The Press, 28 August 2010ROMY UDANGA, The Press
When it comes to KiwiSaver, Gareth Morgan always likes to stand out from the crowd.
This time it's over standards for reporting the performance on his managed fund. His fund management company Gareth Morgan KiwiSaver (GMK) recently became compliant with the global investment performance standards (Gips) which are applied in most funds in the UK, US and Australia. It means the 50,000 or so investors in the KiwiSaver fund can compare "apples with apples" when it comes to GMK's performance and its overseas counterparts.
But not so here. The industry body, the Investment Savings and Insurance Association is still progressing work on developing a standard for reporting the performance of KiwiSaver and other managed funds.
GMK is the second Gips-compliant fund manager in New Zealand (and the only one in the KiwiSaver space) – Wellington-based niche international investment manager Mike Gibbs-Harris' MGH Asset Management became compliant in 2007.
Morgan said his firm chose Gips because "it is the most widely used international performance standard" with some 95 per cent of UK managers, 85 per cent in the US and 60 per cent in Australia complying.
And Mike Gibbs-Harris said by having performance figures verified as Gips-compliant, investors can be assured that "in presenting the firm's performance history we are following international best practice in reporting and that we are not `cherry-picking' portfolios". "If people are investing with you they have to be able to trust your numbers," he said.
But Morgan is not stopping with thinking just his firm should follow Gips. He wants New Zealand to adopt it as a best-practice, industry-wide investment performance reporting standard because "the returns reported by firms to performance aggregators – such as Morningstar – are simply accepted as fact, no questions asked".
The lack of a reporting standard here was highlighted early in the year after Peter Huljich used his own money to boost the performance of the Huljich KiwiSaver fund.
Earlier this month, the ISI commissioned PricewaterhouseCoopers (PWC) to prepare initial draft proposals for a standard suitable to New Zealand that it hopes will be passed into law so all fund managers will have to comply rather than just its members. PWC has recommended to develop further the Australian Investment Performance Standards, which is essentially based on Gips but amended for the Australian retail market.
PWC partner Paul Mersi said that while Gips is widely recognised as the leading standard in Europe and North America, "it is primarily designed for the wholesale funds management industry that is prevalent in those parts of the world". "In New Zealand, the market is dominated by retail funds, including KiwiSaver products. The Gips would require amendment to provide retail investors with information suited to their needs," Mersi said.
But Morgan, whose firm is not an ISI member, disagrees. "We are not sure exactly why this position is held, or what the viable alternatives they propose are – given the Australian investment performance standards put up by the ISI have long been mandated to converge to Gips," Morgan said. "To us it makes sense to use the international standard for performance reporting, and if there are areas to develop within certain parts of Gips, then these can be evolved with the help of the Gips country sponsors."