Fund flow figures not fantastic - still

Saturday, November 5th 2005, 3:11AM

When I started reading FundSource's funds flow information for the September quarter, I thought, OK this ain't bad. New record high, but some worries about investment decisions.

None of these are new - money moving from funds to finance companies, people exiting international shares.
However when you get to the numbers it's sad reading. In the year more than $800 million has left funds, add in the previous year and the number is over a billion dollars.

These outflows are at a time when markets have been performing well and some excellent returns have been recorded.

Funds flow figures are made up of two parts, market movements and investor applications and redemptions.

If it hadn't been for the market doing so well, reaching this new record high of FUM would look like the summit of Mt Everest from base camp - daunting. We would never have got close.

I can understand the appeal of finance companies and some investment into debentures and the like is fine - as long as it is done properly.

One thing which is a concern is that I have seen some evidence there is a clear divide in the market between advisers - one group uses finance companies for their fixed interest exposure and another group uses more liquid and higher grade listed debt and corporate debt instruments.

Surely there shouldn't be two camps?

I can't understand the desire to move out of international equities. While I am not a highly-paid economic analyst, logic seems to say international looks good as the New Zealand economy is slowing and there must be some currency kicker somewhere along the track. The NZD can't stay this high forever.

In other markets like fixed interest and New Zealand shares investors have a number of options other than managed funds, but with the latter it seems funds are the best way to gain exposure.

Is anyone concerned about what is happening?
I am.

« Thoughts on adviser associations getting together

Kiwibank should listen to Bollard »

Special Offers