Thursday, March 04, 2010

The rumness of Captain Morgan [updated]

The resignation today of Peter Huljich for what looks like spruiking the trading results of his Huljich Wealth Management KiwiSaver fund might lead to a little more focus on what some of these government-sponsored Kiwisaver funds have been doing.

070507143232_0 And maybe one in particular: the Gareth Morgan funds, which trade on the basis of Morgan’s name—trading on "his “'Kiwiness' and self-proclaimed high-performance abilities” -- yet while Morgan himself leaves the grunt work of managing the fund to others he spends the major part of his time travelling the world talking up his bike-riding, and travelling round NZ boardrooms bad-mouthing other Kiwisaver providers—for both of which he now has something of a reputation.

This would be perfectly fine if the results of his managers matched his mouth.  But they don’t. As David Chaplin noted in the Herald not so long ago,

    “According to the Gareth Morgan Kiwisaver website, in the 12 months to January 31, 2010: its growth fund lost 6.61 per cent; the balanced fund dropped 2.51 per cent, and; the conservative fund returned 1.75 per cent.
    While it's not an exact overlap in time, the recent Mercer KiwiSaver survey 2009 annual performance data serves as a proxy benchmark to measure Gareth Morgan Kiwisaver against. In the Mercer survey the average conservative KiwiSaver fund returned 8.1 per cent in 2009; the average balanced fund returned 12.1 per cent, and the average growth fund grew by 16.5 per cent.

Not so good.

And a recent Morningstar survey of Kiwisaver providers confirmed the less than stellar performance of Mr Morgan’s managers over the last year.

  • With $28.5 million under their putative control in their “Conservative Fund,” Gareth’s managers’ ranked just 15th out of 16 in this class.
  • Handling $102.7 million of other people’s money in their “Growth Fund,” they ranked only 19th out of 20.
  • And with $130.9 million of people’s would-be savings invested with them in their “Balanced Fund,” they could only manage 22 out of 23.

How does that make you feel about him? That’s over $250 million of other people’s money, a lion’s share of the Kiwisaver treasure trove dropped into his lap through government policy, that Gareth is just not looking after.

Not good at all for a company that’s used his name to attract it all. In a market, that, we should remind ourselves, only exists because of government action (i.e., explicit tax benefits for savers and a legislative requirement for employers to plonk 2 per cent of employees' wages or salaries in their funds). With a company that’s helped get Morgan into positions where he now thinks he can tell you how much you should be taxed, and how.

Time to reconsider the sundry ponderous pontifications of this “people’s friend.”

Time for him –- if he’s to be taken seriously -- to stop talking his book and writing others, and instead to get his arse behind his desk instead of out on the world’s roads on the back of a Harley.

And time for editors to stop reprinting Gareth’s rants as if they’re the revealed wisdom of a secular saint.  They’re not.  They’re mostly just the rum old whingings of an underperforming seal.

As “Steve of Wellington” said in response to one of Morgan's recent whinges in the Herald:

    "I've got my Kiwisaver with you Gareth and all I seem to do is lose money - thousands at the moment. How about less spin and more time trying to recover some of my money you have lost?"

Looks like a good call.

Disclosure: Peter does not have any money invested with Gareth Morgan.  Nor would he.

UPDATE: Cartoonist ‘Blunt’ wonders if Gareth's asked for his own money back yet from “the top scientists” who so easily convinced him that anthropogenic warming was going to destroy the planet.  And further:

Pearls

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19 Comments:

Blogger "Motella" said...

C'mon PC, that's being a bit harsh on a noble man that believes in championing the concept of social responsibility.

Surely it's a good thing that social, environmental and cultural responsibility is promoted above financial bottom line objectives.

What possible good can come from successful businesses?

The poor performing Kiwisaver fund is just Gareth's way of giving a little bit back to society and to apoligise for past profits.

He's just using other people's money this time...

3/04/2010 12:34:00 pm  
Anonymous Falafulu Fisi said...

Gareth invests his own money in his funds, which makes him different from others. Others (i.e., fund-managers) preach to investors that they themselves have magic hands in that they (investors) should give their money to them (fund-managers) to manage because they're really good at it. Umm, similar to what a psychic would tell his/her followers.

