Hi
The massive 150 basis point cut to interest rates yesterday is indeed a big kick-start to the year.
Much of the commentary has been on the home loan space, but it also has big implications for investors relying on income – times will be tough as many interest bearing products will produce little if any real return (after tax and inflation is taken into account).
One of the things which may well happen is that products which allow investors to drawdown some principal as well as interest may emerge into the marketplace again.
My thoughts on the impact of the OCR cut is that it will be a catalyst for change, or at least rethink, in investor behaviour. I suspect it will make investors look again at growth assets in the form of shares and property. The argument I presented on ASB Business Breakfast programme on Wednesday was that residential property investment may get a glow on. With mortgage rates at historically low levels and house prices down, this sector may become more of a beacon to investors.
Others may look to shares, particularly ones with good yields on them.
The other thing which this week’s announcement highlights is that the markets are changing very quickly, therefore investors need to continuously look at what they are doing.
AMP Capital provided its regular quarterly update on the markets and it was refreshing to see that it was a more positive outlook than many others suggest. A message, and one we may hear more of, is that this year there will be some good opportunities for those prepared to take the risk.
Investors should also be keeping an eye on product developments too. In depositrates.co.nz we report on ASB’s PIE funds. It has done something a little different and replicated most of its term deposit book as PIEs.
Coming back to home loan rates you can see what is happening in our Mortgage Centre and which lenders have made changes. While the banks are the leaders in cutting rates, others are getting involved in the competition as well, notably CBS Canterbury.
Sticking with mortgage news we have also provided an update this week on what many of the Wizard franchises are doing now the company has decided to close down its New Zealand operations.
The other theme of the week, and one which is a continuation from late last year, is the on-going saga with ING’s distressed CDO backed funds. As reported on Good Returns this week, ING has written to advisers saying it can defend its position on the funds and how they were marketed. Meanwhile, we report on an investor action group set up with the goal of getting their money back.
The other fascinating story is that FNZ, the wrap platform used by many advisers, has been sold for $34 million.
We have some interesting Insurance News stories coming up next week including AIG Life’s new adviser remuneration plan which is a little like a loyalty programme, and also an update on the PIS/Newpark deal – which is yet to be finalised.
On the People front we have a few appointments from last week including Murray Harris’s departure from Goldman Sachs JB Were and a bunch of new appointments at BT Funds.
Have a great weekend.
www.goodreturns.co.nz
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