Fund flows take a hit

The research house says that in the quarter net outflows totalled $633.9 million, compared to net outflows of $162.6 million in the previous quarter and net inflows of $89.7 million in the March quarter.

Also of significance, net retail funds under management for New Zealand based fund managers declined 3.5% over the September quarter, losing $739.0 million. This is the largest percentage decline in net funds under management since March 2003.

"A number of factors have contributed to the net fund outflows for the quarter, including some restructuring on the part of fund managers, as well as a degree of 'contagion effect' on the back of volatility in world share markets and difficulties in the non-bank finance company sector within New Zealand," FundSource's Gabrielle Donnell says.

"It is also likely that the increased attractiveness of bank deposits with New Zealand's high cash rate has caused some of the general trend for the quarter."

"Yet our expectation remains that fund flows will improve going forward with flows into KiwiSaver managed funds, and with the introduction of the largely more tax efficient portfolio investment entities.

"These are arguably the most significant changes the New Zealand managed funds industry has yet experienced. While we are currently in a transition period, we would expect to start to see the benefits for managed funds down the track".