By Amanda Morrall
Q) Which investments have taken Fisher Fund's growth fund from a top performer to rank 15 in such a short time,and should this type of investment be held or shunned in your opinion?
A) Just a reminder that we can't and don't give advice, just information of a general nature to help you make an informed decision. The type of fund you are invested in depends on a number of factor including your age, time frame for investing, your risk appetite, as well as intentions. Other considerations include fees, performance, transparency, communication and disclosures.
Also, it's worth restating that KiwiSaver, for the majority of the 1.8 million members, is a long-term investment. As such, it's important not to get too hung up on short-term results, although it is understandable why many do in the wake of dramatic fluctuations in performance.
Although Fisher Funds growth fund ranked 15th for its peer group in the past year, it has maintained its position among the top three since inception. (See interest.co.nz's performance ranking tables for the various categories of funds here). For more comparative data on KiwiSaver see also Morningstar's Dec.31, 2011 report here. For an explaination of what defines an aggressive fund, click here.
Whilst there was no single investment that caused the Fisher Fund's growth fund to fall in its ranking, Carmel Fisher said the key contributors to its under performance (relative to other "growth" and "aggressive funds" ) related to its international equities exposure, "specifically its Asian bias and also its overweight position in Australia, relative to New Zealand."
"We were amongst the best performers in 2010 but in 2011 the investments positions that we had that helped us to be a great performer in 2010 hurt us in 2011.''
Fisher Funds growth fund has a 40% allocation to international equities, which according to Fisher, is higher than average for this peer group. Where others tend to have a higher exposure to European and American equities, as per the MSCI index, Fisher Funds, as an active value manager, shows preference to particular stocks. (See Fisher Fund's Website for a breakdown on asset allocation here).
"Most of our peers have a heavy bias to New Zealand which was a great performer last year whereas we have maintained a heavier bias towards Australia which was a relative under performer."
For a year in review on KiwiSaver see Amanda Morrall double shot interview with Morningstar's Chris Douglas here.
Fisher said there were no plans to alter the fund's composition although it did shore up its New Zealand equities to match its Australian exposure. Fisher said her investment team was confident that an upturn in China would buoy the fund's performance in 2012.
"We still have a high conviction view on China and believe it's going to be a relative out performer in the year ahead, so we're happy with our positions there. We also expect that the renaissance of China or its "soft landing " will be positive for Australia so our Australian holdings should have a better year too.
"We do recognise that New Zealand could well have another strong year given our economy is well positioned relative to the rest of the world and also the SOE listings will also likely underpin the NZX performance. So we've moved slightly at the margins; we now have a 50/50 New Zealand Australian weighting which is still higher than our competitors but we're comfortable that we have an even weighting to two markets which we think should be relative out performers next year."
Do you have a KiwiSaver question? See our comprehensive list of Q&As here and feel free to add to it, if you can't find your question there.
32 Comments
I used to read her bit in the SST - until I stopped buying it on principle. I wouldn't categorise her as Mensa material, but she suffers from the same problem that Morgan suffers from: On average (and the more you spread the more you average) investments have to trail the purchasing power of the investment, and by an increasing amount yoy.
To deny this - which you have to do if you've hitched your star to 'growth', you have to deny the link between the real, and money, which means you have to deny that the planet has limits to what it can supply. In short, you have to blindly believe in an ideology, in the face of science.
She wrote a piece where she expounded how at a certain price, more of anything became available, and she wrote it in the land of the Moa, flax-mills, kauri gum and the Maui's Dolphin. Go figure. Morgan came out with his classic on p17 of Poles Apart, the only non peer-reviewed claim in a book rightly approving peer-review re the Limits to Growth. Mind you, peer review could have been by another economist.
Are you in-capable of googling?
