Well I think this is unfair. Australia got a C and the United States, that place where you have had Bernie Madoff and the sub-prime crisis, gets an A.
Sorry this just doesn’t compute.
Now let me be quite clear, I am not saying New Zealand is perfect, or the best of the 16 countries Morningstar surveyed. Yes, there is room for improvement. Yes, striving for “global best practice” (whatever that is) sounds like an admirable goal.
But are investors really getting such a bum deal from the funds management industry? No.
Here’s what I think. Do away with Investment Statements. They tell investors nothing meaningful.
They are glossy, bland documents which tell you little useful.
Increase the resources of regulators and make sure the Securities Commission is really providing investors with protection. I struggle to think of an instance where it has done anything to help retail investors in managed funds.
Acknowledge that KiwiSaver encourages long-term savings and has some incentives. Apparently we got marked down because countries like Australia have tax systems which encourage long-term savings.
Hey, Morningstar, didn’t you notice New Zealand is one of the few places without a capital gains tax?
The PIE tax regime is a huge plus for investors. Apparently that didn’t count much as around one third of the funds in the market are not PIE compliant.
That is an issue for the industry. I have argued for years that fund managers need to get rid of crappy legacy funds.
One thing the industry needs to do urgently is have a clear set of rules for reporting on fees. There is no industry standard these days and managers can massage fees and therefore performance willy nilly.
When you are at it, make it in dollar terms please.
The final point, of course, is that Morningstar wants full disclosure of portfolio holdings. Yes, it's a point of frustration, but it's probably more frustrating for the researcher than investors as it needs that information for its fund manager analysis.
Do you thing a D- is an accurate rating? What do you think the funds management industry needs to do to improve its practices?
Survey on Fund Managers too harsh
« Tough and tougher | No points for coming last » |
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Yesterday saw the release of a report that shed some interesting insights into the investment sector in New Zealand and abroad.
Granted, the Morningstar Global Fund Investor Experience report positioned New Zealand in a very negative light – ranking New Zealand last out of 16 countries with a D-. But if you take the survey on face value then you may get the wrong message. As with any survey, the Morningstar results need to be interpreted with care.
The Morningstar report doesn’t comment on investment performance but instead focuses on the structures of the funds that New Zealanders invest into – the regulatory framework, taxation, transparency and fees.
Here in New Zealand managed fund providers are governed by a raft of different organisations and associations including the Securities Commission, Investment Savings and Insurance Association, Companies Office, Government Actuary, Insurance and Savings Ombudsman, Commerce Commission, Privacy Commissioner, Corporate Trustees and others– all of which have a mandate to look out for investors’ interests.
Amid incorrect assumptions around our country’s structures (in particular, tax), the report does raise some valid issues including the need for investors to know the make up of their portfolios and where their money is invested. The industry has been closely involved in the development of a raft of new legislation designed to address many of these issues.
Overall, New Zealand does not deserve an A, more work needs to be done in the investor space to achieve this; but New Zealand is nowhere near a D- either. New Zealanders have access to high quality managed funds but there are always opportunities to make investment easier and ensure investors are more informed.
Overall, the report is useful in that it has identified issues that New Zealand is already working on and reinforces the work that is underway. In the meantime, we encourage Morningstar to consider reviewing its survey with a better understanding of New Zealand’s system and correct information and release an updated report accordingly.
Peter Verhaart is General Manager at AXA Global Investors.