A falling Kiwi dollar is pushing up the returns of unhedged international investments.

AMP, Pathfinder and OneAnswer all reported 6% to 8% increases in their global share funds in May. Fund managers who are fully hedged rose only up to 2% over the same period.

John Berry, of Pathfinder, said reducing currency hedging, particularly against the USD, was essential for fund managers in the face of a falling dollar.

“We started the year with an average 60% hedge, reducing to 40% in March and to 27% now.   It is widely believed that the NZ dollar could fall further against the US dollar.  It is anybody's guess the time frame it will happen in and how far it will go - but the risks point to a weaker kiwi dollar.”

He said advisers should ask their fund managers for a breakdown of all their returns so they could see what was attributable to hedging and what was because of the movement of the value of the equities themselves.

Adviser Robert Oddy said clients with no hedging in place had had a tough run while the dollar was strong and that was now turning around. “Equity and bonds should be a long-term investment and it’s starting to work out again for those that have stuck the course.”

Advisers needed to better acquaint themselves with their fund managers more generally, Berry said.

On their checklist of things to ask a fund manager should be questions about their people - such as their history and ownership, process - such as the governance structure and service providers used, how their fees compare to others in the market and the level of transparency - such as the consistency and quality of published information.

Berry said advisers should also regularly read the company accounts to determine how liquid the investments are, any related-party transactions happening and whether the directors themselves have money in the fund.