Superannuation funds produce some good numbers in the past quarter

Friday 30th April 2004

Global stockmarkets, for both unhedged and hedged New Zealand investors, recorded their fourth consecutive quarter of positive returns during the March 2004 quarter, Mercers say.

All major international markets delivered positive returns for the quarter in local currency terms, with the exception of the United Kingdom. Unhedged returns were again tempered by the continued appreciation of the New Zealand dollar against the United States dollar and the Euro over the quarter.

The S&P500 returned 1.3% over the quarter while the Dow Jones Industrial Average and Nasdaq fell 0.9% and 0.5% respectively (USD). The European market, as represented by the MSCI Europe Index, ended the quarter up 1.7% in local currency terms.

Funds wich adopt a value investment style performed better than growth manager over the three month period, with the MSCI Value Index (unhedged NZD) producing a return of 1.6% versus a return of 0.8% for the MSCI Growth Index (unhedged NZD).

The top manager in the quarter was Guardian Trust Funds Management which achieved returns of 3.7% in the three month period, It was followed by Tower Asset Management on 3.4%. The median return for the quarter was 3.1% (all returns before tax and fees).

On a yearly basis returns have ranged between 25.7% for Arcus to a 15.0% for BNZ Investment Management. The median return for the 12 months was 20.4% before tax and fees.

In terms of the asset allocation of discretionary balanced funds, the average exposure to growth assets as at 31 March 2004 was 59.6%. The lowest exposure to overseas equities was 29.4% (BNZ) with all other managers holding at least 32% and the three highest at or above 39%. The highest exposure to domestic (or Trans Tasman) equities was 22.4% from ING New Zealand.

Comparing the asset allocations of the current fund managers with their allocations as at 31 March 2001, the average allocation to overseas equities has decreased 0.9%, down from 37.0% three years ago. All but four managers have increased their overseas equities exposure over this time. The average exposure to domestic equities has increased from 16.5% at 31 March 2001 to 17.4% at the end of March 2004.

Mercer has also compared the current managers' three-year results from the March 2001 survey with those of the current survey. In March 2001, BT Funds Management was the highest performing manager with a return of 9.4% per annum. In the March 2004 survey Arcus was the highest performing manager with a return of 6.1% per annum, while BT dropped to eighth position.

In contrast, Tower ranked seventh of the managers in the March 2001 survey, but is the second highest performing manager in the current survey, returning 5.5% per annum over the past three years. Managers with three-year performance at or above median in both surveys were Arcus and Colonial First State.

The median return for the three year period to 31 March 2001 was 8.0% per annum. In contrast, the median return for the three year period to 31 March 2004 was 3.8% per annum.

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