Managed funds outflow rising

By MARTA STEEMAN - The Press | Thursday, 18 September 2008

Kiwi's savings in retail managed funds and in many KiwiSaver investments have been hit by the financial crisis in the United States and global sharemarket turmoil.

New Zealand's top 50 companies, as represented by the NZX 50 index, have lost 25.4 per cent of their value since the October 2007 sharemarket peak, a loss in value of $14 billion.

Investors in retail managed funds have been pulling out their money at an increasing rate in the past year.

Research company FundSource says the total amount of retail funds under management fell by $4.3 billion in the year to June 2008 – from $21.2 billion to $16.9 billion.

The funds typically invest in shares, property and fixed-interest investments.

More than half of that $4.3 billion reflected a drop in the value of the funds on the back of the property and sharemarket plunges. The rest was investors pulling their money out.

FundSource says in a report on the retail managed funds sector that a net $1.57 billion flowed out in the June 2008 year – the difference between money being pulled out and put into retail funds.

It was the greatest outflow of retail managed funds in years, FundSource says. Meanwhile, money has flowed into KiwiSaver since last October.

FundSource provided a selection of 24 diversified, moderate growth and balanced KiwiSaver funds and their performance for three months. Seventeen had lost between 1 per cent and 3 per cent in three months. Data for a year's performance of KiwiSaver will not be available from FundSource till the end of October.

The fall in property values has hurt household wealth. Spicers Household Savings Indicators show, on average, households were almost $6000 poorer, their net worth having fallen 1.2 per cent in the March quarter to nearly $370,000.

June-quarter figures are expected next month.