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Russell investment survey shows property finding favour

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Fuseworks Media
Fuseworks Media

New Zealand's leading investment fund managers are beginning to favour property as increasingly defensive investment strategies are being implemented to counter the vagaries of the current world economic situation.

Russell Investments' quarterly survey of fund managers has property on an equal footing with New Zealand shares as managers look to defend their clients' investments against world events, especially those in Europe and the United States.

"New Zealand stocks have performed relatively well against other markets around the world as our share market has a relatively higher weighting to defensive stocks, such as utilities", says Daniel Mussett, Head of Consulting for Russell Investments in New Zealand.

"But what our survey also shows is that property is viewed comparatively positively by fund managers. Fund managers are telling us that current yields on property make it an attractive prospect as well providing inflation protection. Both New Zealand and international shares are still viewed positively over all.

"That contrasts with the very bearish attitude towards both global and New Zealand bonds. Further, with low interest rates and little prospect of a lift in rates in the near future, fund managers see little reason to invest in NZ cash."

The Canterbury rebuild also continues to provide an expectation that there will be growth in the national economy over the next 12 months. All fund managers expect better growth figures than in the previous 12 months. Interestingly the Rugby World Cup, still in progress, has already dropped out of fund managers' thinking as a contributor to growth.

"We were also interested in the response to our specific question this quarter about the respective performance of the New Zealand and Australian sharemarkets," said Mr Mussett.

"On a relative basis the New Zealand market has, over recent months, outperformed the Australian market. With many New Zealand funds holding considerable allocations to Australian shares, the impact was not trivial.

"Expectations seem to be that the Australian Reserve Bank may adopt a looser policy in coming months and that, like their Australian counterparts, New Zealand fund managers believe the Australian market may be undervalued.

"However, that only holds true if the global outlook remains the same. If things were to worsen globally, New Zealand fund managers expect our sharemarket to continue to outperform Australia."

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