Bonds Boom But Future Returns Are Declining

15 October 2002

Media Release - Embargoed Until 12:30pm

Bonds Boom But Future Returns Are Declining

Bonds continue to be the investment of choice, as New Zealand investors seek a safe haven from global equities.

New Zealand’s largest fund manager, AMP Henderson Global Investors’ annual fixed interest returns were 9.6% globally and 7.7% locally. September quarter returns of 3.7% and 4% respectively, contributed strongly to this result. Property also returned a steady 8% for the year.

AMP Henderson Chief Investment Officer Chris Wozniak said bonds provide a lot of appeal currently, because of their relatively low risk. “However, it’s important to consider that global bond yields are now down to 40 year lows. New Zealand bonds continue to provide appeal, but we have some concerns about the returns being sustained as we go forward.”

The continuing decline in global equities has been driven by a lack of investor confidence as well as softer earnings. Investor confidence, in particular, took a number of hits over the quarter including continuing negative corporate news, a lack of clear evidence of a strengthening global economy and the possibility of a US/Iraq war.

“September equity returns were the worst we’ve seen for some time, although New Zealand fared quite well compared to global markets, with the NZSE40 Index falling only 2.5% compared to a global MSCI fall of 15.5% for the quarter. Global markets are now reasonably priced but emotionally driven investors are still staying away.”

“Investors should ensure they have well-diversified portfolios, as the currently struggling asset classes will pick up again eventually. There are also other asset classes, property and private capital, which are doing well currently and can bolster a well-balanced portfolio.”

“Despite the turbulence of the markets, local investors are still seeing the benefits of timely investment. AMP Henderson has secured over $335 million in new wholesale investment to date this year,” he said.

Ends

AMP Henderson Global Investors New Zealand - Returns to 30 September 2002

Sept 2002
Quarter Return Sept 2002
Annual Return
Individual Sectors – Before Tax

Strategic Equity Growth
NZ Equities Active
Global Equities Active
Property
New Zealand Fixed Interest
Global Fixed Interest
Cash

1.18%
-0.64%
-15.95%
0.84%
4.02%
3.65%
1.57%

8.66%
9.20%
-24.25%
8.04%
7.69%
9.55%
5.64%
Managed Fund – Before Tax

Low Risk Fund
Medium Risk Fund
High Risk Fund

-1.34%
-5.44%
-10.75%

0.60%
-7.67%
-14.23%
Passive Funds – Before Tax

Global Equities – Passive
Global Equities – Passive Hedged
NZ Equities – Passive

-13.96%
-18.18%
-2.64%

-30.27%
-20.93%
13.99%

Index Performance

MSCI Gross Index
NZSE40 Gross Index
NZ Equity Average
CSFB Bills Gross Index
CSFB Bond Index
Global Bond Index

-15.47%
-2.53%
1.75%
1.5%
3.88%
4.93%

-29.90%
13.2%
20.97%
5.47%
7.43%
10.14%

About AMP
AMP is a leading international financial services business, providing wealth management products and services to around 8 million customers worldwide. Principal activities include retirement savings, funds management, life insurance, financial planning and banking services. AMP operates in 24 markets around the world with a significant and efficient domestic presence in its three home markets of Australia, New Zealand and the UK. AMP has around 17,000 employees and planners worldwide, manages assets of more than NZ$350 billion and has a market capitalisation of approximately NZ$25 billion.

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