NZ's AMP Capital lowers forecast returns for 2008

WELLINGTON, April 29 (Reuters) - AMP Capital Investors, New Zealand's biggest fund manager, on Tuesday lowered its forecast returns for the year by as much as half, after most of its funds had a negative return in the first quarter.

AMP said it is taking a cautious approach to investing, boosting holdings in cash, and New Zealand bonds and property while decreasing exposure to global bonds, property and shares.

Global growth should remain reasonable and keep investment returns positive, but the risks had increased notably, said Leo Krippner, head of investment strategy at AMP.

"My previous view was that we'd see OK returns for the year...but when we look at the reality out there we're probably going to have a pretty mediocre year," Krippner told a briefing, adding the benchmark balanced fund was likely to provide a return under 4 percent in 2008, half of its previous estimate.

Three of its four diversified funds showed a negative return in the three months to March, with the growth fund down 6.7 percent, and the balanced fund down 4 percent. Cash was the only fund to record growth, at 2.1 percent.

On a yearly basis, the growth fund was 2.6 percent lower, with the cash, conservative and balanced funds all growing.

AMP, a unit of Australia's AMP Ltd (AMP.AX: Quote, Profile, Research, Stock Buzz), manages assets worth around NZ$11 billion ($8.7 billion).

The fund manager has increased its exposure to the foreign exchange market in the belief that the New Zealand dollar <NZD=> will fall this year.

Krippner said the currency is more than 20 percent overvalued, and should fall as a slowing New Zealand economy prompts the central bank to cut interest rates from a record level of 8.25 percent.