3/04/2010 03:59:00 pm  
Blogger PC said...

@FF: True that most fund managers seem about as able as to make quality returns as you average chap with a a stock listing and a dart -- especially during those periods when the "Greenspan put" was putting rocket fuel into the worlds' share markets.

But are you suggesting Gareth should set himself apart by selling himself as an unsafe pair of hands?

Sure, it would look more honest . . .

3/04/2010 04:08:00 pm  
Blogger Ruth said...

Gareth invests his own money in his funds, which makes him different from others.

Indeed - it makes him dumber than the others. His ROI is appalling considering the magnitude of the V shaped recovery last year.

Morgan and Infometrics have always been doomers/permabears, and I suspect that particular reality challenged position (incidentally a position which nearly all Objectivists hold), is behind the poor performance.

True that most fund managers seem about as able as to make quality returns as you average chap with a a stock listing and a dart

They just follow the index. That is all they have ever done.

3/04/2010 04:32:00 pm  
Blogger PC said...

@Ruth: "They just follow the index. That is all they have ever done."

Which makes Kiwisaver look like nothing so much as welfare for suits.

3/04/2010 04:49:00 pm  
Anonymous Honey Badger said...

Gareth Morgan was as you rightly put it dead last in the Morningstar KiwiSaver ratings for the year to December. I think if he spent less time riding his motor bike and raking muk on his competitors and more time focusing on his returns for KiwiSaver members he might get a bit more respect.

3/04/2010 05:24:00 pm  
Anonymous LGM said...

Gareth "lissthper" Morgan is a comedian. Surely ya'll understand that? I mean, he couldn't really be serious, could he? Not really, surely?

LGM

3/04/2010 09:53:00 pm  
Anonymous Andrew said...

Excellent PC. That needed to be said. And shame on the NZ Herald and the television stations for continually giving this man a platform to promote his own business by slandering others.

Gareth Morgan puts himself forward as someone who has special insights and wisdom that others do not have, and posits that the finance sector is comprised of incompetent people out to rip off mum and dad investors. (For examples see his book: After the Panic: Surviving bad investments and bad advice.)

But as PC states, his results do not necessarily provide us comfort that he has superior ability, in fact his one year returns would suggest the opposite. And if Gareth is so capable, then what would happen if he did not end up managing the portfolios? Well, his website actually tells us:

“Although Gareth is currently an active figurehead for GMK, he’s not in the engine room running the business. […] The investment strategy team consists of Gareth and 5 other staff, plus associated economics consulting company, Infometrics. The team is well used to day-to-day investment management of the portfolios in Gareth‘s absence -- after all he‘s been spending half his year motorcycling the world since 2001 -- so in many ways he‘s just another demanding client!”

What!? So he is not actively managing the portfolio and in reality is just a figurehead! What a disgrace! So what investment qualifications, experience, and insights do these other five members of the investment strategy team? Well lots, if swimming, rockclimbing, and whitewater rafting count as experience. (See his website).

Good luck to those who invest with him.

Andrew

3/05/2010 08:56:00 am  
Anonymous LGM said...

Andrew

Surely swimming, rockclimbing, off-road motor-cycle riding and whitewater rafting are all most important skills when it's time to escape the investors.


LGM

PS. Hope you are well.

3/05/2010 09:20:00 am  
Blogger Flaco said...

Anyone who makes investment decisions (yet alone write an article) based on 12 month returns is a complete idiot. I'm with GMK, quite happy. Looking at his website their is a long term performance comparison. His returns SINCE THE BEGINNING are actually one of the better providers. Do your research if you are going to write on finance.Link below
http://www.gmi.co.nz/Pages/KiwiSaver/ProviderPerformance.aspx

3/05/2010 09:44:00 am  
Anonymous Andrew said...

Flaco

Gareth continually claims to have insight that other investors do not have. He is an advocate of timing the market and of tactically moving between asset classes which would mean that an investor with superior ability would have benefited from the March 2009 'rebound'. You only need to look at the graphs on the link you gave to see that he failed miserably in doing this.

