One of the country's largest fund managers has hit out at finance company deposits, saying they pose an unnecessary risk for small investors.
Thursday, September 15th 2005, 8:41AM
by The Landlord
ASB Group Investments head Rob de Luca said New Zealanders had invested more than $8 billion with finance companies at rates of up to 10 per cent - believing their money was secured and their returns were safe.
"The reality is that neither of these things [is] true. Investors put their money with finance companies, seduced by the phrase 'first ranking secured deposits', but in many cases their money is anything but safe."
He said the money was frequently lent on to highly geared property developers or as high-risk personal loans to people unable to borrow from traditional sources.
Investors were not getting the appropriate compensation for the risk.
ASB Group Investments is New Zealand's third-largest fund manager, with more than $5.3 billion under management.
Although in competition with finance companies, "the reality is if one of these guys falls over it's bad for the whole investment sector, not just for them", a company spokesman said.
"We're more concerned that investors do the right thing and no one gets burned."
