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Managed funds closing

Monday, March 13th 2006, 10:42AM

by Philip Macalister

A few weeks ago we ran an NZPA story about AMP closing up funds. If you didn't read it you should. While it may have failed to express things the way AMP wanted, it provides a glimpse into what's happening in the market place at the moment.

The thrust of the yarn was that AMP's focus was on workplace super (which will include KiwiSaver) and life insurance. It then gave the impression that it was getting out of managed funds.

This isn't exactly true (KiwiSaver is managed funds), rather it is more about rationalising its fund range and closing old, crappy products. AMP has to be applauded for this and others could take a leaf out of its book.

One of my bugbears with this industry is how managers keep unprofitable, inefficient small funds alive.

Have the guts to kill 'em, I say.

There is another trend which the story highlights. It is interesting is that there seems to be a bunch of firms which are shifting their focus to life insurance and KiwiSaver and that the managed fund world may become something for specialists.

Supporting this view is the talk of one large manager possibly selling up, another (which has been a strong investment player) becoming more of a life business, another going wholesale/mez only and other similar observations. (You can fill in the names, I'm not going to right now).

It's something which I will be watching carefully and no doubt commenting more on in the future.

Please send your thoughts on this Blog to Phil

COMMENTS
There have been some interesting comments at the moment ranging to this one - rather funny I thought to more serious ones such as the Nationalisation of the funds management industry.

Government should immediately name a high-level task force to inquire into the closure of New Zealand funds. An early outcome should be a process of consultation, determining the optimal number of funds Kiwi investors should have available for their savings. The opportunity to input in the process should be available to all industry participants.

Simultaneous regulation should be introduced ensuring all New Zealand managed funds are of a high average standard, safeguarding the hard-earned wealth of Kiwi workers. [Late Note - Insert: "The range must include appropriate not-for-profit funds and allocation to SRI"] . It may be that subsidies, or tax concessions, will be available for Qualifying Approved Managed Funds ("QAMF's").

At the same time, experts at The Inland Retinue Department ("TIRD") should be tasked with tackling the cause. A new regime should be drafted limiting the volatility of underlying. A scale of surcharges will be imposed on excessive gains. The new programme will be administered by the IRD using it's existing resources.

Anon

The Nationalisation of the Funds Management Industry

We all know that the ridiculous tax position of managed funds has held back the industry for years, albeit that is about to change, but too little too late.

We also know that the voluntary saving structure (which I support), meaning an absence of incentive or compulsion for saving, has also meant that fund managers have not had an easy ride. It also means that fund managers have probably failed to meet the challenge.

However, the final straw leading to further withdrawal from retail fund management services is probably Kiwisaver. Think of it like this.

The government undertakes standard funds management through ACC, Earthquake Commission, National Provident Fund, Government Superannuation Fund, the NZ Superannuation (Cullen) Fund and now Kiwisaver. Why would a fund manager bother competing, when they can simply offer management services to these funds at a wholesale level? Even NZX is in on the act, offering passive management to the government funds.

The evidence is in, not only with fund managers providing management services to the government funds, but with many former high flyers in funds management such as Bevin and Dyer, being employed direct by the government funds.

Enough said. Saving via managed funds has just about been nationalised, also meaning, of course, that many of the underlying investments also have significant government ownership. Interesting!!


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« Do advisers have a role in KiwiSaver?So what's happening at the FPIA at the moment? »

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