Matt Bird attempts "Reality TV in print" or "fly-on-the-wall" reporting. The subjects are the SRF trustees and the professionals who support them. The time span is that of a typical trustees' meeting.
If you want a good crash course on investing, be a fly on the wall during a meeting of the trustees of the Seafarers' Retirement Fund. That's what I learnt on 20 June 2007. What I also learnt is that being a trustee is no cakewalk. There are a great many serious issues to debate and make decisions about – but not before a bit of humorous banter to lighten things up. "Any apologies?" asks chairman David Scott in formal tones. "Yes, I want to apologise for John here," is the cheeky retort from the trustee sitting closest to John!
As the minutes of the last meeting come up for discussion, it appears that the Government's KiwiSaver scheme had been well debated then. That meeting in April decided it was not prudent to act on KiwiSaver - partly because it had nothing to offer SRF members at the time, and partly because of some intuition that Government would surely tamper with the details in due course. Which it did. The Budget amendments in May vindicated the trustees' stance, and changed the whole KiwiSaver equation for the SRF. Meanwhile, horror stories abound of other super funds spending in excess of $100,000 on redrafting prospectuses and other legal matters, most of which was wasted in light of the Budget moves.
The meeting will return to the vexed question of KiwiSaver. Meanwhile, corespondence comes up on the agenda and there is some heady stuff to get heads around – like the correlation between direct property and property shares from an investment viewpoint; law firm Chapman Tripp's take on new tax laws on overseas shares; then a research report on whether active investment funds are better performing than passive funds. They are, but the fees are higher. All of which is relevant as the overseas investment tax landscape is due to change on 1 October 2007.
There is discussion about the multi-manager strategy and it focuses for a while on AMPCI who have six managers of various portfolios for international shares. This means six slightly different approaches, a form of diversification.
You get the distinct impression that if the financial gurus of the world came up with a new surefire approach to maximising the returns on investments, the SRF trustees would be "on the case". "As long as we beat the wharfies' retirement fund," came a jocular alternative viewpoint.
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But it's on with the agenda and soon they're back to heavy stuff in the form of debate about KiwiSaver. Since the Government's Budget sweetener, the trustees know they have a duty to ensure members can take advantage of a one-off $1000 gift, the $1000 a year tax break and other things. But exactly how is that to be done? All the trustees bring various first-hand experiences to the table to help unravel the complexities of the scheme. The concensus is that the SRF cannot be made a compliant scheme, but a so-called bolt-on would be admissible. Bernie Higgins, representing AON, the Fund's asset consultant, and also the Fund's new administrator, is there to help on technical matters.
How will members react to having to lock in those KiwiSaver savings until they are 65? How will it work administratively when employing companies' contributions need to be split two ways? Lots of questions and the answers are not obvious, but the thinking is clearer. Some professional help would be sought and a proposal brought to the next meeting in August. No doubt, there will a lot of enquiry and research by trustees in the meantime.
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It is Jacques Martin's last days in the administrative hotseat and Nicola Daniel is explaining the progress made with the annual accounts (for this annual report). She reports that auditors KPMG are near to signing off. "No need to picket KPMG then," comes a wry comment from one of the union reps. Nicola reports on various other operational matters such as membership (details in this publication), benefit payments and processing time frames. There is a discussion about the account of a member who is serving time as an inmate in one of Her Majesty's prisons. All grist to the trustees' mill!
Untypical of a routine trustees’ meeting is consideration of a major shift in asset allocation policy for the SRF. A property purchase is on the cards, and a specific property is in the sights. Several trustees have already contributed to the research by visits to the Mt Wellington commercial property and a long checklist of desired property features is checked off: Good location, good tenant, rent guaranteed by multinational parent, long tenancy likely to be renewed, good valuation, good cashflow, good location, good security, good car parking, good access.
The trustees are decisive and supportive when it comes to a vote on proceeding with the property involvement, but with a proviso – there's to be no delay, no pussyfooting in pursuit of minor improvements in what is an already-good price. Bernie Higgins shares some of the experience gleaned in a lifetime career in finance. "Don't be a dick for tick." It's an old adage referring to the possibility of losing a deal for the sake of shaving a few dollars off the price (that extra tick).
Sitting in on a trustees' meeting provides all sorts of explanations for things previously baffling. Like interim rates. They are interim because payments are often made before the full amount of data has been gathered for a definitive calculation. A minor top-up will follow.
 The decision for a property purchase is a sign that the trustees are wanting to be a little more aggressive in their governance. The meeting was in agreement that the trustees could be a little more hands-on. By their nature, and the nature of the relationship with clients, professional fund managers are inclined not to step outside "the square" too much. The trustees agree that they could push harder for certain actions. NZ bonds are a case in point, where the SRF has been exposed to four years of downside, which the trustees might have been able to change if there had been prior agreement. Bonds can and do lose value when interest rates go up – something not always understood by people outside the finance industry. Click Here.
Some discussion needs to take place on where the Fund finds the $4 million for a property purchase. It is agreed that the benchmark asset allocation percentages can be changed to allow freeing up of $2.5 million from NZ Bonds and $1.5 million from cash investments.
A team from Arcus is on queue to present their view of the investment world and report on impending personnel changes. Ross Bradding, Matthew Goldsack and Catherine Buckley report on the continuing trend for increasing profit growth, which bodes well for global equities. At the same time, you get a feeling for the way that Arcus operates. It's a fund of funds model. Arcus' functions come down to monitoring, measuring and selecting (the fund managers who actually manage the money). I'm reminded of the discussion earlier in the meeting about the diversity in the styles and philosophies of different managers. Hey, I'm learning something, and getting to find terms like "passive, with an active overlay" meaningful. The trustees nod sagely. They've been through numerous presentations of this nature before.
It might be a foregone one, but my conclusion is that the trustees accumulate a lot of knowledge in the process of doing their duties, and they put it to good use in serving their colleagues, the members of the SRF. |