The Law of Supply states that at higher prices, producers are willing to offer more products for sale than at lower prices, that the supply increases as prices increase, and decreases as prices decrease, that those already in business will try to increase productions as a way of increasing profits.[1]
^ Sullivan, arthur; Steven M. Sheffrin (2003). Economics: Principles in action
. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. pp. 101. ISBN 0-13-063085-3. http://www.pearsonschool.com/index.cfm?locator=PSZ3R9&PMDbSiteId=2781&PMDbSolutionId=6724&PMDbCategoryId=&PMDbProgramId=12881&level=4
Such comments abound on clips of say cnbc on youtube......
regards
No, I'm not, thanks; but my own study in economics, using old-fashioned methods such as reading books, attending university courses and participating in discussion with academic and professional economists, as well as Googling, has led me to different conclusions from yours, as to what the dismal science has to say about scarce and finite resources.
I am trying to understand why you seem to think that economists think that natural resources are infinite, and so how I can better explain the relevance of economic principles to the concerns you have.
You might like to take a look at this
Good point. How I see things is that economics treats resources as scarce, but we act as if they are infinite. As is posed in the question "What would happen to the price of oil, if we had 2000 years of supply, with an extraction cost of $200 per barrel? As opposed to the 40 years of mixed supply we have left." The answer was "nothing". Which is where you come to the conclusion that though economic theory deals with weighing needs, wants and opportunity cost, it doesn't do a very good job of actually pricing the opportunity cost of consuming 100% of a finite resource today.
Let me pose a simple question. If there were an extra thousand years of oil supply – of onshore traditional oil – available at, say, a production cost of $200 a barrel in addition to the actual 40 years of mixed-cost reserves that wehave today, what difference would it make in today’s price? Remarkably, the answer is “none.” Today’s price isconcerned only with the intermediate-term workings of current costs of current barrels and current demand. Yet everyrational reader knows that this should not be the case: that the existence of huge reserves (or the lack thereof) should
indeed inuence today’s price in a world concerned about its very long-term well-being. In addition to ignoring the depleting supplies of high quality materials, no concern at all is shown for our current devastatingly erosive andresource-intensive global farming practices http://www.zerohedge.com/news/grantham-nails-it-industry-so-much-prefers-bullishnessso-does-pressFor one, to answer "thousand years" it misses expotential growth...ie maths...
ie there simply isnt the energy...
"Let’s think big: surround the sun with solar panels. And while we’re at it, let’s again make them 100% efficient. Never-mind the fact that a 4 mm-thick structure surrounding the sun at the distance of Earth’s orbit would require one Earth’s worth of materials—and specialized materials at that. Doing so allows us to continue 2.3% annual energy growth for 1350 years from the present time."
http://physics.ucsd.edu/do-the-math/2011/07/galactic-scale-energy/
So give or take a bit by 2112 we would be using the eqiv of the energy of the sun....waste heat output alone should tell you that wont work...
$200 a barrel, I dont think we will ever see a sustained $200 a barrel....sure a mad spike as Iran shuts down the Straight....but the problem is our global economy only flourishes with oil at $50USD....at $80USD its struggling...above $100USD and its looking like a recession.....look what $147USD did.....($159USD in today's figures)...
regards
Thank you for your trouble.
That is yet another example of using a simplistic and ill-informed caricature of economic analysis, rather than economic analysis itself, and forming a judgement about economics on that basis.
Why is the hypothetical extra oil in the question posited to cost $200/barrel to produce?
If you assumed the presence of vast additional quantities of oil that cost $50/barrel to produce, then the answer would be completely different. The current price is (rightly) very much higher than it would be in that case.
Correct, but the point being that the price is not an outcome of quantity, but current supply. Where is difference between infinite and finite? Even with prices at $50 the only qualification is extraction costs, not how much in total is available.
If you were on a desert Island with 40 full meals, and were awaiting a possible rescue, would an economist eat a full meal for every day? Or would said economist ration the food and make it last as long as possible? How would an economist treat a finite resource?
Now add another 1000 meals which require slightly more energy to consume, how would that effect the rate of consumption?
The assumption being that rescue is certain, but a low probability in 40 days, but a certainty within 1040 days?
