Money leaks from funds

Investors are pulling money out of managed funds despite forecasts showing they are likely to enjoy better returns.

In the final quarter of last year almost all categories of retail managed funds experienced withdrawals, with the total $222.8 million the largest leak of money since the start of 2003. Over the full year $630 million was withdrawn.

"This is a disappointing result for the managed funds industry," said Tim Anderson, business manager for investment researchers FundSource.

"Net outflows in the face of good performance come as a surprise to us as this pattern goes against our past experiences of investors' behaviour."

He said the flow ran contrary to an improving outlook for international shares and the momentum in the local stock market.

Anecdotal evidence suggested the money was being redirected into the local stockmarket and housing.

But the funds minimised the losses with strong performances, so that funds under management actually rose by 1.5 per cent to $19.9 billion in the December quarter.

Last year, despite $630 million being withdrawn from funds, total funds under management grew by $690 million.

During the December quarter, only international fixed interest and New Zealand property attracted funds - $15.4 million and $2 million respectively.

Diversified fund and international equity funds saw the largest outflows, $107.9 million and $61.8 million respectively.

Fund manager, SBS, National Bank and ASB Bank attracted the most money in the December quarter - $27 million, $24 million and $17 million respectively.

A large portion of the funds flow for SBS came from the transfer of management to them from Tower of the SBS Capital Stable Fund.

As in previous quarters, demand for ASB mortgage products contributed significantly to their funds flow results.

Many of the larger fund managers experienced negative funds flow over the quarter, Anderson said.

Tower again experienced heavy outflows, of $70.73 million. Westpac and BNZ had outflows of $51.35 and $45.17 million respectively.

ING (NZ) (which also manages ANZ funds) held its place atop the net funds under management ranking and have $3.1 billion in assets under management.

Anderson said he had given up trying to predict when the turn around in funds flow would happen, but with continuing good fund performance it was only a "matter of time".