The NZ responsible investment (RI) fund market grew at twice the rate of Australia last year, according to new Plan for Life (PFL) data.
During 2019 the NZ RI fund sector expanded funds under management (FUM) by almost 35 per cent compared to 15 per cent for the comparable Australian wholesale market. Australia-based retail RI funds saw FUM increase by over 21 per cent in the same period.
“Although operating in a smaller market compared to Australia, New Zealand Responsible Funds comprise a similar 5.4% of the total market and have experienced recent growth of over double that of Australia, indicating the increasing importance of this space,” the PFL report says.
Excluding the smaller RI-themed exchange-traded fund (ETF) sector, the respective NZ market was also the fastest-growing for the five years ending December 2019 with a 25 per cent compound annual growth record. By contrast, Australian RI retail and wholesale funds reported annual growth of about 16 per cent and 11 per cent, respectively, for the five-year period.
RI-flavoured ETFs, meanwhile, saw an almost 70 per cent surge in 2019 and five-year annualised growth of over 52 per cent – albeit from a low base.
“ETFs have been slower to embrace Responsible Investment as a focus with only 17 products making up the current total, however rapid growth in Funds Under Management, including 69% over the past year is a standout feature,” the PFL report says.
ETFs accounted for just 5 per cent of the trans-Tasman RI market as at end December last year, the PFL figures show, equating to roughly $2.2 billion.
The NZ RI sector measured about $6.2 billion at the same date, or about 14 per cent of the total market as captured by PFL.
Australian wholesale funds represented almost 64 per cent of the RI sector with $28.6 billion while the responsible retail FUM hit close to $7.8 billion (about 17.4 per cent of the total).
Overall, the Australasian RI FUM was almost $45 billion as at the end of last year, or 6.6 per cent of the broader investment market.
“In terms of annual growth, Responsible Funds have exceeded the wider market by an average of 4.6% p.a. consistently over the past 3 years and have reported negative quarterly Net Flows only once since 2015,” the PFL report says.
Since 2014, wholesale RI global equity funds have also been lodging at par or better performance figures than the comparable wider investment universe, according to PFL.
“Wholesale Market Responsible Overseas Equity Trusts have clearly outperformed general Overseas Equity Trusts, displaying the largest comparative disparity amongst asset classes, including Australian Equity, Property and Mixed Asset Class products,” the report says.
Based in Melbourne, the PFL actuarial consulting and research firm was founded in 1988 by Simon Solomon while Rael Solomon is now regional managing director.