Personal finance editor Amanda Morrall talks to Gareth Morgan of Gareth Morgan Investments about their KiwiSaver style and strategy.
Q) You reject peer comparisons so what's your measure?
A) We are the only fund manager in NZ that is GIPS (Globe Investment Performance Standard) compliant which is the international standard on investment performance; 85% of fund managers in the U.K. are GIPS compliant, 70% in the U.S., 75% in Australia. GMI is the only one in New Zealand. Ask yourself why that is the case. Why can these guys (the GMI's competitors in KiwiSaver) get away with it? (Read more on GIPS here).
The landscape is changing and with the FMA (Financial Markets Authority) here now they'll all have to conform. For me in terms of credibility with my audience, I'm quite happy to use the international standards. But I'm not happy to be put into a slew that is self-serving the masters that pay them. Which is the Morningstars of this world paid for by the industry.
Q) Morningstar rejects this criticism and argues strenuously that they are objective.
A) They're not objective. They are actually in my view, they tell total untruths and I've had them on about this. You haven't got decision makers in New Zealand, they're just sales people so what happens in this situation is you just have a stand-off. It's a question of integrity and for me there's no integrity in that process.
Q) What separates GMI investment (outside of benchmarking) from the other players in this space?
A) The three things that we value pretty highly are: transparency, low fees, and diversification.
So with transparency, the client can actually see what securities they own, they can see over any one period what you've done with those securities, so they can independently verify their performance by reading the security prices on the stock exchange. We don't use unit pricing because that's a smokescreen behind which a whole lot of funny business can occur.
The portfolios are diversified because these are long-term portfolios. If I wanted to make a quick buck, for the clients, and I go in and put all the money on a couple of stocks and off they go the other way and boy we have a good time, but I think that's totally irresponsible. We're very much a tortoise in our investment style. And our fees are low. I think that's unique for a fund manager to have all three attributes. Some are better than us on fees, nobody is better than us on transparency and some are equally diversified to us but no one has all three attributes.
Q) Ten years from now where would you like to see GMI KiwiSaver funds?
A) Definitely up for everybody. I would like to see, for given volatility, that we continue to outperform the market benchmarks. I'll be very happy if that's the case.
(Eds: Morningstar offers the following rebuttal in its defence):
"It is clear to us that Gareth Morgan does not understand Morningstar’s business. We are a staunchly independent research firm and do not accept payment from fund managers for research reviews – such as KiwiSaver – or our fund awards. We operate a user-pays model. Advisers and investors pay a subscription to access our research and like-wise if a fund manager wishes to promote a research report there is a cost involved here as well. We are a publicly listed company, so anyone can see that and the majority of Morningstar’s revenue comes from areas such as licensed data, investment research and investment software."