Funds have strong quarter

Managed funds had their strongest in flows in three years in the first quarter of this year, the latest FundSource research shows.

Friday, April 27th 2007, 6:31AM

After nearly three consecutive years of outflows, the December quarter recorded the start of a modest turnaround, a $4.5 million inflow. However the March quarter saw a net inflow of $90 million.

"You can attribute this to a confluence of factors, chief among them being very strong investment returns over the last three years and upcoming tax changes that make managed fund products a superior investment option," FundSource head Binu Paul says.

As an example, funds in the Diversified Growth sector, which have a larger exposure to growth assets like international shares have delivered on average around 10% after fees and tax, year on year over the last three years.

"We would also expect that the new workplace savings regime, KiwiSaver, will support this trend, largely due to the fact that as an employer driven initiative, it will invariably act as a first-time introduction to managed funds as an investment option for a lot of individuals," Paul says.

The table below highlights some of the main trends in fund flows across sectors for the quarter ended March 2007. The only two sectors to record outflows where cash, which is a little surprising as interest rates are so high, and international shares.

Net Fund Flow
Sector	$ Mill
NZ Diversified	137.12
Australasian equity	56.59
NZ fixed interest	20.39
Intl fixed interest	14.75
Property	6.08
Global Intl equity	-25.65
Cash	-32.27

Total Net Funds Under Management (NFUM) for the March quarter grew 1.4% from December with an increase of $304.5m. This compares to growth of 2.3% over the December quarter, when the industry grew by $477m.

Assisting the March quarter growth was positive performances from managed funds across the board; NZ Equity funds for instance returned on average 1.4% for the quarter, while NZ Property Funds returned on average 3.4% (net of tax and management fees).

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