Morningstar are right on the money with this. Maybe it will stimulate govt to create a strong watchdog for the capital markets....but I doubt it.

NZX could lead the way if they were not so busy trying build an empire.

And a big thank you for the return of the edit function - no excuse for poor spelling and grammar now!

Totally agreed.

Look at the NZX carry on as covered by the prickly one

http://asianinvasion2006.blogspot.com/2009/05/nz-information-exchange.html

Where were the Securities Commission the last 5 years. After Deborah Hill Cone's expose of Hanaover back in 2004 they should have been pouring over the whole sector. What happened?

Maybe Jane Diplock was too busy in her job as Chairman of the International Organisation of Securities Commissions........perhaps more focus at home may have been helpful?

PeterR - re NZX, that is exactly what I meant. If Weldon was not trying to build his empire, the NZX could be focussing on the issues raised by Morningstar, Fran O'Sullivan and Brian Gaynor.

I am not as knowledgeable as you chaps but as someone who five years ago made a conscious effort to avoid the rental property market (for the very reasons Bernard and others have given), eschewed finance companies, and believed those who said a term deposit was not the way forward, I was left with little option but to take a leap of faith and enter the managed funds sector. Now when my ANZ adviser recommended placing more than 25% of my investment into the now frozen ING DYF he quoted Morningstar as backing this product up. So, though I am happy to agree with Morningstar's assessment of the dismal state of the NZ Managed Funds industry I just wonder how much Morningstar has itself contributed to this situation?

Further on Fran O'Sullivans Herald article:

What was also missing from Fonterra's interim financial report to the 31st of January 2009 was the 10 page section "Summary of significant accounting policies" present in the 30th of November 2007 interim report.

That section had included information on how assets and liabilities were valued including sub-sections on inventories, brands, goodwill and derivative financial instruments.

Fonterra's removal of the section "Summary of significant accounting policies" suggests the interim report's numbers are built on unacknowleged changes to accounting policies.

Why change accounting policy in this way?

As a US-based fund manager my view of NZ's rating as published (which is completely on target) is less about introducing watchdogs and government intervention, and more about getting the fundamentals right. Not after the horse has bolted, but rather pre-capital investment at the ground level.

In the US whether funds are established privately or via a publicly traded vehicle, not a penny can be raised without compliance with strict SEC rules and regulations. Unfortunately the disarray in the US capital markets does stem from a breakdown in oversight, but in general we do ensure rules are complied with when new funds/vehicles are put together and subsequently.

For example, before Ma and Pa invests a penny the sponsor (i.e. fund manager) must go to great lengths to disclose the risks involved. The investor has to be advised of any potential liability, beyond the various more obvious risks, and is repeatedly asked to seek independent legal and professional advice. Ma and Pa must then qualify re income, assets, etc.

These are the fundamental contractual requirements set down by the SEC for all fund raising/management activity in the US. These rules don't hamper quality investment opportunities. To the contrary, they weed out the not so qualified, wannabes and scams.

The problem in NZ, from what I have gathered over the years, is there is too little emphasis on transparency and disclosure as well as qualifying investors, and too much emphasis on "sales pitch". Establish rules to restrict the sales pitch, qualify the investor, and disclose the risks. Only then will NZ's managed funds industry take hold and start to gain credibility.

Once this happens the world is NZ's oyster.

SIMON SAYS.......and I agree.

All too true. Where can a sane person INVEST with any certainty...???

I have just spent the morning with the major BANKS...yes plural, who unfortunately cannot advise me on a safe strat-edgy to invest in this insane world.

Very...edgy.

So I will stick to the safe option...SPEND it as slowly as I Saved and Invested it, accumulating a reasonable sum, over 40 years...missing the NZ minefields as we go.

When and if it is all gone, then the STATE can keep me, instead of ME keeping the STATE, FARMERS, BANKERS, and the various YOUNG BENEFICIARIES and the RORT minded... in their ease and comfort).......et-al.

Seems the PONZI schemes are still rife in NZ...

End of RANT.

Raf,

Yes, I think the prickly one can feel another post coming along. Just have to find the time this week.

there:
in or at that place; "they have lived there for years"; "it's not there"; "that man there"
in that matter; "I agree with you there"
to or toward that place; away from the speaker; "go there around noon!"
a location other than here; that place; "you can take it from there"

their:
Belonging to them; Belonging to someone of unknown gender
theirs - That which belongs to them; the possessive case of they, used without a following noun

"How can Morningstar publish reports with such factual errors surrounding taxation and still hold any creditability? "

Why is their assessment not credible?

Morningstar hit the nail on the head highlighting the NZ tax system. It is simplistic, which can be advantageous for local business and the average taxpayer, but it does not offer the flexibility or "incentives" afforded investors (or even Joe taxpayer) in other parts of the world. Which is what's required for NZ to stimulate or at least maintain stable economic growth, and a competitive edge.

For NZ to compete globally and take advantage of opportunties its tax system needs an overhaul. It doesn't need to be complex, just more attractive and incentivized for domestic and foreign taxpayers. Contrary to Michael Cullen's views over the years, this would not result in lost revenue.

Michael

Take a look at the following quote from Morningstar's report:

"Dividend and capital gains tax rates are high, and there is no tax incentive for long-term investing"”tax rates are the same for dividends, short-term capital gains, and long-term capital gains."

Compare that to the reality of tax-exempt passive funds that have been around for over a decade.

Even Deloittes came out and said the taxation details in the report are rubbish.

Is no one else concerned at how so-called professional research firms produce such nonsense? How can we believe any of the report when it contains such fundamental and basic errors?