Funds ride higher as shares stage a comeback

By ELLEN READ

Rising share prices in New Zealand and overseas are boosting returns for many managed funds.

Funds with equity investments have clearly outperformed other asset classes, six-month figures issued this week by researcher FundSource show.

The numbers show a strong improvement in managed funds for the June quarter and the year, FundSource business manager Tim Anderson said.

Equity markets had provided the largest amount of positive performance, he said.

A buoyant local market and rejuvenated international indices had pushed fund returns firmly into the black.

Actively managed New Zealand equity funds topped the performance list returning an average 8 per cent after tax and fees for the six months to June 30.

Telecom's 20 per cent rise since early March is largely responsible, as the funds benchmark themselves against the NZSX-40 gross index, in which Telecom has a 21 per cent weighting.

That index is up 8 per cent this year, so although fund managers have only just managed to keep pace, FundSource research shows 75 per cent to 80 per cent of people who invest themselves don't even match index moves.

The top-performing domestic equity fund for the six months was the Guardian NZ Equity Fund which returned 14.74 per cent.

Telecom's boosting effect is shown by the fact that the Fisher Fund, which does not invest in Top 10 companies, returned only 0.3 per cent.

But that fund is a good long-term performer, having a 26.95 per cent return for the three year period, compared with an industry average of 16.27 per cent.

Global equity funds are still playing catch up because international shares did not start improving seriously until March.

For the six months to June 30, New Zealand's international equity funds returned an average 1.08 per cent.

This was due to the gains in the Standard & Poor's and Dow Jones indices since March.

This sector outperformed the benchmark MSCI return of 0.74 per cent this year.

The first three months of this year held the funds back: if only the March-June period is calculated, the average return is 8.67 per cent.

Also during the second three months, all the global equity funds surveyed had positive returns.

Some were still in negative territory between January and March.

New Zealand cash and New Zealand fixed interest funds returned lower average returns of around 3 per cent.

Superannuation funds - in which there is a lot of interest as the launch date for the New Zealand Superannuation Fund approaches - had an average return of 3.78 per cent for the first six months of the year.

More than $17 billion is in retail managed funds in New Zealand, out of a total $40 billion in investment money.

FundSource