12.0 mill last quarter to negative $95.3 mill this quarter.

Total net funds under management grew by 0.5%, or $116.6 mill over the June quarter, compared to 4.3% ($907.7 mill) for the March quarter, despite positive fund flows.

Sectors adding to the growth in net funds under management included the property and international fixed interest sectors, at $135.5 mill and $121.8 mill respectively.

Property was the strongest performing domestic sector over the June quarter, while the international fixed interest sector benefited from strong positive fund flows.

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