One of the fascinating questions for investors at the moment is asset allocation. The markets are in a mess, indeed many consider these are quite unusual times.

Added to that there are huge distortions, in particular the government’s deposit guarantee scheme.

So how do you allocate money?

It’s a question that was discussed at last week’s SiFA conference and also at ASSET Magazine’s Roundtable event in Auckland this week.

During a discussion on asset allocation at SiFA advisers openly talked about what they were doing at the moment.

There were many answers and also many conflicting views. Perhaps the most surprising was on cash. While some were strongly favouring cash and holding 60-80% of portfolios in cash (that is anything up to one-year), others had next to nothing and others were moving away from cash.

Where were they going? All sorts of places. Some were into listed property, others leaving. Ditto gold.

Allocations to international shares were varied too.

It’s easy to draw the conclusion, no one knows what to do and some will get it right, either by luck or skill, and others will fail.

I don’t think that is necessarily true.

One thing that is true is that it seems advisers don’t have a lot of independent research to draw on, nor are there many places they can turn to for asset allocation advice.

How this sort of information gets delivered to the market is a vexed question, but one that hopefully will be addressed.

Meanwhile there is a whole different story going on in retail land. Work www.depositrates.co.nz has done shows investors are jumping into finance company offerings because of the rate and the government guarantee. The short-term logic of this is clear. However, there are some potentially scary outcomes. When these investments come to maturity, new rates are likely to be much lower (so low in fact equities may look attractive again).

Secondly, there is going to be a whole heap of money coming up for repayment at once and this could be problematic for the companies to handle.

While the markets have been sad and not much looks good at the moment, there are opportunities out there. Seems you just have to look for them.

Hanover’s always been good at selling its wares, but now the true test has arrived. Can it sell its debt restructuring plan to its 16,000 investors?

On presentation the company has started well – indeed done much better than other finance companies. It has today given the media a detailed briefing. Next it embarks on a series of investor presentations around the country.

It has been pretty open about its situation and its plans. That is a major plus.

As for the plan itself. Well you would have to give the shareholders (Mark Hotchin and Eric Watson) a top score for stumping up with $96 million in support.

However, don’t be fooled by the size of the number. It includes property assets which may be worth less than what they are put into the company at (even though their value has already been discounted), and some of the cash support is in contingent form, rather than a cold, hard cash payment.

But at least they are backing their company. What’s more than have aspirations that it has a future after this plan is finalised in 2013.

One thing which struck me in the media conference today and with my interview with Mark Hotchin and chief executive Peter Fredricson, is the repeated use of this phrase:

“We don’t know what we don’t know.”

It was used many times and sums up their dilemma. The fate of the business and the debt restructuring plan is predicated on what happens to the property market over the next few years. If it picks up, or more importantly doesn’t tank, then the outlook is optimistic.

If it does tank…well, I think you can work out the answer.

What I also like is that the shareholders and management are backing themselves to do a better job than receivers. I support this argument, even though some of my peers don’t.

Change could be the word of the week. The obvious big change this week has been with the government.

But I sense there is a heap of changes coming for the funds management and advisory industry too. For years we have written about and commented on “consolidation” in the industry – however it has often failed to eventuate.

Four stories on Good Returns this week all pointed to change. First up we have a new cornerstone shareholder at Fisher Funds Management. (Our updated story on this is here). Then today two of the founders of Brook Asset Management said they were moving on.

Added to that FNZ is trying to sell its wrap business, which could provide more change. While no buyers have been publicly identified, a couple which have been mentioned in dispatches are AMP (it doesn’t have a wrap service in Australia or New Zealand) and AXA.

Who knows what will happen, but considering a lot of competitors use the service, one can guess that a sale could lead to more changes.

Then we have the Reserve Bank talking about consolidation of finance companies, even suggesting that some of the assets or businesses in trouble at the moment could be acquired by some of the stronger companies. On the face of it this makes for an interesting development, and I guess potentially good for clients of struggling companies.

Then if we are looking for more changes our new government is likely to make KiwiSaver a different beast from what it is. This means more work for most involved including employers.

This is one of the things which I hope we would avoid with KiwiSaver, having lots of changes. It has plagued the Australian system and seemed to be something New Zealand should avoid. Unfortunately that lesson hasn’t been learnt.

And I guess when the government next changes there will be more tinkering with KiwiSaver.