Hard News by Russell Brown

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Hard News: Through the Looking Glass

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  • Ian MacKay,

    Since there is about $14billon in the fund now and at that rate by 2018 there would be perhaps $30b, wouldn't 40% enforced internal investment cause distortions in the Market? (Some-one said that our Market runs at about $50b.)

    Bleheim • Since Nov 2006 • 498 posts Report Reply

  • Zippy Gonzales,

    I'm seeing it now.

    It's a user-generated Telethon! It's an Entrepreneurial Top Town! A Geek's Show (obscure pun on A Dog's Show, excellent family values show of old).

    Wellington • Since Nov 2006 • 186 posts Report Reply

  • Paul Campbell,

    It's all very well decrying the lack of VC investment in NZ (and I do all the time .... we do need more) but you need to realise it's a very different sort of investment - it's risky, in fact MOST investments fail - but if you do it right some pay off big time

    What you don't want is the guy who's picking stocks and bonds for your Kiwisaver/Cullen fund/401K/etc picking startup companies to invest in - you need someone running a VC fund who understand the part of the biz they are working in who can make an educated guess as to whether the guy you're giving money to is blowing smoke out his ass or not - and who can provide the other sorts of support a VC company provides to its investments

    I've worked for startups supported by both good and bad VCs - there's a world of difference

    I think in the interests of diversity it's appropriate for an investment fund to place a small portion of its investments in VC funds that have good track records or are run by people they think will make competent decisions (and also have some of their own money at stake)

    Dunedin • Since Nov 2006 • 2622 posts Report Reply

  • Jeremy Eade,

    It seems a shame to screw with the fund so early but like Craig I’d love to see a good summary of the risks and opportunities, but especially the risks at the moment.

    And I am a little stunned…..for all the blue ribbon bluster of the last 20 years for government to be a periphery player in our economy it strikes me as a noticeable u-turn.

    Have economics circumstances changed in the last month that much? Fuck yes.

    Accepted market philosophy is at a mess at the moment. That such important markets could collapse themselves through their own unregulated gluttony is a major failure of the system from any angle.

    Is Key starting to acknowledge that is there is no way you can reduce government out of the modern economy at this present stage of our economic development (2008-2011) . You’ve got to keep people selling and buying even in bad times because that’s the blood flow of the market. The market is populated by the citizen , the canopies are now in repossession back to a sad street in new york but the populace will always turn up for commercial enlightenment because what else are we going to do, live in caves?

    And of course who knows more about building economies in what could be either a long volatile economic period or a fast swing out of growth thanks to hopefully better legal and market structures?

    that"s what key has to articulate, that he has a vision that out reasons Cullen . Cullen built the economy for this kind of year, a quiet solidity.

    auckland • Since Mar 2008 • 1112 posts Report Reply

  • Russell Brown,

    Gordon Campbell ...

    Smacks National:

    There’s a pattern emerging here : raid the Kiwisaver savings scheme, intervene in the Super Fund earmarked for the needs of our ageing population, scrap the Fast Forward science fund, abolish the tax credit for research and development, dump the home insulation fund meant to offset the energy costs of dealing with climate change….

    What do all these moves have in common ? They all involve a drive for short term advantage, and denial about the need to plan for longer run challenges facing the country. Savings, research, demographic change. All are being jettisoned in the name of instant gratification. If I can steal a line from the conservative columnist David Brooks, John Key shows every sign of having the policy libido of a 15 year old boy.

    And the Greens ...

    Before the Greens cheered this proposal, they might have considered whether – once you open this door - just what the cost may be, and where the 40 % is likely to go. The Fund guardians will - allegedly - be left free to decide where in New Zealand they put the money. The NZSX is small, and the Fund guardians are highly unlikely to become creative venture capitalists of fledgling enterprises overnight. Arguably, nor should they be. Moreover, the Fund moneys would quite conceivably be going into the kind of local investments that the Greens would abhor.

    Auckland • Since Nov 2006 • 22830 posts Report Reply

  • Gareth Ward,

    Forcing the fund to invest in NZ isn't about the current crises of course. It's a permanent decision for a very very long term fund to be investing in such a way.
    It's a fine line to be running between "make us money to pay for our retirement" and "remove capital roadblocks for local businesses". I'm all for a bit of both, but it will need some incredibly solid rules that are guaranteed to be around beyond the electoral cycle. Putting a minimum Kiwi investment level in there seems the most effective way of doing that but the number in front of that % sign will need to be very carefully thought through.
    - Too low and it's pointless
    - Too high and you're forcing our Superannuation Fund to invest in underperforming assets just because they're Kiwi.
    I'm not convinced that 40% hasn't just been plucked out of thin air...

    I'm unfortunately of the view that most of the blame for our wealth-creation/ productivity/export/business issues lies with the individuals starting and running (or not) our businesses - Govt sets the environment, sure, but they ain't creating or building the businesses themselves are they...

