Mixed bag of results from managers

Consulting actuary Melville Jessup Weaver asks the question: Do the managers add value? Also it provides commentary on how well managers have done in the past 12 months.

Monday, August 5th 2002, 8:32PM

The answers are mixed, with zero value added over the 5 year period but value added over 1 and 3 years. The result for overseas shares for once shows that for all periods, value was added. The result possibly reflects the fact that in a falling market managers do add value. However the results are in contrast to the NZ share sector, where value was lost in a falling market.

Comments on each manager’s performance over the past 12 months

Overall comment – The net returns vary from -10.8% for AMP Henderson to -0.9% for Tower Asset Management, a difference of nearly 10%. The dominant influences on performance were exposure to the overseas share sector (with average returns of -26.7%), the varying positions of exposure to foreign currency and the level of cash in the funds. Most of the absolute results are driven by the benchmark asset allocation of the funds monitored.

This means that if the benchmark allocation is unfavourable, a manager who performs well against benchmark may not rank well according to value added to the fund.

For each manager:

· Alliance Capital - In addition to continuing to achieve good local fixed interest and cash results their sharemarket returns, particularly in the important overseas market, are looking good. The absolute return for the fund monitored has been hit by the exposure to passive overseas share returns.

· Arcus Investment Management – Their over-exposure to growth assets has seen their ranking for their absolute returns drop to 10th Over the longer term they had added good value to their benchmark.

· AMP Henderson – Their value added result for the fund monitored has improved over the last year. However the impact of high overseas share exposure, high currency exposure and a passive fund have seen a –10.8% result for the year.

· ANZ Asset Management – The results for value added for the total fund remain consistently above average. The numbers for local fixed interest have slipped over time.

· BNZ Investment Management – Their absolute results were adversely affected by their high exposure to overseas shares, foreign currency and passive overseas shares. Their local fixed interest numbers are improving.

· BT Funds Management – Good overseas share performance has held up a slipping local share performance and a continuing disappointing local fixed interest result.

· Colonial First State – Their local sharemarket fund with its exposure to Australian shares and a falling Australian dollar has seen them drop to second in the 1 year absolute ranking. Their overseas sharemarket result continues to impress and add value against the benchmark.

· Global Retirement Trust – They must be relieved they decided to introduce some exposure to active overseas shares and reduce their exposure to foreign currency. Without the changes they would have had a very poor absolute return for the year.

· Guardian Trust Funds Management – Good results for local fixed interest, cash and overseas fixed interest, but these are being outweighed by the overseas share result. The local shares show signs of improving.

· ING – Their world has suddenly turned around completely, with an absolute ranking of 3rd for the year.

· Tower Asset Management – On a gross basis they have achieved top ranking for absolute returns for all the periods shown. The value added numbers also impress.

· WestpacTrust Investment Management – The results for the fund monitored are improving although the high exposure to overseas shares has impacted adversely on the results.

· Willim M Mercer – The fund monitored is well constructed and in the current market, able to produce consistent returns. The rankings for the net returns drop through the impact of fees.

The funds monitored are

Manager/Fund/Funds under management $mill

Alliance Capital Management (ACM), EFG Managed Fund $3,060.6

Arcus Investment Management (AIM) Balanced Value Fund, $1,688.0

AMP Henderson Global Investors (AMPH) Superannuation Balanced Unit, $10,248.0

ANZ Asset Management (ANZAM) Balanced Discretionary Fund, $1,832.0

BNZ Investment Management (BNZIM) FLP Balanced Growth Fund, $2,523.2

BT Funds Management (BTFM) BTNZIS Balanced Fund, $2,074.2

Colonial First State Investment Management (CFS) Asset Growth Fund, $2,616.7

Global Retirement Trust (GRT) Balanced Fund, $297.6

Guardian Trust Funds Management (GTFM) Composite/Balanced Fund, $4,389.0

ING (ING) – formerly AJ SIL Balanced Fund, $3,666.1