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NZX needs to grow for Kiwisaver boom

NZN 8/09/2016 Edwin Mitson

Global asset manager Russell Investments has warned New Zealand needs to have more companies listed on the stock market and more equity managers who actively manage their portfolios due to the large flow of Kiwisaver funds seeking local returns.

Seattle-based Russell, which manages $342 billion in assets around the globe, believes Kiwisaver $35.6b of assets will double over the next four years.

Russell investment analyst Sam Walker says the New Zealand market is particularly prone to capacity constraints because the local market features a small number of stocks and a limited number of active equity managers.

An active equity manager is someone who picks and chooses which stocks to buy and sell and the time to do it.

Such funds usually charges higher fees. A passive fund tracks an index like the NZX 50 Index or the FTSE 100 and charges investors lower fees.

"Several active NZ equity managers are already at or close to capacity, and the increasing influx of Kiwisaver money will struggle to find a home in the domestic market," Mr Walker said.

NZX data shows $1.26b has been raised in initial public offerings and compliance listings in the year so far, a figure vastly surpassed by the $4.3b of bonds issued by companies seeking to refinance debt to take advantage of falling interest rates.

Russell suggests possible solutions could also include New Zealand investors reducing their exposure to local stocks or adopting a passive approach to investing.

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