While world markets took a dive early in August – including across the board falls of about 3 per cent in most major bourses last Friday – the previous month held mainly good news for New Zealand institutional investors, according to the latest Aon Hewitt Investment Consulting Report.
The July Aon Investment Update found all asset classes and virtually every manager included in the survey reported positive returns over the month with listed property and equities stand-out performers.
Property was the top asset class during the month with both “domestic and global property funds rebounding after a disappointing June”, with the respective benchmarks returning 4.1 per cent and 5.3 per cent, the Aon survey says.
Over the month the global equities (unhedged) and New Zealand shares benchmarks returned 2.7 per cent and 3.2 per cent respectively.
However, during the three months to July 31 unhedged global shares outperformed the next-best asset class (Australasian listed property) by almost 8 per cent, with the index returning 12.7 per cent for the period and the median offshore equities manager in the survey hitting 14.4 per cent.
Guy Fisher, Aon investment consultant, said the international shares outperformance was driven largely by the falling NZ dollar over the period.
“Much of this [global shares performance] is currency (reported returns are unhedged), but many portfolios are around 50 per cent hedged so returns will still be very strong,” Fisher said.
Of the 16 global equity funds in the Aon survey, only the Russell Emerging Markets fund fell into the red in July, dropping 4.6 per cent over the month, with Magellan (5.5 per cent monthly return) the top performer over all reported periods.
“There has been a sharp dispersion between emerging markets and developed markets over the last three months,” Fisher said. “Mainly driven by events in China.”
All Australasian equity managers in the survey recorded positive returns over July with Fisher Funds Trans Tasman Equities on top with 4.2 per cent and the Devon Trans Tasman fund the weakest on 2.2 per cent.
However, Devon was “the strongest fund over one year (24.3 per cent) and three years (26 per cent)”, Aon says.
The Mint Trans Tasman fund topped the five-year charts, reporting an annual 20.1 per cent return over the period.
Despite recording reasonable long-term numbers, the two Milford Australasian equity funds in the Aon survey underperformed during July.
“The Salt NZ equity funds have also underperformed over the last three months,” Fisher said. “This coincides with them taking on the AMP mandate, though it would be unfair to link the two events.”
However, he said the Salt Long/Short Fund – a rarity among NZ managers – “had a pretty successful first 12 months”, he said.
All local and global bond funds in the Aon survey also reported a positive July, with the median manager in the respective asset classes returning 1.4 per cent and 1.3 per cent.
Over the five years to the end of July, the median manager in each of the seven major fixed income, cash and equity asset classes covered in the Aon survey outperformed their respective benchmarks.
