News Round Up

More equity release options needed, Managed funds have first positive quarter, Alternative exchanges hits $1 bill, Deemed rate of return falls, New debt indices, Morningstar finalises buy.

Monday, July 31st 2006, 5:22AM

Most older New Zealanders who have taken up commercial equity release schemes are satisfied with them, research from the Retirement Commission shows.

The research also found that 64% of respondents with a scheme had not considered alternatives, and only 17% had looked at more than one organisation offering equity release products.

Retirement Commissioner Diana Crossan said that while the research showed that equity release schemes can be a useful option for older ‘asset rich, income poor’ New Zealanders, she was concerned by the lack of research into other options.

Crossan said people considering equity release, as with most financial products, should compare schemes, understand the full cost, take into account all of the implications, discuss the idea with their family and take professional advice.

Respondents said the best feature of an equity release scheme was that it made funds/income available (39% of respondents). The worst feature was the high interest and costs associated with the scheme (55%).

Managed funds have first positive quarter in years
Concerns about finance companies appear to be helping increase funds flows into managed funds.[MORE]

Alternative exchange hits $1 billion
Alternative stock exchange Unlisted says the aggregate market capitalisation of all the companies on its platform is more than $1 billion.

“The billion dollar milestone is further evidence of the value of Unlisted as a securities trading facility for small to medium sized New Zealand companies, despite the slow issuer growth during and following the regulatory review in 2005,” Unlisted manager Bruce Cossill says.

Since its launch in December 2003 Unlisted has transacted over 3,200 trades of 36.6 million shares worth $38.5 million.

Deemed rate of return falls
The deemed rate of return used for taxing foreign investment fund interests for the 2005/06 income tax year has been set at 9.82%. This is down from 10.17% last year.

The deemed rate of return applies to all types of investments, including interests in superannuation schemes and life insurance policies, for which the deemed rate of return method is used. It is set annually and is based on an average of five-year government stock rates to which a 4% margin is added.

New debt indices
A new set of indices which follow the interest rate swap market have been launched. The NZX Swap Indices, developed by NZX and Westpac, create benchmarks for the rapidly growing swap market.

They will model the total returns that can be achieved by investing in interest rate swaps. An interest rate swap is a derivative instrument which enables investors to "swap" between floating and fixed interest rate payments.

Swaps are usually traded over-the-counter between banks and their institutional and corporate clients, and can be used to lock in fixed rates of return.

"With swaps trading taking off in New Zealand, this is the time to establish appropriate benchmarks," NZX head of products Geoff Brown says.

In conjunction with the launch, Westpac is launching a series of synthetic products based on the new indices which will allow clients to replicate any of the benchmark or aggregate indices via total return swaps.

Morningstar finalises buy
Morningstar has completed its previously announced acquisition of Australian publisher and researcher Aspect Huntley. The purchase price for Aspect Huntley was A$30 million, of which A$2 million will be paid in 2007 subject to post-closing adjustments. Aspect Huntley was formed in July 2003 as a result of a merger between Aspect Financial and Huntleys’ Investment Information. Aspect Huntley bought InvestorInfo, publisher of IFA and Investorweekly, both leading financial trade magazines in Australia last year.

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