Here are the key things you need to know before you leave work today:
Updated with stunning sharemarket falls in Shanghai and Hong Kong, below.
MORTGAGE RATE CHANGES
Westpac has matched BNZ at 4.39% fixed for one year.
TERM DEPOSIT RATE CHANGES
BNZ reduced its 5 and 8 month term deposit rates, and reduced all rated 2 years and longer.
4 YRS, 7 MTHS JAIL FOR MORTGAGE FRAUD
A property developer was today jailed for mortgage fraud for dishonestly obtaining about $52m of loans. He was sentenced to for 4 years, 7 months. The case has prompted banks to tighten lending processes.
MAIN CAR INSURERES COMPARED
An interest.co.nz special: Insuring your car with one insurer over another could cost you twice as much. But would this see you get more bang for your buck? Jenée Tibshraeny investigates.
REGIONAL TRENDS VARY
QV says average property values rocketed up in Wellington over the last 12 months, headed sideways in Auckland and took a dip in Christchurch. That left the average QV house price index up +6.4% in the year to January.
SOFTER SIGNAL
ANZ's forward looking Truckometer survey was out for January today. The Heavy Traffic Index bounced up recovering most of its December fall, while the Light Traffic Index eased. The indexes are positive about Q4 growth, but the Light Traffic Index is giving a slightly softer signal for growth from mid-2018. The Heavy Traffic Index is up +8.0% in a year while the Light Traffic index is up +3.6% in the same period.
MORE FEES
Augusta Capital has paid NPT $4.5 mln to manage their portfolio for $0.9 mln per year. Augusta owns a tad less than 19% of NPT.
LESS FEES
Both ANZ and Kiwibank have decreased fees for members of their default KiwiSaver funds. That will be a $1 mln reduction. The other seven default providers have not, yet anyway.
ANOTHER LARGE PROJECT
Scentre Group, the Aussie owner of Westfield shopping centres, has kicked off its $790 mln redevelopment of its Auckland Newmarket complex. It will include a second store for struggling Aussie department store operator David Jones. Our tally of major Auckland projects now totals $39 bln, some of which have been recently completed.
MORE SHARP FALLS ACCELERATE
Updated: After a Wall Street beating (S&P500 was down -3.75%), both the NZX (-1%) and ASX (-1%) are down, Hong Kong is down -3.3%, Shanghai is down -4.1% and Tokyo is down -2.6% in active trade. Singapore is down -1.5% today so far. (As at 6pm NZT.) Remember, anything more than +/-0.5% in a day is significant.
BENCHMARK INTEREST RATES SLIP
Wholesale swap rates eased back -1 bp across the whole range of durations today. Meanwhile the UST 10 yr, is now at 2.85% which is about where it opened in NZ this morning. The Aussie 10 yr is at 2.85% (down -1 bp). The Chinese 10 yr is at 3.91% (up +1 bp), and the Kiwi 10 yr bond is 2.99% (unchanged). The 90 day bank bill rate is unchanged.
BITCOIN SLIPS
Bitcoin is now at US$7,935, down -2.1% on the day.
NZ DOLLAR UNCHANGED
The Kiwi dollar has changed little today. It is currently at 72.1 USc, at 92.8 AUc and 58.9 euro cents. This puts the TWI-5 down at 73.6.
Daily exchange rates
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19 Comments
For what its worth, I think they are fair. Even the largest funds in New Zealand cannot be said to have 'scale'. And in the end, I don't think investors should focus on fees. That is a complete distraction. What should be focused on is the after-all-fees, after-all-taxes returns.
Why should you care about fee levels if the results are market-leading and beat rivals and benchmarks?
Even if a fund manager has low fees, but delivers under-performing results, then you should really care. Fee levels, as I say, are a marketing distraction.
David, I see your point, but I would suggest that fees are very important. Whatever the returns, whatever the financial weather, the management fee stays the same, so why not work off as low a base as possible? Performance-based fees are another matter.
The reason that many aren't worried about fees is that we've had nearly 10 years of pretty good performance, especially in equities. In a multi-year downturn, when the equity portion of a managed fund is posting negative returns because the fund doesn't do equity shorts, trade options, or use any hedge-fund strategies, fees suddenly take on significant meaning and might be the difference between making a positive or negative net return that year.
Personally, when I see fees above 1.5% in a managed fund, I start to wonder what is on offer in the way of consistent returns from that fund manager that can justify the cost, and whether that high fee represents an offer of protection in a downturn. For a long-only fund, which the majority are in NZ, I'm not sure it does. However, some are happy to pay for the 'boutique' label, so that's the way it is!
