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[sharechat] LEARNING TO INVEST: The performance of INSTITUTIONS

From: "G Stolwyk" <>
Date: Thu, 25 Jan 2001 02:32:52 +1300

Let us discuss institutions / banks / insurance companies and other fund managers!
H: Oh, the word ' institution' gives me a rash! I get sick whenever this word is mentioned.
G: Why?  H: Many have acted against the interests of the country and those of the smaller shareholder.
I am referring to takeover- and other rules applied by the stockexchange. These favour institutions. 
G: Are you also referring to their support of company directors wanting higher fees / options regardless of the damage done to a company if such a proposal went ahead?
H: Many are lemmings; they support anything! But why?
G: Could it be that because of the size of their holdings, they have more influence than the small shareholder?
And that some could be ' closer ' to the company than desired?
H: I get it: " I scratch your back and you scratch mine"
G: Difficult to prove; nevertheless, the investor wants  to know when an institutional holder ' abandons a sinking ship'.
Announcements are made from time to time; sometimes their excuse is genuine, often it is not!
H: I can still remember investment companies claiming that they were ' in there for the long run '. Some Americans were well known for similar statements.
G: Yes, and after a short time, they were gone!
H: How do you rate NZ institututions?
G: Agreed that the worst performing ones had to curtail their investments.
I am particularly referring to those who operated superannuation funds and unit trusts and whose capital and / or investments were wittled down to a few million dollars.
I don't understand that the small investors stood by these operators when relative costs increased!  
H.Over the years, their returns have been totally unsatisfactory; I won't rate them!
G. Many small investors are not sophisticated; mind you, we also had to start somewhere!
I have voluntary advised a few people from time to time and I thought that they were potential ' bait ' to unscrupulous paid advisors.
Many think that the advice will be better if they paid for it!!  
H: I am incensed when these institutions use ' average ' instead of ' compound ' returns.
We discussed this before in our post of Dec.19. 
G. I feel that institutions ought to more pro-active.
Some may start with protecting the investments of their clients: no unnecessary overseas trips and other junkets!

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