New Zealand
Auckland, 4 February 2010

• Balance funds returned 2.8% for December 2009 quarter

• Overall 2009 results sees funds regain ground lost in GFC with funds returning 14.7% for past year

Balanced funds continued their recovery, delivering a positive return for the third consecutive quarter and regaining much of the losses experienced in 2008, according to a Mercer Quarterly Survey of New Zealand Wholesale Balanced Funds.

Mercer’s December 2009 survey shows the median manager returned 14.7 per cent for the year ended December 31, 2009 compared to -14.4 per cent in 2008. The median two year return was -0.5 per cent.

The highest performing fund over the full year was Mercer producing a return of 20.7 per cent. AMP Capital Investors produced the lowest return at 10.6 per cent.

While funds recorded positive returns in the final quarter, the median return of 2.8 per cent fell short of the 7.6 per median return recorded in the September 2009 quarter. The best performing fund for the quarter ended 31 December 2009 was ING, which recorded a return of 4.1 per cent before tax and fees, while the lowest return was from NZAM/Milford Balanced Portfolio at 2.2 per cent.

Martin Lewington, Mercer’s business leader in New Zealand said the outlook remained cautiously optimistic for investors.

“2009 was a strong year for balanced funds, many of whom were able to recoup almost all of the losses experienced in 2008 by the end of this past year. However, funds haven’t quite broken even yet, which is reflected in the slightly negative two year return,” said Martin Lewington, Mercer’s business leader in New Zealand.

“Furthermore while the last quarter’s returns were still in positive territory the results weren’t as strong as we’d seen in the two quarters preceding reflecting the market jitters that persist as the global economic recovery unfolds.”

Over the longer term returns were positive with the median manager returning 1.2 per cent per annum over three years and 6.8 per cent per annum over five year periods.

“The effects of the global financial crisis will be felt for sometime in these longer term returns,” added Mr Lewington.

Other findings from the December Mercer Managed Fund survey include:

• In terms of the asset allocation of discretionary balanced funds, the average exposure to growth assets as at 31 December 2009 was 61.5% (including allocations to alternatives) compared with 59.1% 12 months ago.  With the exception of Tyndall Investment Management and Tower all managers surveyed had increased their allocation to growth assets from a year earlier.  The continuing shift to growth assets may suggest that investment managers in general have an optimistic outlook for 2010.

¹ Growth assets included Shares, Property and Alternatives

• Generally speaking, at year end balanced fund managers were investing more in overseas fixed interest and less in NZ fixed interest, more in shares and less in property, and are holding less cash that at the end of 2008.

• The lowest exposure to overseas shares was 27.6% (Tyndall Investment Management) with the AXA Global Investors holding the highest exposure at 43.9%. The highest exposure to domestic (or Trans-Tasman) equities was 20.7% (Tyndall SRI Balanced).

• Tyndall Investment Management (10.0%) had the highest allocation to Alternative investments at 31 December 2009.