Foundry Asset Management Limited ["Foundry"] is a New Zealand-owned investment and funds management company. Specialising in the management of investment portfolios for investors, who are seeking...

This report has been written with an aim to do the analysis of the New Zealand and
Australian economy in light of World economy so as to find the suitability of various funds
available and maintained by Foundry assets management for investments. Currently, we are
maintaining three portfolio funds i.e. Foundry Value cautious, Foundry Value Blend and
Foundry Value Growth Portfolio.
 Currently, the world is in a period of high unemployment, interest rates are at almost
zero, inflation is about 2% per year, and GDP growth is less than 2% per year. A
expansionary fiscal and monetary policy would be suitable which can move those
numbers to an acceptable level keeping inflation the same.
 The developing nations pie on the global share is in increasing trend whereas the pie
of developed nation is in decreasing trends. It is estimated that China’s share is going
to increase by 10 to 16% by 2015 whereas USA share will decrease by 21 to 18% by
2015.
 Exports of goods and services, one of the largest contributors to the splendid growth,
should be given importance to revive the economy. Trade-to-GDP ratio should be
increased so as to increase the flow of foreign fund into global economy.
 In order to counter rising headline inflation, if central banks hike interest rates, they
might be surprised with a sudden lower trend in coming weeks, simply because of the
volatility associated with fuel and food prices. And since monetary policy impacts
economies with a lag, it complicates the policy further. Thus it is argued that central
banks ought to target a price index whose rate of increase corresponds to the inflation
that generates the costs that central banks are seeking to avoid by focusing on an
inflation-control objective.
 The world economy especially European nations are in debt trap. Hence, the yield at
European nations are in rising trend as the markets’ worry about the debt being not
serviced is proportional to the cost of the debt, and so the costlier the debt the higher
the yield the market would demand. The detailed is given in below table:-
Table 1 The Debt Trap
Country
5-year growth
rate*
Average Cost of
debt**
Growth - Cost
Ireland -1.9 4.1 -6.0
Greece 3.8 6.7 -2.9
Portugal 1.7 3.4 -1.7
Japan -0.8 0.8 -1.6
*Nominal GDP growth based on 2007-11 average
**Average Yield on 2 and 10 year government bonds
Sources: OECD; Financial Times; The Economist
Hence, looking after the condition of the global economy the Foundry Value cautious will be
suitable for the risk adverse investors with huge investments of around 70% in fixed income
securities whereas Risk seeker can go for Foundry Value growth with 90% investments in
Equities with huge investment value.
 GDP grows by nominal growth rate of 3.3 % compare to very low growth rate of
other developing nations.
 The decrease in Gold price put pressure on the Australian dollar due to decrease in
demand of AUD
 Country is able to maintain the debt at very low percentage of 26.9 % with deficit of
just 12.5 billion in 2013....