Fruitful year for local funds

Managed funds produced positive returns for investors last year and are expected to do so again this year.

New Zealand equity funds and diversified funds recorded strong performances according to figures released today by investment research company FundSource.

The year's highest returns came from domestic equities with average active fund returns of 17.12 per cent for the year, after tax and fees. This was up from 16.24 per cent in 2003 and made last year the second consecutive year of double-digit returns.

The returns were also ahead of the NZSX50 Gross (33 per cent) - which is the after-tax benchmark - which rose 16.32 per cent in 2004. The untaxed NZSX50 Gross index rose just over 25 per cent.

Investors have around $20 billion in managed funds and, of this, over $800 million is directly in equity funds. A further $1 billion is invested in local shares via diversified funds.

Fisher Funds Management's New Zealand Growth fund topped the domestic equity sector, with a 26.01 per cent return. Over five years it was top performer, with an annualised return of 13.29 per cent against an average of 7.82 per cent.

"Underlying economic activity continues to feed momentum in NZ equities," FundSource business manager Tim Anderson said.

"In spite of rising interest rates and a forecast economic slowdown, investors remain confident the New Zealand sharemarket can continue this run of positive performances."

That said, returns are expected to moderate after a record year.

"We don't expect such outstanding results. New Zealand equities will not match this year's gains."

International Equity (Global) funds - which have around $1.6 billion under management - returned an average of 5.33 per cent last year. The ASB World Shares Trust was first with 7.42 per cent.

Once again returns for this sector exceed the relevant benchmark, the MSCI World Free Gross (33 per cent) index, which returned 3.48 per cent in New Zealand dollar terms.

While international equity markets performed strongly in 2004, the appreciating New Zealand dollar (which rose 9.63 per cent) reined in the MSCI World Gross (33 per cent) index from 7.93 per cent in local currency performance to 3.48 per cent in New Zealand dollar terms.

Balanced funds, the most popular sector with $7 billion under management, returned 7.08 per cent last year.

The top performer last year over 2004 was the AMP Citigroup Balanced Trust with 10.13 per cent.

Fund performance:

* Best returns were for domestic equities.
* Fisher Funds was the top performer - with returns of 26 per cent.
* Fisher Funds had a five-year annualised return of 13.29 per cent.
* The sector average over five years was 7.82 per cent.
* The top performing balanced fund was AMP Citigroup Balanced Trust with 10.13 per cent.