The following is an transcript from our live-web interactive Tuesday with New Zealand's fund manager Brian Gaynor of Milford Asset Management.
Amanda Morrall: The SOE sell-off has been touted as a great opportunity for KiwiSavers.What are your thoughts on this?
Brian Gaynor: Yes they will be good for KiwiSaver but investors would like a wider range of new companies, not just electricity companies.
Amanda Morrall: What is it you dislike about electricity companies?
Brian Gaynor: Not a dislike but they are regulated and don't have growth opportunities offshore. We would prefer coys with strong growth prospects.
Amanda Morrall: Could we expect Government to lighten up on regulation somewhat with the sell-off and also greater competition to spark up the industry?
Brian Gaynor: The current Govt maybe easy on regulation but if the Greens are involved in Government then that would scare investors away from electicity coys.
Amanda Morrall: Okay, then maybe I will ask you about Energy Mad. This is Kiwi company is going public. They specialise in energy efficient light-bulbs and were among Forbes top 50 recently. Any opportunity there?
Brian Gaynor: Energy Mad looks very interesing, Milfordwill be having a very close look at it. We need coys like Energy Mad.
Gareth Vaughan: Hi Brian. What are your thoughts on how a Trade Me float might be priced?
Brian Gaynor: The big issue with Trade Me will be the price.There will be a lot of tension between Fairfax, the seller, and NZ investors. Hopefully investors will get a good price to buy into Trade Me.
Bernard Hickey: Do you think stock market investors will be able to handle all four energy SOE IPOs and TradeMe in the next couple of years?
Brian Gaynor: Yes there is plenty of money around to invest in shares. We have only 9.6% of KiwiSaver invested in NZ shares with 42% offshore. That money is offshore because of limited opportunities in NZ.
Don MacLeod: Brian, you said the electricity industry is dull (low growth). Our best growth sector appears to be food production, but how is best the way to enter this market, short of buying a farm or beginning a startup?
Brian Gaynor: Unfortunately that is one of the biggest drawbacks with investing in the NZX, it has no real opportunities in the food/agri sectors.
Amanda Morrall: Brian, how do we get people investing less in term deposits and property and more in the good growth Kiwi coys? There seems to be a fear of the stock market generally,especially now.
Brian Gaynor: Yes New Zealaners are afraid of the NZX. We need a few more winners like Mainfreight and Ryman, that will change investors' view of the NZX.
Andrew S: ... further to Amanda's question, how might a person looking for alternatives to term deposits and property get started in the stock market?
Brian Gaynor: Two choices, either do it yourself or give it to a fund manager. I suggest 50/50 and then follow the fund manager closely, you can lear a lot from that.
Gareth Vaughan: One further question on the SOEs, do investors really want/need what are effectively another three Contact Energys in their portfolios?
Brian Gaynor: The most important point about investing is diversification. Electricity coys are ok as long as investors have lots of non-electicity coys in their portfolios. Just electricity coys is no good.
Amanda Morrall: Going back to that last question Brian. What signs should people look for in a fund manager?
Brian Gaynor: Performance - although not a guarantee of the future. Also experience - although I would say that. Make sure the fund managers does what it says it will do.
Amanda Morrall: And what role do you think a financial advisor plays in all this? Is there a role or is that just an added expense.People in NZ don't like to pay.
Brian Gaynor: It gives people more choice, you can chose whether to go to a financial advisor or not. Some of them are very, very good. Particularly if you want long-term advice.
rc: Do many NZ Fund managers have the majority of their personal net worth invested in their respective fund they manage? (i.e. like Warren Buffet, George soros etc)
Brian Gaynor: Milfordhas a policy that staff can only invest in Milford funds, they cannot have their own investment portfolios. I am not sure about other companies, you should check.
Gummy Bear Hero: Brian : What does the NZX ( or Mark Weldon ) have to do to encourage more companies to publicly float their shares ?
Brian Gaynor: Gosh the NZX has tried but I don't believe NZ business people are ambitious. A lack of ambition, particularly compared with Aussie, is one of our biggest problems.
Amanda Morrall: Do you think with TradeMe going public, the SOE sell-off, Energy Mad and most recently Summer Set (a retirement villa company) that could spur more businesses to do the same?
Brian Gaynor: There will be huge interest in Summerset because Ryman has been so successful. However investors should look at Summerset on its own merits and not automitacally assume it will be another Ryman.
Amanda Morrall: It's probably a company not many of heard of. It brings me to another question about active fund management.What traits do you look for in a company and what kind of research is involved?
Brian Gaynor: Active fund management works in NZ, that is a fact. That is because there are only 6 broking houses covering the market versus 23 in the 1980s. Gives a good investor a better chance of "beating" the market.