    Auckland, NZ • Since Mar 2007 • 1727 posts Report Reply

  • Paul Campbell,

    I should add that there's a chicken and egg sort of issue here - you want to have local high grade investments here to invest in - but a lot them start out as startups - if you don't have lots of companies starting up (and lots of them failing) now you wont have cool stuff to invest in a decade from now

    As I've said elsewhere a lot of our companies like our kids - they grow up and leave home for their OE - but it's largely because they have to sell their souls to overseas investors in order to grow

    Dunedin • Since Nov 2006 • 2622 posts Report Reply

  • Rik,

    I'm no international financial guru so feel free to call me an idiot but did we have the rather large currency fluctuations that we have these days back in 1975?

    I'm wondering if Nationals plan is just about balancing that out a little bit? Sounds vaguely reasonable...

    Since Jun 2007 • 130 posts Report Reply

  • Gareth Ward,

    I agree in general with Gordon Campbell there Russell - National has recently put themselves out of the running for me because of the mentality that runs counter to establishing an innovative, export-focussed, sustainable economy in the medium-term. Labour ain't doing a great job in that realm, but when you compare the policy positions they seem to be the lesser evil.

    But I'm not so sure that this Super Fund policy is quite in the same vein - there is certainly an argument (which would come from the Skilling's and the Weldon's) that actively encouraging NZ investment is a longer-term play. Of course Weldon runs the capital market that will receive much of that but the argument still stands.

    Auckland, NZ • Since Mar 2007 • 1727 posts Report Reply

  • Che Tibby,

    Have economics circumstances changed in the last month that much? Fuck yes.

    you see, i'd say no. they haven't changed. subprime was a nightmare just waiting to happen.

    i head over the road to have a coffee went i need to do reading, and 18 months ago i eavesdropped on a financial corporate type explaining to his colleague exactly what was going to happen when the schtook hit the fan. they toned it down when they heard the noise of my jaw hitting the counter in shock.

    so economic circumstances haven't "changed" in the last month, they've played out according to projections

    the back of an envelope • Since Nov 2006 • 2042 posts Report Reply

  • Russell Brown,

    Forcing the fund to invest in NZ isn't about the current crises of course. It's a permanent decision for a very very long term fund to be investing in such a way.

    Yes, as I noted above, it permanently changes the rationale of the fund, and in a potentially problematic way.

    It's a hella big policy to be pulling out of your ass at a time like this.

    Auckland • Since Nov 2006 • 22830 posts Report Reply

  • Gareth Ward,

    Paul you've raised some very interesting points there - personally I hope the way around it is VC funds setting themselves up in such a way that multiple Kiwisaver fund can invest 1% of theirs funds under management. As such they expose themselves to some upside growth without risking it all, and we get professional VC organisations with decent funds to run the 1-succeeds, 2-do-okay, 7-fail model...

    Then you have Kiwisaver funds like Fisher Funds who are that level above VC but still actively and specifically investing in small businesses. The more of them we have in this economy the better.

    I agree that the NZSF shouldn't be playing much in that sort of market though...

    Auckland, NZ • Since Mar 2007 • 1727 posts Report Reply

  • Jeremy Eade,

    "so economic circumstances haven't "changed" in the last month, they've played out according to projections."

    To some projections, there's always a lot of projections on wall street .

    The failure of that market has put huge pressure on every other market and while there's a reasoned economic way out of here, the failure of that market is a big talking point from now on.

    auckland • Since Mar 2008 • 1112 posts Report Reply

  • Jeremy Eade,

    that's the change, national probably didn't ever dream of this kind of election...or labour for that matter.....what a backdrop

    auckland • Since Mar 2008 • 1112 posts Report Reply

  • Paul Williams,

    But that would be a very major change to the purpose of the fund: which is to fund a future liability as a large number of New Zealanders reach retirement. To this end it has been placed in the control of independent managers tasked with achieving the best possible return for New Zealanders, which will not necessarily lie in New Zealand.

    This confusion of purpose is worrying.

    I understand the need to both encourage infrastructure development and boost savings. I am aware that NZIER have reservations about whether the Cullen fund is stimulating new savings, but simply tapping it 'cause it's there puts at risk it's orginal purpose. I don't imagine there's a corresponding gaurantee to increase state super proportionate to any losses? Moreover, the last twenty years of public sector reform has been about reducing the risk of Ministerial meddling. I know first hand that officials were worried that Anderton was too close to the allocation of MED funding for instance.

    Also, if this modified arrangement defers new/additional saving, won't we be back where we were?

    Is Key doing to Cullen what Muldoon did to Kirk/Rowling?

    Sydney • Since Nov 2006 • 2273 posts Report Reply

  • Craig Ranapia,

    Yes, as I noted above, it permanently changes the rationale of the fund, and in a potentially problematic way.

    Um, yes... but anyone who thinks the Cullen Fund wasn't a "political plaything" from it's inception is being a wee bit naive. Sorry, but bah humbug, plague on both your houses, etc. I'd actually like both National and Labour to stop treating this campaign like a game of contract bridge, but perhaps I'm the one being naive there.

