News Round Up

International equities outperform, Salvus reports loss, Trans-Tasman offerings coming soon, Review progressing, Borrow to invest. Comments; Tax takes and the deal of the year.

Monday, February 27th 2006, 2:58AM

The month of January saw investors in international equity funds outperform those in diversified funds and New Zealand share funds, FundSource says.

All three categories of international equities - Australian, Regional and Global - posted strong performances for the month, averaging 3.65%, 5.25% and 3.63% respectively.

This pushed the average returns over the past 12 months up to 19.43% for global international equities.

“The investors who maintained a long-term focus and held onto their investments even after the very negative bear market are now being appropriately rewarded with strong double digit returns. Unfortunately, funds flow data shows that there are many investors who have done the opposite, withdrawing from international equities then missing out on the upturn that would have allowed them to recoup their losses.”

Salvus reports loss

Unrealised losses on its portfolio have seen listed investment company Salvus report a net loss of $1,239,303 the six months ending December 31.

The most substantial change to the investment portfolio over the period was the acquisition of a 12.9% stake in Tru-Test Corporation. This buy required a modification to the initial investment parameters set up by the board because the size of the investment (at initial cost) was greater than 15% of portfolio NAV and resulted in greater than 30% (at initial cost) of portfolio NAV invested in unlisted companies.

The Board approved the change as it believes that the acquisition has strategic value, both from a fundamental and economic cycle perspective, given the company's large currency sensitivity and exposure to international markets.

Of the core holdings, the most significant contributors to performance over the period were Mainfreight (relative outperformance +27%) and Hallenstein Glasson (+18%). The main underperformers were Pod (relative underperformance -46%), Methven (-10%) and 42 Below (-8%).

Trans-Tasman offers coming soon
Australian and New Zealand issuers of securities will be able to promote their offerings on a trans-Tasman basis.

The two governments, last week, agreed on the signing of a treaty in relation to the mutual recognition of securities, which allows securities to be offered in both countries using the same documents.

It is expected the agreement will come into force later this year once the necessary securities legislation changes are made.

Currently Australian offerers are required to seek exemption notices from the Securities Commission before they can promote offers in New Zealand.

Review progressing
The Review of Financial Products and Providers (RFPP) is progressing well and is currently in phase two – the development of options for reform, the Ministry of Economic Development says.

Its officials have been developing preliminary options for reform to test through the advisory groups established in November last year. “The advisory groups have provided valuable input and feedback in the policy development process. Advisory groups will continue to meet throughout the first half of this year to inform the public consultation paper planned to be released by the middle of this year.”

Borrowing to invest
Leveraged Equities has been approved as a leveraged investment for the Man Investments Series 11 OM-IP 220 offer. It is offering loans, with margin calls, of up to 90% and charging a 10.50% variable interest rate.