AMP Henderson investors recoup ground after strong quarter

Superannuation and managed fund investors who have watched their investments shrink over the past three years can celebrate the June quarter as the best in five years.

AMP Henderson Global Investors said at a briefing today that its balanced, medium risk fund returned 8.6 percent before tax in the quarter to give a 2.4 percent positive annual return.

Its high risk fund had a bumper 13.4 percent in the quarter, giving an annual rate of 1.0. while the low risk fund was up 5.6 percent for the quarter and 6.1 percent for the year.

During the bear market of the past three years, investors in the balanced fund would still have got a negative 1.8 percent annualised return. Over five years it improves to positive 3.1 percent.

The high risk fund was negative 6.34 percent over three years and positive 1.5 percent over five while the low risk fund is 3.4 percent over three years and 5.4 percent over five.

Chief Investment Officer Paul Dyer said the buoyant quarterly returns, the best since the December 1998 quarter were not sustainable.

Good returns were broadly across all markets here and overseas.

"All cylinders were firing," he said. "We don't often see a quarter such as this."

It began with fears of economic fallout from Sars and the Iraq War and of a global recession. These had "clearly abated".

Central banks had made a clear commitment to underwrite growth in the quarter, Mr Dyer said. They had even possibly over-stated the possibility of deflation.

AMP Henderson, itself involved in demerged talks with its British operations, began the quarter with the view that equities were quite cheap and interest rates would fall further. Towards the end of the quarter, the fund manager decided interest rates had bottomed and it unloaded almost all of its holdings.

The subsequent steep rise in bond yields meant AMP Henderson now has an agnostic view about the various sectors and has begun buying bonds back.

Mr Dyer believes the New Zealand dollar is now above fair value and "we are getting early indications that the steady rise of the New Zealand dollar may be coming to an end".

The recent high volatility of the New Zealand dollar and other dollar bloc currencies was a possible warning sign of a fall.

AMP Henderson has added global commercial property to its portfolio of investment options and sees it as a very attractive investment. This is despite a likely pricking of the property bubble in much of the English speaking world.

Mr Dyer said the local domestic property market was not as stretched as in Australia and Britain.

In the quarter, domestic shares returned an impressive 15.2 percent. Global equities rebounded from discounted levels and delivered 17.8 percent in raw terms but 9.3 percent when translated back into New Zealand dollars. The New Zealand dollar rose 5.9 percent against the US dollar in the quarter.

Global fixed interest and New Zealand fixed interest assets returned 3.7 percent and 4.0 percent respectively, benefiting from the falls in long-term interest rates.

Property yields remained stable with the New Zealand portfolio achieving 2.4 percent for the quarter.

"AMP Henderson's long-term view of property continues to be favourable if adequate diversification is achieved," Mr Dyer said.

- NZPA