The key point would be to show correlation coefficients between fees and returns, analysing a bunch of funds say over a 5 or 10-year period. If the correlations are positive, then there might be a case for higher fees. If there is no significant correlation, then, all other things being equal, a low fee is arguably better because fees in that case don't predict performance.
Points well made. But I do think we need to be careful of the huge amount of accepted research on fees. Most of it is based on US funds; a minority on European and Japanese funds.
But I don't think that reserach necessarily applies in New Zealand. We only have ~200 KiwiSaver funds, way less than 500 others. These are tiny numbers. And in such a small set (with the availablility of international research) it is entirely reasonable for most managers to 'beat the market'. I know many don't, but surprisingly, over the longer term, close to a majority do.
So correlations on such a small pool may not have the cache of much larger populations. But I will get our senior analyst to run them, and report back.
I think whatever your analyst finds will be very interesting and make for good discussion. I think that 200 data points would be enough for a reasonable level of statistical power, and you wouldn't have to worry about confidence intervals because you'd be measuring basically the entire population of interest (Kiwisaver funds).
I guess another possible slightly more complicated approach might be to run a multiple regression model on fund returns data, with various predictor variables in the model such as:
* management fee percentage
* performance fee (yes/no)
* domicile (i.e. do global managers with an NZ presence like State Street/Blackrock/PIMCO perform better than a purely NZ-domiciled manager?)
* fund duration in years
* fund management staff turnover (average duration of managers in years)
* value of funds under management
* primary focus (NZ/Australiasia/global)
* hedged/unhedged
It would be a bit of work to collect the data, but I think it would be super interesting to see which of these variables, if any, might predict performance in terms of the probability of a fund beating its published benchmark and/or in terms of net returns, and how much variance in the model each predictor might explain.
Fair enough for the average of the 9,511 mutual funds in the US. But I doubt they would reliably beat the top quartile. If they did it would be one random outcome. Doubt it would be repeatable. This sort of urban myth is actually not what Kahneman said. (btw, I love Kahneman's work. Read Thinking, Fast & Slow a few times and refer to it often.)
Good point David - yes I've read Thinking Fast & Slow.
In terms of breaking performance of funds into quartiles, are you saying that you've got a 1/4 chance of randomly selecting a good performing fund - or do the top quartile always consist of the same funds year after year after year and people should be smart enough to pick the top performers?
Well, whatever next, Shanghai finally decides to join the “party”.
Not a bad idea, those on power can use the opportunity to cleanse some of the silly nonsense under the guise of “worldwide market correction”.
General populace, while alarmed, can understand their caring and benevolent government is doing the best it can to “manage” such an unpleasant event.
There is a price to pay for safety of course..
Im no financier but Donald seems to be looking for two trillion which is the face value losses on shares to date.
That is not the shareholders true losses of course so maybe they will take another two trillion off shares to fund Donalds bonds.
Thats 20% of the sharemarket value gone.
Shakey logic I know.
Competition for bonds may reduce the yield but they are safe as houses.
It’s getting tougher for Manhattan’s apartment landlords.
For more than a year, they’ve been handing out rent-free months and gift cards, then topping off those enticements with reductions in price. Now renters, who have the luxury of choice in a market overflowing with new supply, are demanding that owners dig even deeper.
Concessions jumped to yet another record in January, with 49 percent of newly signed leases coming with some sort of sweetener, appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate said in a report Thursday. That share surpasses the previous peak of 36 percent, set just a month earlier.
Landlords also got more flexible in their pricing. With concessions subtracted, the median rent dropped 3.6 percent from a year earlier to $3,141. The decline was the biggest since October 2011, the firms said. Read more
A bit after 2008, I remember reading an article about NYC maitre d's, and how they had become uncharacteristically friendly and helpful to customers when their restaurants were doing bad trade at the time.
The article cited here is definitely something that NZ landlords should pay attention to. You never know when your tenants (that is, your customers) will become worth their weight in gold, especially the ones who pay on time and look after the place. Markets can turn and the power gradient change.
China’s factory inflation slowed for a third month, amid higher year-ago base comparisons, as the consumer price index softened.
Key Points-
The producer price index rose 4.3 percent in January from a year earlier
- That matches projected 4.3 percent rise in a Bloomberg survey and 4.9 percent in December
- The consumer price index climbed 1.5 percent, the statistics bureau said Friday
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