Emotions Cloud Market As Global Equities Hit

23 July 2002

Emotions Cloud Market As Global Equities Hit Investment Performance

For the second consecutive quarter property and bonds turned in strong returns while offshore equity markets continued to fall.

The latest data from New Zealand’s largest fund manager, AMP Henderson Global Investors, showed property and bonds delivering strong annual returns of 9.8 % and 7.2% respectively.

By contrast global equities had a tough quarter with active and passive funds returning –12.5% and -18.3% respectively. Chief investment officer Chris Wozniak suggested that emotions were clouding analysis as he noted the increasing contradiction between the global economy and equity markets.

“After experiencing tough conditions at the end of 2000 and a major economic slump in 2001, most global economic indicators are now positive. There have been two consecutive quarters of economic growth in most OECD countries, while global industrial and business confidence are up.”

“Despite all these positive signs, global markets had a poor quarter. This is due to global security worries, concerns about corporate governance and the final effects of the NASDAQ bubble.”

“While three years of negative US equity returns has occurred on three previous occasions over the last 100 years, investors are finding the prospect tough going. It’s also taking a while to accept that the days of regular double-digit returns are over. When global markets turn positive again the returns are more likely to be in the 7% to 9% range.”

The poor equity performance of the last few years has highlighted the importance of counter cyclical performance of other asset classes, and also the importance of good portfolio construction to take the sting out of global equity declines.

“Private capital and property have had two strong years, oblivious to stock markets. Similarly bonds are experiencing a renaissance among investors,” said Mr Wozniak.

“To take advantage of this we launched New Zealand’s first bond partnership earlier in the quarter. The Strategic Income Partnership is structured to provide tax efficiency and liquidity to retail investors and has generated a lot of interest.”

Mr Wozniak also noted that the weakening US currency had kept his team busy managing currency for clients.

“Our active currency management helped protect against the impact of the US dollar falling 11 % against the Euro and 18 % against the NZ dollar.”

Investors also seem to be harnessing the equity market falls as a good time to buy into the World Index New Zealand Fund (WiNZ), with net fund growth of approximately $10 million per month.

Ends.
For more information
Chris Wozniak
Chief Investment Officer
Ph: (04) 494 2200

AMP Henderson Global Investors New Zealand - Returns to 30 June 2002

June 2002
Quarter Return June 2002
Annual Return
Individual Sectors – Before Tax

Strategic Equity Growth
NZ Equities Active
Global Equities Active
Property
New Zealand Fixed Interest
Global Fixed Interest
Cash

-2.8%
-1.4%
-12.5%
1.9%
2.5%
3.9%
1.4%

4.8%
1.3%
-24.6%
9.8%
7.2%
8.8%
5.6%
Managed Fund – Before Tax

Low Risk Fund
Medium Risk Fund
High Risk Fund

-1.1%
-5.6%
-9.3%

0 %
-8.5 %
-14.5 %
Managed Funds – After Tax

Low Risk Fund
Medium Risk Fund
High Risk Fund

-2.1%
-6.5%
-10.4%

-2.7%
-10.8%
-17.3%
Passive Funds – Before Tax

Global Equities – Passive
Global Equities – Passive Hedged
NZ Equities – Passive

-18.3%
-12.1%
0.4%

-31.3%
-17.7%
4.7%

Index Performance

MSCI Gross Index
NZSE40 Gross Index
NZ Equity Average
CSFB Bills Gross Index
CSFB Bond Index

-17.8%
1.0%
1.2%
1.4%
2.5%

-29.8%
4.7%
13.2%
5.5%
7.1%

About AMP
AMP is a leading international financial services business, providing wealth management products and services to around 8 million customers worldwide. Principal activities include retirement savings, funds management, life insurance, financial planning and banking services. AMP operates in 24 markets around the world with a significant and efficient domestic presence in its three home markets of Australia, New Zealand and the UK. AMP has around 17,000 employees and planners worldwide, manages assets of more than NZ$350 billion and has a market capitalisation of approximately NZ$25 billion.

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