Looking for Honey in a Bear Market

Investment Manager Outlook – Looking for Honey in a Bear Market

22 JANUARY, 2009 – Traditionally risky investment classes are regaining some attraction for New Zealand investment managers.

Russell Investments’ latest survey of those managers finds they are looking to international equities for opportunities and have become bearish about cash. That’s consistent with opinions of their peers surveyed by Russell Investments in Australia and the United States.

Russell Investments is a global market leader among manager-of-manager investment firms, advising more than 2,000 clients on more than NZ$1 trillion in assets. More than 40 million individual investors have access to Russell services and products.

Alister Van der Maas, Russell’s senior manager of investment consulting in New Zealand, says the survey also found NZ managers think NZ equities are expensive relative to international equities, probably reflecting what managers perceive as significant opportunities in ‘undervalued’ international equity markets compared to opportunities in NZ.

“While 22% of the managers felt the NZ equity market is significantly undervalued, 33% undervalued and 44% as fairly valued, they still have a degree of uncertainty about NZ equity returns,” Van der Maas says.

“They consider prices may be negatively impacted over the short term by downward revisions of earning expectations and declines in global and NZ growth rates. But some managers do think there may be a recovery in equity prices later in the year.”

Asked how New Zealand will fare in the current global economic turbulence, 78% of managers thought the impact would be substantial. Declining exports and constraints on the availability of credit to banks and companies will impact growth managers said, for at least six to nine months this year.

The survey was conducted at the end of last year and beginning of 2009 and nine key NZ investment managers responded. A relationship with Russell Investments was not necessary for managers to be included in the survey.

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