Money: Big numbers in safety

By MARK FRYER

Tough times breed cautious investors.

That is the message in the latest figures showing the amount of money flowing into managed investments.

In the three months to the end of June, New Zealanders put a net $354 million into managed funds, according to figures from researchers FundSource (formerly IPAC).

More than two-thirds of that - $246 million - went into mortgage trusts.

These are funds that pool investors' money then lend it to property buyers, passing the interest payments back to the investors after deducting fees.

They may not be the most exciting investments, but many investors obviously prefer the security they offer, rather than the sort of excitement that the sharemarkets have provided lately.

In the same period, global sharemarket funds attracted $73 million, while funds which invested in the local market suffered an outflow of $930,000.

Recent losses on overseas sharemarkets are one reason for the trend, says FundSource executive chairman David van Schaardenburg.

"People are now going 'hey, I just want to focus a bit more on capital preservation', and get a not particularly appealing but passable return in the interim, until things around the global economy and therefore the global markets start to stabilise and the outlook starts to improve a lot."

Mr van Schaardenburg says the increase in money flowing into fixed-interest funds is also the result of new investments being developed by managers, particularly the banks.

In the past year, Westpac and ASB have launched mortgage funds which have attracted a lot of money, points out Mr van Schaardenburg.

In the past three months alone, almost $60 million flowed into the ASB's residential mortgage trust.

He suspects a lot of the money moving into fixed-interest funds is switching out of term deposits.

Banks like investors putting money into such funds because it tends to be "stickier" than term deposits - meaning investors are less likely to switch - the profit margin is better and "they don't have someone ringing up every 90 days who might move their money out."

The question now is whether the safe-and-steady funds will hold their appeal when shareprices turn up again.

* Contact Personal Finance Editor Mark Fryer at: Business Herald, PO Box 32, Auckland. Phone: (09) 373-6400 ext 8833. Fax: (09) 373-6423. E-mail: mark-fryer@herald.co.nz.