New data from the Reserve Bank of NZ (RBNZ) has confirmed the first half of 2022 as the worst in more than a decade for local investors as year-on-year funds under management figures turned red.
According to the just-released RBNZ statistics, the NZ managed funds sector shrank 5.6 per cent over the three months to June 30, turning in a second consecutive negative quarterly result and dragging the annual asset growth-rate under water for the first time since the global financial crisis.
“Annually, total funds under management decreased 2.2%, the first annual decrease recorded since March 2009,” the RBNZ report says. “This decrease in total funds under management was consistent across 86% of the respondents surveyed quarterly.”
Supported by mandated member flows, the KiwiSaver sector fared slightly better than the average with net assets falling some 5.4 per cent to end the June quarter on $87.3 billion: year-on-year total KiwiSaver funds under management (FUM) rose 0.6 per cent.
“Similarly, Other Superannuation decreased this quarter falling 7.9% to $32.4b,” the RBNZ report says. “This is a 5.8% decrease from Q2 2021.”
Total FUM across the entire NZ managed funds market stood at $243.1 billion at the end of June with all product types – including retail, wholesale and private wealth – sliding backwards in 2022.
“Private Wealth has decreased 4.5% this quarter from $39.6b to $37.9b. The value of Retail Unit Trusts fell 7.3% this quarter to $51.8b. Retail Unit Trusts have been increasing steadily since March 2021, and this is the first time they have recorded a sizeable fall,” the report says.
“Both Private Wealth and Retail Unit Trusts tend to hold a large proportion of shares, so this decrease is in-line with the decrease in listed shares.”
During a tough period for risk assets, the value of overall managed fund holdings of listed shares fell 9 per cent in the June quarter to close at just over $112 billion, equating to an almost 6 per cent decline compared to the same time last year.
However, while long-term bond valuations rose a little in the quarter (remaining more or less flat over the last two years), short-dated debt took a massive hit in fund portfolios.
“Short term debt securities holdings were down 12.0% to $13.9b as at 30th June 2022,” the RBNZ says. “This is a 22.2% decrease year on year.”
Despite the market ructions, asset allocation remains largely unchanged in the KiwiSaver sector, barring a slight increase in offshore cash and bonds over the June quarter.
The RBNZ data also shows some marked movements in KiwiSaver derivative positions during the previous 12 months as net positive exposures for local assets jumped from $213 million at the end of June last year to more than $2 billion over the next three quarters, and falling to $1.6 billion in the latest three-month period. Net asset derivative positions for KiwiSaver offshore assets spiked to $432 million in the March 2022 quarter, subsiding back to $87 million during the June period in line with recent levels.
As at June 30, about 57 per cent of KiwiSaver assets were invested overseas. The RBNZ figures also show roughly 60 per cent of the KiwiSaver assets were held in shares, amounting to $35 billion in global stocks and $17.3 billion in NZ shares.
The RBNZ survey sheds some light on the discretionary investment management service (DIMS) sector, too, recording almost $46.4 billion in individually managed portfolios at the end of June, including $38 billion sourced from private wealth managers – a figure that has soared from just $24.5 billion at the end of March 2020.
Based on regular surveys of 35 local fund managers (with a $1 billion minimum assets), the RBNZ report covers about 93 per cent of the total NZ funds market, excluding the Accident Compensation Corporation and NZ Superannuation Fund.