AMP Capital Investors said today it will continue to pare back its New Zealand equity investments as warning signs of a slowdown in the economy intensify.
AMP is the country's biggest fund manager, with over $10 billion invested.
Tore Hayward, AMP's chief investment officer, said that while the local sharemarketperformed well in the June quarter, current valuations don't reflect the slowing economy and severe capacity constraints.
The headline NZSX-50 gross index has piled on some 15 per cent in the past eight weeks, on the back of takeover and merger activity, to trade at fresh all time highs around 3330.
AMP has ridden the wave, with its New Zealand Equities Strategic Fund returning 6.12 per cent for the June quarter and 22.41 per cent for the June year.
"Overall it was a strong quarter for the New Zealand sharemarket, for property and for bonds," Mr Hayward said.
"In a quarter where oil hit US$60 a barrel, and there were signs of slowing economic growth -- globally, and in New Zealand -- the markets proved to be resilient."
But the latest string of poor economic data -- including a weak GDP number, declining business confidence and a fall in retail sales, means AMP plans to lessen its exposure to the local market -- a process that began in the March quarter.
The fund manager will shift 2 per cent of its asset allocation from the New Zealand market into global shares.
Mr Hayward said AMP expects the New Zealand economy to underperform in the coming quarter, but is loath to use the word "recession".
AMP also plans to increase its exposure to the local property market -- largely through unlisted commercial property investments, to take advantage of strong rents.
It will shift 5 per cent of its investments from global to local bonds; 1 per cent from global listed property to global equities; and reduce its hedging as the New Zealand dollar trends down.
AMP's low, medium and high equity diversified funds returned 3.33 per cent, 4.02 per cent and 4.74 per cent respectively during the June quarter. For the year to June 30 they returned 10.06 per cent, 11.14 per cent and 14.56 per cent.
Global property returned 12.10 per cent for the quarter and 39.08 per cent for the year, while its New Zealand Property Fund returned 5.06 per cent and 15.36 per cent respectively.