Gummy Bear Hero: We have many successful companies which do not seek public ownership , such as Fulton Hogan , the Otago Daily Times , Weta Workshops , etc ... they're Kiwi success stories , but remain private . How do we entice them to offer shares to the public ?
Brian Gaynor: A large number of NZ businesses do not want any public scrutiny and don't list. That is a shame because the NZX gives a company great growth prospects.
Amanda Morrall: Along those lines Brian. How do we stimulate greater interest among investors glued to property?
Brian Gaynor: Very, very hard. Parents have told their children to avoid the NZX because of what happened in the 1980s. It will take a while to change this but I believe KiwiSaver will help change our attitude to the NZX.
Leonard Bloksberg: I tend to see IPOs as a good investment.Is this justified? Most seem to rise significantly post float, then diverge. Have any not gone up post float? What portion continue to be good long term as well?
Brian Gaynor: Yes on average IPO's do will but they can also bomb out. Diligent went from $1.00 to $0.15 but is now over $1.00 again. Look at IPOs carefully.
Blair Rogers: Times have moved on - I find it easier to invest in the ASX than it is in the NZX - certainly have more faith in the ASX than the NZX - deeper market with more interesting possibilities.
Brian Gaynor: Over the past three months the ASX has beendown 10.5% and the NZX only 6.3%. The NZX does better in bad times, the ASX in good times.
Gummy Bear Hero: Do we need a re-education programme ,starting in the school system , to wean the country off seeing property as the only game in town .. .. and to actively promote business and equity investing ?
Brian Gaynor: Agree with this one. The schools could do a lot better re education but so also could the business community.We don't explain issues very clearly.
William Lane: Do you think the property market will still continue to fall?
Brian Gaynor: I see it going sidways to slightly down but it depends on what part of the country you are in. Aucklandmaybe marginally better than the national average.
Leonard Bloksberg: NZ companies tend to pay high dividends but reinvest little toward capital gains. Would a shift toward higher retained earnings result in capital gains comparable to the "more exciting" international markets?
Brian Gaynor: Yes I agree that would be great but Rakon is a company that has never paid a dividend and it has disappointed investors. NZ investors like dividens, indeed they love dividends.
Gummy Bear Hero: Brian , would you recommend that we re-configure KiwiSaver on the same lines as Australia's superannuation scheme , and make it compulsory too ? Do you see any short-comings in the Aussie scheme?
Brian Gaynor: I see very little shortcomings with the Aussie scheme, it has been a fantastic driver the the Aussie economy and Austraians have far more retirement savings than us.
12 Comments
DB : That is the entire transcript , above . Brian Gaynor was only available for about 35 minutes . ... he stayed on a little longer as the questions began to flow near the end of the session .
... I was hoping we'd have longer to question him . He stands up as one of the commonsense straight-shooters in financial circles ... A national treasure !
Cheers, Gummy. Some great questions in there from you as well. I agree with your assessment of Brian Gaynor 100%. He makes such a refreshing and valuable contribution to business reporting and commentary in NZ’s financial landscape.
I don’t know if you can, but I can certainly recall with horror the cowering sycophancy that was business reporting and commentary during the heady days of the 1980’s in NZ. Back then journalists and commentators slavishly printed company press releases with neither question nor critique, and in some cases added lavish praise to boot. Were they too afraid to speak the truth? Intimidated into silence for fear of being sued? That is why I am so appalled to note that Mr Gaynor is currently being sued for defamation by, and I just can’t remember who it is, for one of his articles this year. I hope he fights back and wins, and goes for substantial costs in money and time as well.
.. truth be told , I was surprised that a certain someone didn't pop up and ask Brian Gaynor his opinion of peak oil ...... or of global warming ...... haaaaaaaaa !
Incase you missed it DB , Ron Brierley recently blasted hell out of Bruce Sheppard ...... these geezers from the " go go " era of the '80's don't take being questioned as friendly banter .
.. . I was in Australia back then , and it was hellishly funny watching TV when some 140 lb weakling journo was thrust into the path of Kerry Bullmore Packer .
Brian Gaynor: Very, very hard. Parents have told their children to avoid the NZX because of what happened in the 1980s. It will take a while to change this but I believe KiwiSaver will help change our attitude to the NZX.
Why assume that attitudes towards the current NZX will change? Until the NZX is demonstrably run fairly in the interests of all investors and not biased towards the big players or those in the know, then it behoves any sensible New Zealander to stay away from the NZX. And that includes picking a Kiwisaver account that minimises its participation in the NZX.
Brian's own article last week pointed out the difficulty there is in interpreting company accounts. Mum and Dad Kiwi investors deserve a much better run NZX that demnads real standards; the NZX wants our money but too many of those involved in Ne Zealand's sharemarket are quick to patronisingly dismiss us as unsophisticated Mum and Dad investors
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