    North Shore, Auckland • Since Nov 2006 • 12370 posts Report Reply

  • Che Tibby,

    @jeremy. think of me as dancing around the issue a little - what i'm driving at is that there is *no way* that anyone involved in finance over the last few years could not have known that the last month was going to happen.

    the problem has been that no-one was willing to stand up and point out that emperor needed a better tailor.

    fortunately we here in new zealand have been fortunate to have a saville row guy working in wellington </che really murders the metaphor>

    the back of an envelope • Since Nov 2006 • 2042 posts Report Reply

  • Gareth Ward,

    anyone who thinks the Cullen Fund wasn't a "political plaything" from it's inception is being a wee bit naive

    Well it's certainly true that I'm a wee bit naive, but I'm not so sure. I will conceed that there may been some element of "good politics" in it's initial creation but it was intentionally setup in such a way as to not be politically charged once it was running.

    Auckland, NZ • Since Mar 2007 • 1727 posts Report Reply

  • Jeremy Eade,

    m, yes... but anyone who thinks the Cullen Fund wasn't a "political plaything" from it's inception is being a wee bit naive."

    isn't it accepted that we need more funds for a wave of well deserved retirements coming up.

    auckland • Since Mar 2008 • 1112 posts Report Reply

  • Paul Williams,

    Um, yes... but anyone who thinks the Cullen Fund wasn't a "political plaything" from it's inception is being a wee bit naive.

    That's rubbish Craig. NZ savings are low by international comparison and something needed doing. Since Muldoon scuppered Kirk's scheme, we've been stuck in political no-man's land. Winston's attempt to develop some scheme was doomed but Cullen's is hardly distinguishable from the Australia scheme which, despite recent losses, will provide a respectable retirement income for most.

    With an aging population, forecast declines in workforce participation and slowing MFP growth, the ratio of workers to dependents is on the rise and unless you're going to put your hand up to pay more taxes, savings is essential.

    Sydney • Since Nov 2006 • 2273 posts Report Reply

  • Jeremy Eade,

    "the problem has been that no-one was willing to stand up and point out that emperor needed a better tailor."

    that's loyalty for you. I agree with you that many of us were waiting for a thud especially after waking up to the rock n roll economic fantasy that was enron.

    auckland • Since Mar 2008 • 1112 posts Report Reply

  • Gareth Ward,

    I said:

    Forcing the fund to invest in NZ isn't about the current crises of course. It's a permanent decision for a very very long term fund to be investing in such a way.

    From Stuff re the 40% plan: "Mr Key said it would help to ease recession"
    OK, if that's true then I'm (yet again) incredibly disappointed - stop fucking with long-term savings, retirement and innovation policies in the name of short term economic conditions or tax breaks!!!!!
    These things need careful thought, good planning and stability to be useful...

    Auckland, NZ • Since Mar 2007 • 1727 posts Report Reply

  • Matthew Poole,

    I'm no international financial guru so feel free to call me an idiot but did we have the rather large currency fluctuations that we have these days back in 1975?

    No, we didn't, but that's nothing to do with market stability. Rather it's due to the fact that we didn't have a market currency until Labour came along in the 80's and floated it. Most of the world had regulated currencies in the 70's, so we were hardly alone in that regard.

    Auckland • Since Mar 2007 • 4097 posts Report Reply

  • Mike Graham,

    I guess that anything set up by a politician could be regarded as a "political plaything", but at the time it was set up there was reasonable agreement amongst financial commentators that something like the Cullen Fund was sorely needed, and that, if possible, it should be keep at arms length from the pollys.

    So what do we have, in shades of the '75 election, the leader of the opposition proposing significant changes to the scheme, AND to Kiwisaver as well.

    The main things that concern me, and most of these have been referred to in earlier comments, are:
    1. 40% invested in a single, small, country seems way too much - dostortioin in the sharemarket and all that.
    2. Venture Capital funds should only been a VERY small part of any super fund
    3. Are we going to see changes every election time - in three years will we see the next leader of the opposition saying "Only 20% in NZ" - how then does the fund exit gracefully without distorting the market again?
    4. Investing overseas is part of diversification - the object of the fund is to create a growing fund for the future, and the more diversified the less peaks and troughs.

    </rant over>

    Auckland • Since Nov 2006 • 206 posts Report Reply

  • Stewart,

    Good to see the PAS posse giving this a good shake-up to see how it will play & what the longer-term ramifications are, but what about the kiwi in the street?

    I can't see the 'average voter' giving the topic this much analysis so it is likely to come down to a 'gut feel' for how this issue will affect voting. My suspicion is that the vast majority of voters have already decided who they're going to vote for (even most of the 'officially undecideds') and there's not much will sway them between now & Nov 8th.

    Personally, I can see a majority deciding that they have had enough of the Labour Party in power and that it is time for a change - people who mention the nanny-state, people who want to be able to smack their kids without the potential for police action, the 'sensible sentencing' crowd. And a small section of the electorate who is politically uneducated enough to vote for the party that they think is going to win so they can feel like they have backed a winner.

    Te Ika A Maui - Whakatane… • Since Oct 2008 • 577 posts Report Reply

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