Chief investment officer Tore Hayward says the company has shifted 5% of its diversified portfolios out of global bonds to New Zealand bonds. And he says New Zealand shares and the New Zealand currency are likely to fall soon.

“Strong growth has pushed up New Zealand bond yields relative to global yields and we don’t think the gap is sustainable,” Hayward says.

AMP is now likely to reduce its currency hedging from its present neutral position, although the timing of this is still unclear, and the company is also making noises about reducing its exposure to New Zealand equities.

Too early a move on the currency would mean the company loses the benefit of the interest rate differential between New Zealand and other economies.

“We would need more conviction that the currency has started to trend downwards before reducing our hedging.”

The New Zealand economy has continued to grow ahead of expectations over recent years, partly because of lowering unemployment boosting productivity, Hayward says.

That phase is coming to an end - “unemployment can’t drop much further,” he says.

All those factors reduce the return from investments in New Zealand companies.

The company’s fixed interest strategist, Leo Krippner, says the currency is unlikely to stay high against for much longer, although there is a possibility it may do so. “The New Zealand dollar is 6% over-valued against the Australian dollar, 16% against the US dollar, and 26% against the yen.”

Against all the indexes, the currency can be expected to fall, he says, although the country’s higher interest rates may keep it up for a time.

However, the thing about trends is that “you know them when you see them but the problem is that you usually only see them in retrospect.”