Worst quarter on record

The New Zealand retail managed funds industry recorded net funds outflow of $349.8 million in the three month period to December 31. This is the largest outflow of money since research house FundSource started recording data in 1990.

The worst previous quarter (June 2002) was $92.4 million better than December.

Total net outflow for 2002 was $435 million and the bulk of this money ($216.2 million in December and $700 million over the year) came out of diversified funds.

The deterioration was also exacerbated by net outflows in the international fixed interest sector and more surprisingly in the New Zealand cash sector, FundSource says.

The moderating influence was the mortgage sector, which recorded positive net inflows of $87.2 million. However, the mortgage fund sector net inflows were again isolated to the funds offered by ASB, BNZ, and Westpac.

Net funds under management (NFUM) fell from $18.16 billion to $17.83 billion over the quarter, representing a 1.8% decline and $323.4 million fall.

The fall was an improvement on the September 2002 quarter when funds under management fell by 3.8%. The smaller decline reflects the improved performance of the international equity sector over the recent quarter, when major international markets rallied, and as a result the decline is due largely to funds outflow.

Over 2002 net funds under management declined by 9.7% representing $1.9 billion.

Recent corporate activity has had a depressing impact on fund flows with BT who was bought by Westpac, Tower which reported a $75m loss and Royal & SunAlliance (renamed Promina in preparation) that is planning an IPO, all being at the bottom end of fund flows. Versus their peaks, over half the managers in the survey have had declines of more than 20% in funds under management.