AMP Henderson expects investor returns to revert to 'normal'

By NZPA

Wednesday 29th January 2003

The country's largest fund manager, whose funds under management have shrunk to $10.3 billion from over $11 billion 18 months ago, expects investment returns to revert to more "normal" from now.

AMP Henderson investors have had a wild ride over the past decade with "excessive" double digit returns in the early part of the decade and negative returns for the past three years.

Chief investment officer Paul Dyer said assets, following the beating dished out to global equities for three years, were now more realistically valued and in line with historic pricing.

"Investors who invest today are more likely to get more `normal' returns," he told a briefing for journalists on Henderson's December quarter result.

Speaking on a day when the share value of Henderson's parent AMP Ltd was pared back 5 percent to new record lows, Mr Dyer said that returns for reasonable risk "growth" assets, should be about 6-7 percent after adjusting for inflation before tax.

Price earnings ratios for US stocks had blown out substantially in the 1990s and had now returned to near their historic average of around 15 times prospective earnings.

In New Zealand, they are around 13 times earnings, slightly at the low end of historic levels.

While shares are not "outrageously cheap" they are seen as quite attractive, particularly New Zealand shares, where a number of stocks are "very reasonably priced".

No asset class stands out as outstanding value although property is seen as attractive both here and overseas while fixed assets may be slightly overpriced.

Henderson's balanced fund managed a 1.6 percent return for the quarter which mitigated a 10.2 percent fall for the year. Over three years the fund has returned negative 2.9 percent per annum. Over five years the return is 3.1 percent per annum while over 10 years it is 7.8 percent.

"Many investors undoubtedly feel pretty frustrated," Mr Dyer said.

"It's true that the investment returns of the last three years have been poor, but the last decade hasn't been."

Henderson has to a surprising degree not seen trend for investors to quit savings plans such as pension schemes.

The fund manager was advising people to hang in there and stick with their investing principles.

"At the end of the day there is no answer except to ensure that you do your investment basics correctly," Mr Dyer said.

The quarterly result this year was boosted by the rise of the New Zealand dollar.

Overseas shares returned 11.8 percent in the quarter in New Zealand dollar terms but fell 4.4 percent when the currency was hedged.

On an annual basis, overseas shares had an ugly negative 36.3 percent return but only 18.9 percent when the adjusted for the New Zealand dollar.

Property returned 3.6 percent over the quarter and 8.8 percent for the year, overseas fixed interest 1.8 percent and 10.1 percent, New Zealand shares, 0.6 percent and minus 1.1 percent, NZ fixed interest 1.8 percent and 9.2 percent, while cash returned 1.5 percent and 5.8 percent.

Henderson's low equity fund had a quarterly return of 1.3 percent against 3.4 percent for the high equity fund, while for the year the returns were minus 0.8 percent and minus 17.2 percent respectively.

Mr Dyer did not expect the New Zealand dollar to continue its strong run.

Asked if a war in Iraq would present a buying opportunity, Mr Dyer noted the prospect of a war had been very well telegraphed and although assets rose strongly after the last Gulf war, he warned it was dangerous to base investment decisions on past events.

Comments from our readers

No comments yet