Gareth Morgan’s marketing spiel in the New Zealand Herald this week made for a very entertaining read.
Morgan excels at scaremongering and he did not disappoint with his ‘KiwiSavers could be next victims‘ rant.
But while he raised some valid points – he always does – I think his text should be viewed in the commercial context in which the Gareth Morgan KiwiSaver (GMK) scheme operates.
In his article Morgan singled out the Huljich KiwiSaver scheme for criticism. Admittedly, Huljich has been caught out indulging in some unsafe marketing practices but it’s a huge stretch of the imagination to compare the savings scheme to some recently-defunct finance companies on the back of that.
More to the point Huljich is probably GMK’s most fierce rival in the particular KiwiSaver niche they operate in – both trade on their ‘Kiwiness’ and self-proclaimed high-performance abilities.
And the two schemes have been very successful in attracting members with GMK, in particular, getting off to a flying start when KiwiSaver launched in 2007. Of late, however, Huljich – in member numbers at least – has overhauled GMK.
According to the Workplace Savings NZ (formerly known as ASFONZ) website , Huljich boasted just over 54,000 members as at September last year compared to the 44,581 members reported by GMK in November 2009.
This represents spectacular growth for Huljich, which claimed only 14,123 members in March 2009 versus the 35,095 members on the GMK books.
It’s difficult not to conclude that Huljich might be cutting a bit of Morgan’s grass.
In a short-term performance sense both Huljich and Morgan have also lost some of their shine, which shouldn’t really matter to KiwiSaver members facing 10 to 40 years of investing. It’s also why fund managers who have just experienced a bumper year should report it with a dose of humility- a quality neither Huljich nor Morgan suffer from.
However, Morgan, in particular, has toned down his performance rhetoric recently after a disappointing year.
According to the GMK 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 GMK 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.
Steve of Wellington takes up the story here in one of the responses to Morgan’s article: “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?”
Tags: David Chaplin, kiwisaver
i think you missed morgans point that huljich have inflated their performance by related party trading – misleading the punters surely ? and by doing so attracting more members .
I agree with Steve’s sentimenta. Gareth has got a bit of front claming robust performance. My GMK growth fund has always lost money – this from the company led by the man who sees himself as a top economist and analyst. Almost all my other share investments have shown positive returns in the past 12 months, but GMK kiwisaver has been negative even when every other share indicator is positive. Bad luck always or poor management? C’mon Gareth, lets see you put your performance where your hype is and provide some positive returns- for a change.
I’ve invested through a number of managers in the past, and I’ve got some with GMK now. The best thing that I’m finding is that I actually know what I’m investing in. After recent events in the investing world, I’m trusting the industry even less than usual, so I like knowing what I’m getting!
Interesting that Gareth Morgan refuses to provide his performance data to the likes of Mercer and others. It seems he would rather rely on rhetoric and industry bashing to attract funds than performance, which has been poor, in fact near the bottom of the class.
Gareth was 100% correct in exposing the dodgy practices being used by Huljich. Not quite Bernie Madoff levels, but using internal transactions to boost “returns” is not what we expect from our Kiwisaver guardians.
For those who question GMK’s returns, at least the transparency is there, and while I’m investing in Kiwisaver rather than cashing it in I’m quite happy for the shares in the portfolio to remain at a lowish level.
Where is The Don in all of this? Conspicuous by his absence…
Someone go interview him!
I have to agree with Peter that you are missing the point of GMK. It is not trumpeted as the best return but as the most honest. I can see down to the last dollar where my money is invested which is more than I could ever say about other funds I have been in where everything was about the unit price You wouldn’t have a clue what that unit price reflected.
True that the growth fund has had a fairly poor performance for the past year but that is why it is called a growth (aka high risk) fund. Does what it says on the tin. In my humble opinion the market is in an accumulation phase so I would happily surprised to see huge returns in the growth fund at this point. Maybe you should consider the more risk averse options.
Enjoyed all comments, but is the point you can manipulate the numbers!! So if the timing is correct your fund could be going broke, but with a bit of cash I can make you look great, until tomorrow.
[...] response to one of my previous blogs some readers took offence at my use of the phrase “unsafe marketing practices” to [...]
All this arguing about which fund is the best, who gives a red razoo if you invest your $1042 a year its matched by the IRD a 100%, even if a fund loses 50% of that, your still well in front, of any investment broker ,bank or any institution,thats been investing money for the public for the last 100 years Gareth morgan, Peter huljich, or who ever, can not predict whats happening on the world markets, so if we get lucky we might get some money in our retirement, not like some pensioners today, who have lost all there investments to these so called gurus who are only lining there own pocket.
What is the item/ property sold by Huljich to his fund, at an apparent discount?, who arrived at this value?, is it equitable and achievable other than in this related party transaction?, that transaction should be undone!