Worst quarter on record

New Zealand retail managed funds posted their lowest recorded net funds flow (NFF) figure in the June quarter this year.

The net outflow of $83.5 million for the three month period is the lowest ever recorded by FundSource Research, and beats the previous low, recorded in the December 1994 quarter. The outflow was primarily attributable to a $183 million net outflow in the diversified sector. The deterioration was also exacerbated by net outflows in the international equity sector and more surprisingly in the New Zealand fixed interest sector.

As with previous quarter, the moderating influence was the mortgage sector, which recorded positive net inflows of $154.7 million. However, the mortgage sector net inflows were again isolated to ASB Bank, WestpacTrust and to a lesser extent BNZ.

While the stable asset classes faired better, the cash sector was largely negative despite a boost from National Bank which recorded net inflows of $64.9 million into its retail cash fund.

As with NFF, net funds under management (NFUM) fell from $18.93 billion to $18.16 billion over the quarter, representing a 4.1% decline and $765.3 million fall.

The magnitude of the fall was marginally better than the decline of 4.3% recorded in the September 2001 quarter.

As with previous funds under management declines, the latest quarter’s decline was principally the result of weakness in international equity markets.

FundSource believes the catalyst for the withdrawal from the diversified sector is the result of the negative impact that international equity returns have had on diversified fund returns.

It says that the average diversified fund has produced negative returns in the one month, three-month, six-month, one-year and two-years on an annualised basis.

While the international equity sector also recorded net outflows, the absolute dollar impact from the diversified sector was higher due to the greater size of the sector.

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