Fair enough, put 7 billion economists on a planet with 40 years of oil at current consumption rates. Will the behaviour be the same if there is 1000 years of oil at current consumption rates? Asuming both scenarios have similar extraction costs. Simply put is the fact that we have 40 years supply of oil at current consumption rates, fairly reflected by increasing consumption rates and price?
"The way I see it, resources are treated as if a solution to the problem of running out will be here... any minute now."
yes.....
philbest and team is a classic case.....some technology will come along.....dont worry about oil we will like we did with coal move onto something else etc.
there seems to be absolatuely no concept in considering our children's and grandchildrens needs...if there was we would be hoarding our natural resources.
regards
If you want to waste your time guessing what the world will be like in your grandkids time, go ahead. I will tell you one thing guaranteed to be true... your guess will be wrong. Given your guess IS wrong, you dont know whether your actions today will help or harm.
Economists do not assume that technology will appear to fix any energy problem to make anyone feel better. They say that there are forces that encourage the emergence of such a technology. Things like the increasing price of consumable energy from existing sources, the relative cost of substitutes, and the profit motive.
On what do you base your fear that no new technology will be developed? Pessimism? The fact that nothing has come along right now? The fact that YOU cant think of what it might be? A study of a history in which no technological progress happened? Or another one in which all technological progress was knowable in advance?
Crude oil is only the CHEAPEST form of energy we currently access. When the cost of crude increased recently, extraction of oil from shale became worthwhile. More energy became available to the market only because of the price increase. Nobody would buy it if the price of crude was, so nobody would extract it.
Energy is the most abundant thing in the universe. In any practical sense, "we" will "never" "run out" of "it". At some point, in theory, we could reach a point where the energy needed to be expended to generate the marginal unit of energy is greater than the energy being generated. At that point we will probably be more concerned with the imminent heat death of the universe.
MdM - old fashioned? Very recent, I'd suggest.
"What will cause the demand curve to shift? Among the answers: Price of substitute.
Why do you need a substitute? Because presumably you ain't got enough of the primary. )Unless you are such an idologue that you assume the primary is still an infinite supply-possibility) What happens when that happens to every susbtitute?
Doesn't matter if it's bling, does if it's energy. You see, no economic activity - whatever - happens without it.
Meaning that all the economics profs in the world, are wrong if they don't take that into account. Sorry, it's kind of like the 'world is 4000 years old and was divinely created' idiots being wrong, no matter how many of them there are. I find it amusing to note how many seem to belong to both sub-sets.
Fisher wrote that in the SST about a year ago (I stopped getting it when they skewed the opinion offering). If I ever get a spare moment, I could probably find it. Not high on my prioroty list, I prefer reading stuff based in the real world. Physics, stuff like that.
What do you think would if the energy available halved? Do you think the potential for efficiencies is limitless? Do you think people can get 'richer' in the face of less being actually done? I'll bet your economics experts don't even understand that, yet they all have to fill their tanks or run to a halt. All have to eat or die. Odd wee disconnect.
Yes, economics professionals are wrong if they think that economic activity takes place without energy.
But that is about as meaningful as me saying that you are wrong if you think that the moon is made of green cheese. You have never said that it is, so there is no reason for me to think that you do think that.
Why do you think that economists think that economic activity is independent of energy supply?
Making use of the term "substitute good" and explaining how it impacts on prices and hence on supply and demand, does not imply that economists believe that there is a readily available easily utilised substitute for everything. If I were to state that "homosexual" is the term for somebody who is sexually attracted to people of the same gender, and explain some of the sociological and cultural issues that arise from the existence of homosexuality, that would not imply that I think that everybody is sexually attracted to people of the same gender.
No, not without energy, (and we were not discusing that) but some if not most seem to treat energy as a good purchased with money....so if you need more energy the cost rises so more becomes available....which isnt the case....once the price gets above trivial....to egt energy you expend energy.....the price of that energy doesnt matter they cancel out either sid eof the =
So
1 barrel of oil at $100 = (to get) 30 barrels at $100 which is about where we are at., so the net is 29.