To illustrate: Look at his Growth Fund performance. Please explain to me Flaco, how a growth fund since January 2009 could actually have lost money. What is in his growth portfolio? They must have picked the worst stocks in the world to have that type of performance. Is this evidence of superior insight? What does this tell you about their process? This is what is important since this is what will drive future returns to you.

Long term returns are important, I agree. But if that is your benchmark, then two years is not enough time to make an assessment of his abilities. I think PC was critiquing Gareth Morgan here on his pontificating that he has more insight into the investment markets than others, and as a person with such insight that he should have led to significantly better performance over the last year.

Andrew T

3/05/2010 10:11:00 am  
Blogger PC said...

@Flaco: You work there, do you, Flaco?

Because the graph you posted shows that if you invested a dollar with Garetrh it would soon be turned into something smaller.

That's what all those minus signs mean at the top of the page.

Frankly,I was being kind by not posting the two-year returns.

3/05/2010 10:13:00 am  
Blogger Flaco said...

@pc disclosure: I work in finance but not for GMK.
I'm just being the devil's advocate in a conversation that is on short term performance which tells you nothing, esp when GMK is actually one of the best performing funds since inception. wind back to Jan 09 - I wan't complaining when my funds hadn't lost 20%, not complaining that I didn't get the rally either as I'm still doing better than the majority with less volitility (and thus risk) I've worked offshore and am more big on transparency as this cowboy of a finance industry in NZ is a joke overseas.. so I like like my transparent reports. More so as I work in the thick of it here and I know what goes on behind the scenes.

You want high reported returns join huljich! or how about ING? ;)

@andrew - I don't expect him to be the sole strategy team - would be concwerned if it was just him to be honest.
More importanlty is that his money is in the fund as our interests are aligned.

3/05/2010 12:43:00 pm  
Blogger twr said...

An example of an investment professional who puts his money where his mouth is is Peter Huljich, who, like someone who actually cares about his customers' results, refunded them when he felt he'd made a poor decision.

Unfortunately, he gets vilified for it by the vested interests like the nasty evil little troll from Craig and Co on the tv this morning, who has made a very lucrative career out of rolling the dice with other people's money, and getting paid handsomely whether the customer wins or loses.

And of course, the vocal majority uses this as yet another opportunity to clamour for more regulation, usually favouring themselves.

3/05/2010 03:45:00 pm  
Anonymous Anonymous said...

Look guy's you're all missing the point, Gareth Morgan must be an Australian , he whinges like one !

3/05/2010 04:09:00 pm  
Anonymous Anonymous said...

@twr: Huljich would have been fine if he had disclosed it earlier.

3/05/2010 04:29:00 pm  
Blogger twr said...

@Anon : technically, possibly yes, but the amount was negligible overall, and the naysayers are using that technical breach to attempt to bury one of the few people in that industry who appear to have a bit of a conscience.

They are trying to claim that because it's not disclosed, it affects performance measurement, and they therefore can't evaluate whether the performance was "normal" and therefore "repeatable", however performance is categorically *not* repeatable as we have seen time and time again, so it's obvious it's merely an excuse to bag a competitor.

It's very obvious from the illogical behaviour of the markets (such as the oil market before the crash, the equity market during it, etc) that the people making these huge decisions with other people's money have no real idea what's going to happen, and are merely having a punt, safe in the knowledge that they get paid either way.

3/05/2010 10:04:00 pm  
Blogger twr said...

... And furthermore, there is a very libertarian answer for those investors who don't like it - they can put their money elsewhere.

3/05/2010 10:06:00 pm  
Blogger Kimble said...

I think a problem most people have with what Huljich did was that they were out promoting their returns to get more clients.

One question that needs to be answered is why WOULDNT Huljich have announced he was donating his own money? Sounds like the sort of thing the marketing department would LOVE to talk up.

On GMK's performance, the problem with all KiwiSaver funds is that all the funds are really new. Their returns from inception may be interesting, but their more recent returns (when they had more of more people's money) are much more important in determining investors overall experience.

Going back to Huljich, they were able to gain an additional 20% in their performance figures from the donation of only a few of thousand dollars. Most investors in the scheme would not have been much better off in absolute dollar terms, but the percentage is going to be huge.

3/10/2010 03:45:00 pm  

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