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Milton's recipe to stop foreign takeovers

The creation of a New Zealand-controlled fund holding domestic assets would boost investment in equity markets and help stave off foreign takeovers of financial services companies, Fidelity Life chief executive Milton Jennings says.

Tuesday, January 25th 2011, 7:43AM 1 Comment

by Benn Bathgate

In a submission to the Savings Working Group he says the creation of such a fund, "is particularly relevant for Fidelity Life which is the largest New Zealand owned life insurance company who potentially could be taken over by foreign interests, which will leave our life insurance industry completely foreign owned."

He said that while many of the country's finance sector companies were under Australian ownership, "we want to try and protect the ones that are left."

He believes New Zealanders' poor rate of investment into equity markets has resulted in "a number of good New Zealand companies being brought up by Australia and other countries to the point where most of the financial services industry is in foreign ownership."

The situation may get worse too, Jennings said, with large pools of funds in Australia and Asia unafraid of paying large multiples for good cash flow businesses.

Jennings advocates the creation of a Government-established fund containing some state-owned enterprise (SOE) assets which private New Zealand investors and KiwiSaver funds can then invest in as a means of increasing saving and giving a boost to productive New Zealand assets.

He says KiwiSaver funds would be ideally suited to such investments, "because they have long term horizons similar to the infrastructure assets."

As well as providing a boost to the country, such a fund would keep KiwiSaver and private investors' cash within New Zealand, with the money "far better here than on the New York Stock Exchange," he said.

The Government and bodies such as the NZ Superannuation Fund and ACC could have a controlling stake in the fund and a Government guarantee put in place to maintain investor confidence.

"The fund could purchase good New Zealand companies to avoid them being taken over by foreign ownership. It could also invest in infrastructure assets like toll roading, rail, airports, ports, power stations, broadband, where these is a monopoly situation and the profitability is nearly assured."

Jennings also said such a fund could be used to provide private investors with exposure to the country's farming and food sectors  which currently offer limited access for investors at present.

 

 

 

Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz

« News Round Up: January 23KiwiSaver mismatch a 'huge challenge' for advisers »

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Comments from our readers

On 25 January 2011 at 10:31 am Independent Observer said:
It is wrong to conclude that domestic investors require enhanced encouragement to invest in local businesses. Many savy kiwi investors simply find better investment opportunities offshore.

To establish a fund (or any other localized protection mechanism) for the purpose of retaining kiwi ownership in local businesses may distort the natural allocation of capital and potentially inhibit the growth opportunities for these businesses.

What is appropriate is the lengthening of investment horizons by investors (foreign & domestic alike) – but that is another story…
Commenting is closed

 

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