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Fund managers part of flat earth society: Weldon

NZSE boss Mark Weldon challenges fund managers' investment philosophy.

Tuesday, February 18th 2003, 6:59AM

New Zealand Stock Exchange chief executive Mark Weldon is challenging fund managers and investors to question their decision to invest larger proportions of their portfolios offshore.

Over the years New Zealand investors have been leaders in the concept of investing significant chunks of their portfolios offshore. The theory behind this move stacks up, however investors who have embraced have also suffered large losses in the past three years.

Weldon, in the exchange's new Open newsletter, describes the people who follow this theory as being members of the flat earth society.

"Every other OECD country in the world takes the approach of invest at home first, and if returns there fall below parity, then move offshore.

"Australia for example invests about 40% of domestic funds in Australian equities. This compares to our average of less than 15%.

Weldon says New Zealand fund managers continue to place the majority of the funds they are managing offshore

If this trend continues local businesses will be starved of capital to grow their operations.

"We need to turn the presumption in its head and make the question everybody asks their fund manager or fund consultant: 'Tell me how much I can put in New Zealand at good returns, and only after that will I invest offshore'," he says.

Weldon says the differences between Australia and New Zealand are minimal. Both countries have small GDP's (on a relative basis) and they are viewed, by the rest of the world, as being one place.

"Yet Australians understand deeply that they are responsible for their own future, that no-one owes them anything and they better back themselves, because no one else will

"The flat earth elements of New Zealand society do not get this. They believe that the guardian angel of market goodness will send rewards our way if we behave nicely. Nonsense."

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