Wednesday, January 18, 2012

Gareth Morgan Investments Sale To KiwiBank - Some Questions

According to The NZ Herald and other news agencies about $1.5Billion of Investment Funds are changing hands at a so far undisclosed price. My understanding from the information so far is KiwiBank will continue to operate thes funds under the GMI (Gareth Morgan Investments) name with Gareth Morgan remaining at the helm.

My questions are:

1. Where did KiwiBank find the money to purchase this business - has the Government put it's hand in it's pocket using Taxpayers money?
2. If the Government is funding this why wasn't this disclosed?
3. Apart from Gareth Morgan and his offsider Andrew Gawtih what expertise do KiwiBank have in the Funds Management area? This is specialised work with a different philosophy to banking.
4. What back up is there in the funds management area if Gareth Morgan or Andrew Gawith get run over by a bus.

Please be assured in asking these questions I have no concerns about the safety of these funds, which include about $650Million KiwiSaver Funds in the short term, apart from the impact of normal market fluctuations.

One thing I do see is that it seems that Gareth Morgan has organised himself a nice little sinecure which at the end of the day will be funded by the taxpayer. Whale Oil is already on to this and asks if Gareth is prepared to voluntarily pay Capital Gains on his profits - I don't think he will.

Hat Tips: NZHerald, Whale Oil, NewstalkZB, TVNZ


Medusa said...

Explain to me why kiwibank is paying me 3.15% interest on my savings and they can pay this slimy leftie prick how much??

pdm said...

Medusa - better to ask them but I suspect this is the answer you will get:

Interest rates on investments is dictated by the OCR while the purchase of the GMI Investments is Capital Expenditure.

What gets me is that they continue to go Cap in Hand to the Government for more funds for expansion. I am not sure if this purchase is best use of what money they have.

Judge Holden said...

Christ Medusa, you have no clue how the world works do you? It's sweet in a way. Put your $6.50 in life savings under your mattress if you're that upset.

"I am not sure if this purchase is best use of what money they have."

Oh well, if you're not sure there's no way they should have done it then. I mean you're the expert!

Anonymous said...

Kiwi Bank is Government guaranteed so its easy to borrow, again, again from NZ Post, who are also Government guaranteed.
To Morgan it's est $50m - $100m as a Capital acquision and as such is tax free. NO CGT here.
His Kiwi Saver account is ratshit in performance so he is getting out asap.
Kiwi Mugs

pdm said...

anon - still no nickname I see.

If you look again I said Whae Oil suggest Gareth Morgan voluntarily paid CGT. This would show his good faith in supporting the CGT in the election lead up.

Pleased you mentioned the poor performance of the Morgan Funds. I did not have the time to research it when did the post. Hardly a professional.

Judge - I probably know more about the Funds Management Industry than you do.

Anonymous said...

Alas PDM. That signed off anon wasn't me - I'd never call myself Kiwi Mugs. Just so you'll stop nagging I'll call myself 3.16.

I wouldn't haved thought that NZ Post and Kiwi bank could buy much at present without significant borrowing. If they are relying on govt guarrantees or govt money its arguably a back door nationalisation of the business. That conflicts with what I would percieve to be National govt policy.


Barnsley Bill said...

A better question might be: is Michael Cullen continuing his track record of buying lemons? Kiwi rail and now one of the worst performing super schemes. I am sure Morgan being a tragic lefty and labour fanboy is a complete coincidence.

pdm said...

BB - never thought of that. Has has probably paid double the value - he wasn't known as the fiscal fool for nothing.

anon 3.16 - looking forward to your first post under that. What I was alluding to was that they expected a Government hand out. That is more likely to be their way with Cullen at the helm.

Mort said...

Ultimately it means sod all that GMI are hopeless at investments when it comes to valuing the business. What matters is the cashflow from management fees.
The base business would have been valued on the income it has, and the way the Kiwisaver Fund-managers and indeed all managed funds' managers earn their income is via management fees and commissions. The fact that this money is not value for service is irrelevant to the valuation of the fund management business when the fund is a forced capture with a 1 in 6 chance of getting the new kiwisaver enrolled. The poor buggers getting stiffed by the less than average efforts of the GMI fund managers are being penalised for their ignorance/ neglect.
You could argue that the poor performance of GMI funds has cost them elected movements of investors from other default funds, and you would be right. But, what is the proportion of default fund investors who actually change provider?
Do we know the answers to questions like, what are the management fees GMI charge their investors? What is the net cashflow and net profit of GMI? What is the industry standard for valuation of these types of businesses? How different from the industry standard is Kiwibank's price?
As for whether the taxpayer received value for money from Kiwibanks' actions, will they make a positive return in cashflow and profit from the purchase, i.e. is the debt taken on for the purchase good or otherwise in an investment sense? Or is the purchase just a smoke and mirrors game to make Kiwibank too big to allow to fail? Paul Brock: Empire building much???

Anonymous said...

"Gareth Morgan is a jealous man with small dick ....! He claims that he is out on a noble mission .... HA HA HA! He needs some attention .... the poor "rich" man ... with the pathetic gay mustache!
A big problem on a small island ... is inbreeding .... we can see that when we read comments from some of you ...... It smells gene errors of several of you!

Gareth Morgan with the small small penis and the ridiculous mustache is going to be forgotten shortly after his death ..... In contrast to Viking Jarle Andhøy!

"I've talked to many of the friends of Gareth ... and everyone could confirm that he has struggled with penis complexes from the time he was a little boy ....." ;-)

I've tried to be as unfair as the great "environmental warrior" Gareth Morgan is in his criticism of Jarle when I wrote this .....

We Norwegians really hope that Gareth Morgan dies .... for the sake of the environment!

To those of you who intend to answer me .... I reply in advance with a giant fart!!!

Greetings from one of many Vikings who laugh when we think about the small penis that Gareth Morgan has between his legs...! ;-)