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    Banks lose as share slump hurts funds
    Alison Kahler

    The $234 billion retail managed funds industry has suffered its worst quarter in eight years after disillusioned investors switched from the sharemarket to property and cash, fuelling a slide in new business in the sector.

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    The biggest losers were AMP and the big banks, which with the exception of ANZ, did not appear together in the top-10 institutions attracting fresh funds for the first time since December 1994.

    The flow of money out of shares is likely to continue if global stockmarkets fail to sustain a post-Iraq war rally and fund managers produce negative returns for a second consecutive financial year.

    A 64 per cent dip in new revenue in the three months to March 31 coincided with growing criticism about a fee structure that allows fund managers to be rewarded for the size of their portfolio rather than investment performance.

    The rush into property and cash came despite new data showing that superannuation fund managers in April produced their best returns since October 2001. A 4.3 per cent gain from the Australian stockmarket and a 5.2 per cent increase in international shares helped the median manager produce a 2.9 per cent rise in April.

    "We need another April, or just a couple of bog-standard months, for superannuation funds to produce a positive return this financial year," InTech Financial Services senior consultant Andrew Korbel said.

    Mr Korbel said the negative returns suffered by superannuation funds over the past two years had reduced the value of a $100,000 investment to $92,258 as at April 30.

    The best manager in the financial year to date, Barclays Global Investors, returned minus 0.7 per cent, according to InTech's survey of 31 fund managers.

    The worst, Westpac owned-BT, returned -6.9 per cent.

    The poor performance and the war with Iraq meant inflows into retail funds, as measured by industry research leader Assirt, were only $434 million in the March quarter. This was 85 per cent lower than the March quarter and the worst result since March 1995.

    It was also a dramatic decline from the $5.6 billion recorded in the September 2000 quarter.

    "It just shows how good we had it in the bull market. Quarterly inflows are now less than a tenth of the peak," Assirt's head of investment solutions, Steven Gamerov, said.

    Inflows into managed funds take into account new business, redemptions and fund performance.

    Only 32 out of Australia's 64 retail fund managers recorded net inflows in the March quarter, according to Assirt.

    Australia's three biggest fund managers - Commonwealth Bank, National MLC and AMP - had combined outflows of $103 million.

    Outflows from Westpac's business slowed but still reached $718 million, bringing the bank's total outflows over the six months to March 31 to $2.36 billion.

    "Investors make decisions based on emotion and fear can grip them quite quickly. It doesn't take much for people to hold off and they move in hordes," Perennial Investment Partners managing director Ian Macoun said.

    "It can turn around quickly but you need quite an accumulation of good news," Mr Macoun said.

    The most successful fund managers in the March quarter reaped the benefits of investors fear of global market volatility.

    Six of the top 10 managers had net inflows because investors sought out their property securities funds, mortgage trusts and cash investments as safe havens.

    The most successful manager, UBS Global Asset Management, was an exception to the rule. It had net inflows of $469 million due to the continued success of its Australian share funds.

    Outflows recorded by other managers had little impact on the total size of the industry. Total retail assets under management fell by only 2.2 per cent to $239.5 billion in the year to March 31.

    The nation's biggest retail fund manager, Commonwealth Bank, had $45.6 billion under management at March 31, a 19.4 per cent market share. National/MLC retained the No.2 ranking with $32.4 billion under management and a 13.8 per cent market share.

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