Local equity funds show 10pc returns

By ELLEN READ Markets Writer

Last year's retail fund performance results are in. The good news? Although international share funds faltered, funds investing on the local sharemarket showed big improvements on the previous year.

Research house FundSource estimates New Zealand equity funds (excluding passive index-trackers) had an average annualised return of 10.38 per cent, way ahead of the previous year's negative 3.09 per cent.

Before fund managers pop the champagne, it should be noted their brain power added little value on average, as the NZSE 40 gross index rose 9.09 per cent over the year (assuming a 33 per cent tax rate) without their help.

The top performer was AXA Australasian Select Equities (a New Zealand-focused fund, despite the name) with an 18.95 per cent return.

Funds investing in Australian and New Zealand equities returned an average 6.74 per cent, compared with 2.98 per cent in 2000.

The New Zealand contribution was dragged down by a 5.65 per cent return from the ASX top 200 index.

Sovereign CFS Tasman Shares (16.27 per cent) was the top performer.

Locally based funds investing in international equities had a tough time of it, with an average negative return of 9.19 per cent.

Another Sovereign fund, Sovereign CFS Global Property Shares, was top performer with 12.14 per cent.

Property unit trusts returned an average of 9 per cent, a huge leap from the previous year's 2.82 per cent return.

The retail funds covered in the survey account for $19 billion of the $41 billion within the local managed funds industry.

FundSource business manager Tim Anderson said the prospects were good for better returns this year, given an underlying backdrop of recovery in world growth.

New Zealand was enjoying a competitive currency, generally robust commodity prices and strong growth in tourist numbers and reaping the benefits of several good agricultural growing seasons.

Business and consumer confidence was showing early signs of strengthening and consensus expectations suggested GDP growth of around 2.1 per cent this year.

"Nevertheless, being a small open economy, NZ will continue to remain vulnerable to any downward drift in global growth," Mr Anderson said.

He was unwilling to recommend specific funds. "If I was to say one sector, I would say international equity unit trusts, as they cover a wide range of economies."

www.fundsource.co.nz