1 barrel at $200 = 1 barrel at $200, net is zero...
make that barrel $1000, its still net zero...
and the problem is that ratio needs to be 10 to 1 or better (though some say 8 to 1) to make our capitalist economy work.
Hence some econmoists say the GFC was due to oil / energy getting to 6% of GDP.....these seem to be in a minority....most dont even consider it.
regards
and your conclusions are what btw?
What can the dismal science tell you about engineering, science? geologiical limitations? it cant even predict its own sphere...
Not just economists, many ppl, CEO's etc seem to share the same problem...maybe we should call it behaviour, ie amny if not most ppl behave as if resources are infinite and price doesnt matter....
Took a look at that link....whatever....I cant see how it adds to this thread.
regards
huh? what do you conclude when ppl say more growth? or we need 5% growth to pay off the debt? how about John Key? heads of EU?
When ppl buy bigger SUVs.....etc...
of course they are treating resourecs as infinite.
What about Tribeless etc? the "get Govn out of the way" so businesses can consume one off resources brigade?
Bill English, we need to get our resources out into the productive sector? what happens when they are gone aka the UK? that trick is a one off......
Of course many if not most ppl are treating resourecs as if they are infinite....in actions at the very least.
What do you think is happening with oil? its use is growing at about 2 to 3% per year....
population at what 2%? per year......by clear action we are treating our planet as inifinite.
regards
If you are genuinely interested in understanding economists' answers to these questions then I suggest you study an economics text book. However, you are not convincing me that you do actually want to understand others' points of view and I am therefore making a standard economic cost-benefit trade-off; the cost to me, in terms of my effort to explain it all, is not justified by the small probability that you will derive any benefit from it
MdM - I suspect we have a two-part schism here.
Economics, as in: tracking numbers, can indeed monitor a down-turn, and a perpetual one at that. I guess you could have tracked the 300-year Roman decline, for instance, including the debasing of their coinage to 0.02% of it's original, and done it merely from an observer point of view. Fair enough, that's even a valid piece of monitoring.
But - the Fisher problem (and the Real Estate problem, and the Developer problem, and the TNC problem, and the politician's problem, and the investors problem) is that their system requires growth. That is unsurprising - whatever interchange-monitoring system was put in place, locally of globally, had to start conceptual life on the upside of the gaussian. Nothing but a growth-based model would have fitted.
Our beef is with those who persist in insisting that exponential growth is possible, and/or desirable. We come at it from the top down, in physics terms. A bit like coming at the grains on a chessboard, from the last square backwards. We can prove that growth, while not disengaged from the physical planet, is a doomed regime. We can prove (as the Nats currently are) that this disengagement is not/cannot be happening. We can then speculate at to why/when the growth will cease, and speculate usefully as to what will follow.
At which point I find the boosting of 'investment' (be it Olly/RE, the Morgan outfit, Fisher, being a bit like assuming that, having accelerated thus far, your car will keep accelerating forever. Hindsight is no clue to that piece of physics, unless you're dispassionate and lateral in your thinking).is interesting. First, that it needs to be indulged in (and across the board) and secondly that it appears to be so unchallenged in the business media.
Perhaps these changes all have to happen from the bottom up, as per small-food vs TNC's, as the incumbends in any given regime will always control the powermongering most, juat at the point where they become least useful due to change.
What do you expect from someone who buys an $8 million house in Devonport in Spring 2007 at the peak of the world sharemarkets.
Would it not be wise to wait until such houses have come back in price ?
is it not a clear statement to the world of belonging to the noveau rich ?
When you look at how poorly most of her funds have performed over time,is it not a kick in the teeth for Fisher Funds investors ?
Is it not a statement that we should invest in houses and not in equities ?
I can tell youfrom experience of investing with Fisher Funds,that I have been a mug.
I would also have been a mug if I had invested with Morgan.
All that glitters is not gold.
Avoid people with high profiles.All they sell is promises.
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