Retail fund investment drops amid global market uncertainty

The amount of retail funds under management in New Zealand shrank during the past quarter, says new research that partly attributes the decrease to global uncertainty.

NZX subsidiary Fundsource says retail managed funds decreased by $503 million, or 2.5 per cent, to sit at $19.64 billion at the end of the June quarter.

"There's been a lot of uncertainty in the market, which is making investors nervous," said Fundsource business manager T.J. Singh.

Some investors were likely to be moving from managed funds into term deposits as they searched for safer options.

"Also, since a number of non-bank finance company failures, funds have been gradually flowing out of the mortgage sector," Singh said.

"In terms of short-term performance, substantial falls in world sharemarkets in April and May sparked by the sovereign debt crisis in Europe have been damaging."

However, he said, Fundsource believed that investors should keep a long-term view, as pulling out of managed funds would only materialise their losses.

In the boutique fund management space, he said, Milford (with $23 million) and Devon (with $16 million) had done well with their "equity centric" funds.

More money was going into KiwiSaver funds, reaching a total of $446 million in the quarter to June in the funds included in the report.

ING (including ANZ and NBNZ) was one of the main beneficiaries of the strong inflow, with $123 million going into its KiwiSaver funds, followed by ASB (including Sovereign) and BT (including Westpac).

"[When] there's more certainty in the market and people have more confidence you'll see more money flowing back into other sectors," he said.

"Managed funds offer diversity and they also offer greater yield, as compared to term deposits."