Kiwi fund managers are increasingly looking across the Ditch to round out their portfolios because of a lack of opportunities in New Zealand, RaboPlus' investment head says.
Tim Hewson, who last week visited local managers on a fleeting visit from Australia, said he had seen a noticeable shift towards investing
in more Australian companies.
"I've seen an increased aptitude to Australian equities. It's just out of necessity for greater market opportunities."
Hewson said if fund managers were looking at Australian companies, it would be in the best interests of investors. In Australia fund managers were also seeing challenges in finding opportunities.
"Gone are the days of double-digit returns. Fund managers are being asked to deliver value."
There was now more of a focus on value strategies rather than growth, he said.
In the last year managers had reduced the level of risky assets in their portfolios and were now more focused on giving a consistent performance.
"One of my key take-aways [from the New Zealand visit] has been, against a whippy local market, consistency has become the key focus. Twelve months ago they were focused on realigning their portfolios."
Hewson said a few years ago Kiwi fund managers had as much as 95 per cent of their portfolios in high-risk assets. "They have now shifted down the risk curve."
The most risky assets had been reduced from an average of 65 per cent to 30 per cent, while more money was being ploughed into moderate-risk assets. There had also been a pick-up in investment in multi-sector funds to increase diversification.
Hewson said the biggest challenge for managers in the next year would be delivering on their objectives and meeting the expectations of investors.
"It's going to continue to be volatile out there. Sticking to their knitting will be the biggest challenge."
RaboPlus would switch to its new name of RaboDirect from Sunday. Hewson said the name change would align New Zealand with its European business, which already used the direct brand.
"Direct is synonymous with retail and online." Australia had switched to using the direct brand a few months ago.
