NZ-based Australasian wholesale equity managers produced a less-than 50/50 result over the 12 months and quarter to September 30, according to the latest Melville Jessup Weaver (MJW) survey.
While NZ equity managers as a group have historically tended to beat the S&P/NZX50 index, the MJW report says “fewer than half the funds have achieved an above-benchmark return” during the 12- and three-month periods to the end of September.
Ben Trollip, MJW investment consultant, said while the firm hadn’t carried out any detailed performance attribution, the increasing allocation of NZ managers to Australian stocks could be a factor in the below-benchmark result.
“The NZ share market has been stronger than Australia over the last few years,” Trollip said. Furthermore, with the NZ dollar appreciating strongly over the year, those managers not hedged to the Australian currency would’ve suffered.
He said anecdotal evidence from NZ share managers also suggests that many of them have pared back exposure to large cap NZX companies, rating them over-priced. However, the same large cap stocks have driven much of the NZX outperformance over the last 12 months, Trollip said.
He said growing KiwiSaver flows could be another factor influencing NZ share market returns.
“If big KiwiSaver funds continue to make large allocations to NZ shares that will eventually create challenges for stockpickers,” Trollip said.
The median Australasian share fund returned 6.8 per cent in the September quarter and 32.3 per cent over the annual period compared to the respective benchmark returns of 7.3 per cent and 33.2 per cent.
Over the 12 months to September 30, returns ranged from almost 35 per cent for the Russell Investments NZ Share fund (a blend of Devon and Harbour) to 27 per cent for the Mint Trans-Tasman Fund.
“The returns from the core Australasian share managers this quarter were relatively tightly clustered, ranging from 8.1% to 5.7%,” the MJW report says. “The top return came from Milford NZ shares, a strategy which has also achieved 1st place over the 10 year period with a 10 year annualised return of 13.2%.”
Over the three-, five- and eight-year periods the median Australasian equity wholesale funds in the MJW survey outperformed the benchmark by about 1 per cent.
Global share managers in the survey also reported a decent September quarter with returns ranging from 2.3 per cent to 6.8 per cent, the MJW survey says, with most in benchmark-beating form.
“All but three funds beat the MSCI World Index this quarter. ANZ and MFS, two funds which have done well in recent years and are still ranked high over the 10 years, had weaker quarters with rankings of 9th and 11th respectively,” the MJW report says.
According to the survey, the MSCI returned 2.7 per cent on an unhedged basis in the September quarter and 5.3 per cent hedged 100 per cent to the NZ dollar. Meanwhile, over the annual period the MSCI returned -2 per cent (unhedged) and 13.1 per cent fully-hedged against the median manager performance of -1.6 per cent.
“Returns from [NZ] bonds remain relatively strong for the asset class with managers’ results ranging from 1.2% to 1.9% over the quarter and 7.0% to 7.3% over the year,” the report says. “Nikko stands out in this section, beating all of its peers for all periods except for the 10 years, where it came in 2nd. While AMPCI achieved the best 10 year return at 7.7% per annum, this quarter it has come in last.”