This is about as good as it gets

While the order is the same as at December 31, there are some significant differences in the composition of each of these five companies operations.

Nearly all ASB's inflows went into its relatively new Mortgage fund that is designed to be a similar to a cash account. IPAC says the mortgage fund attracted a total of $41.8 million in the year.

Also, ASB like AMP and WestpacTrust attract most of their funds flow through their internal distribution channels, while NZ Funds and Tower source a greater amount of their business from the independent financial planning network.

IPAC general manager David van Schaardenburg says the unchanged order of the top five in terms of funds flow shows which groups are doing well in growing the business. He also adds sixth placed Armstrong Jones into this category.

The overall size of the managed funds industry grew, on a net funds flow basis, by $257 million during the quarter.

Van Schaardenburg says the growth was fuelled by the banks’ success in selling product through their branch networks, and buoyant international share markets.

Overall, van Schaardenburg describes the quarter as being relatively pleasing.

He notes the industry has been growing at around 12 per cent annual growth (inflows as well, as asset growth) for the past couple of years.

The current environment is reasonably friendly for managed funds with good equity market performance, and low interest rates.

"This is about as good as it gets in a free market," he says.

The industry would need some form on legislative stimulus to achieve higher growth rates, he says.

While this happens in all the other developed countries overseas, it is not the case here.

Another factor which may be holding back growth a little is the continuing merger and acquisition activity and company reorganisation work which is going on.

Many of the growth trends within the funds management remain unchanged. Notably, unit trusts are the most popular type of collective investment vehicle, followed by superannuation funds.

Group investment funds despite having an on-off again attraction with investors, where one quarter lots of money follows in then the next it goes out, remain relatively static overall, and insurance bonds continue to shrink.

On the sector front diversified funds accounted for 70 per cent of the total funds flows over the quarter. While still being the overwhelming favourite with the investor diversified fund inflows were down, relative, to the previous period, when 100 per of inflows went into balanced funds.

Van Schaardenburg says the strength of the balanced fund sector is a reflection of the success of the bank branch network.

The other two sectors to do well in the quarter were regional and international equities and New Zealand shares.

Regional equities have increased 11 per cent to $880 million and international equities are up 12 per cent to $1.79 billion.

Investors have chased these sectors because of their higher returns, relative to the New Zealand market.

However, the New Zealand equity sector attracted inflows of $13 million in the quarter taking its total to $1.2 billion.

Cash was the sector that suffered once again. Van Schaardenburg says a large net outflow of $104 million was recorded by the sector, principally because of the low interest rate environment. Despite the sector suffering the niche cash manager Macquarie grew its funds under management slightly to $111 million.

The individual stars of the quarter were the ANZ Gateway World Shares Fund and the ASB Residential Mortgage Trust which each received more than $40 million. The next most successful managers were two of the AMP balanced funds (see table).

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