Taking Stock 15 October 2026

Any regular reader of Taking Stock may recall my strident condemnation of the people who devised the Provincia Property fund, doomed to investor disappointment because of its structure.

The fund paid its manager generously but also paid on growth that was funded by debt, as well as rewarding the management company for finding acquisitions and also for arranging debt facilities. Size, not quality, could be rewarded. The combined fees were absurdly high.

It was as poor a structure as RJI was when it was listed in 1982, grossly over-rewarding the founder, with very little ability to fire the managers or direct them to prioritise the interests of the investors. Provincia and Jones were effectively judge and jury, with minimal investor input, and very poor governance.

Various stranded Provincia investors contacted me, some of whom fought valiantly and seem to have gained the upper hand. I admire their tenacity.

The good news is that change may be afoot.

Craig Priscott, who has successfully intervened with other dreadful unlisted property syndicates like Superstore, has become a significant shareholder and has engineered a change in chairman. Clearly, he has financial grunt and the energy to fight.

Contemporaneously, a company valuer, Northington, has analysed Provincia and found that over a decade or so the management fees exceeded investor returns!

Tellingly, one of the founders, Carl Burling, is alleged to have sold out of his units at a 40% discount to par while the fund continues to claim its assets are worth more than par, and that its prospects are bright. There is virtually no liquidity in the stock, meaning investors rarely can escape. Dividends have been nil or pathetically low.

So, it is great news for investors that a new chairman and a well-heeled investor may either arrange to replace the turgid management, or initiate a staged liquidation, bringing an end to an awfully structured unlisted property syndicate.

I compare that with The Wellington Company's three syndicates that 11 years ago bought commercial properties and adapted them to student accommodation during the education boom in Wellington, when foreign students scrambled to get into Victoria University.

Of course, many such students left NZ after the Kaikoura 2016 earthquake. Some have not enjoyed the focus on left wing ideology of the university, showcased by people like Rashbrooke, who in that time became a Stuff commentator preaching far-left ideas.

When the students left, the property concept became flawed. Valuations slumped. The dividend pool was threatened.

The owner of The Wellington Company, Ian Cassels, at one stage sacrificed his management fees to honour the dividend promises.

In recent months he has orchestrated sales or repurchases by his company. This will enable all investors to recover their capital, two with a marginal gain, and has maintained credible returns for investors during the very difficult recent years.

In effect he has taken responsibility for transforming the properties to suit the market that exists today.

I give him great credit for honouring his investors.

The three syndicates were sensibly structured, with good rules, and transparency, but it certainly helped that the principal displayed principles.

Provincia, in my view, should be managed by those with the mindset that the investors are due an outcome very different from what has been assumed, in recent years. My current view is that unlisted property syndicates are useful for vendors but awful for investors. Those advertising gross returns of 7.25% are grossly under-rewarding risk. Run, rabbit, run.

Many, other than me, have for years sought new legislation to prevent fund managers being locked into their role, removable only by the most difficult processes, making the contract worth millions, often tens of millions. (Jones sold his contract for $75 million, thirty years ago, or more.)

The latest protest comes from the new chairwoman of the three Fisher listed share trusts, Kingfish, Barramundi, and Marlin.

Fiona Oliver was appointed to her new role in July, after the former UBS executive, Andy Coupe, retired from chairing the poor structures.

Oliver was confronted by statistics showing years of quite dreadful performance by the three Fisher funds, in contrast to market indexes, resulting in share price devastation, Kingfish having fallen from $2.20 to $1.10 in four years, while the sharemarket index has grown.

Oliver would also have noticed that Fisher Funds have a high management fee structure and a quite absurd bonus fee structure, claiming out-performance bonus fees based not on equity indexes but on the cash rate. The fund is an equity fund, not a cash fund. How did financial advisers allow this structure to be implemented?

I once asked Fishers why they continued with this anomaly. The answer I received was that at annual meetings the issue never arose. (Partly this would be because the Kingfish fund would be bought only by retail investors, never inquisitive fund managers).

All of these defects explained why many, me included, would rate the Fisher Fund group as more credible than the now defunct fund managers Vestar, Money Managers, Broadbase and Reeves Moses, but only by a short head, not by a neck, let alone the length of the strait.

Its track record with its three listed trusts, Kingfish, Barramundi and Marlin is abysmal. There have been times when its heavy buying of Ryman and Michael Hill has had the air of desperation, not logic. Neither company features today in its top twenty, but undoubtedly both contributed to Kingfish's awful results.

Oliver must see all of this.

She is commissioning a review to consider sacking Fisher Funds and finding another fund manager. I politely suggest that Milford would be warmly regarded by most.

Carmel Fisher herself, the saleswoman who founded Fishers, has retired having quit with a nine-figure lump sum, an extreme reward for her energy, media skills, ambition and brand selling dedication.

Oliver is to be applauded for her initiative.

Will the day come when at regular prescribed times, investors get to vote on changing the fund manager?

The Provincia investors would welcome such a change.

So would I. We should not need regulators to legislate.

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When in the decades from 1990 to 2010 several NZ trust companies were trawling for retail investors, looking to manage their estates and trusts, the sector was barely inspected by anyone, least of all the media. Nobody seemed to care, not even the regulators.

The trust companies serviced investors who were not visible, either poorly advised when they enquired about the service, or unwilling to make enquiries, guided only by the Yellow Pages or newspaper and television advertisements, protected by nobody.

What brought the trust companies into the headlines around 2005 was their singularly incompetent work when they chased fees by offering to represent those who had invested in mortgage trusts or finance companies.

Perpetual, NZ Guardian Trust, Trustees Executors and Covenant were all so incompetent and negligent that the trust sector was naturally scorned for their obvious incompetence. (The Public Trust wisely sidestepped the non-bank sector.)

Few will forget how often blind eyes were paid to examine useless covenants in poorly structured trust deeds, expected to apply the handbrake on non-bank deposit takers, when lending focussed on margins, rather than loan recovery, with no respect for rules.

NZ Guardian "supervised" Hanover's rotten group. Covenant looked after Dominion, Bridgecorp and others. Trustees Executors was negligent in managing South Canterbury Finance, but Perpetual was the worst, pretending to be the guard dogs for those who invested in canines like Lombard.

The 2008 second-tier money-lending collapse was well traversed in my book The Billion Dollar Bonfire, which traced the lending nonsense that seemed to scuttle off to holes in the floorboards whenever the trustees called in for a cup of tea and to deliver their invoices.

I guess the good news is the quite appalling abandonment of the trust companies' sense of responsibility to investors, led eventually to inspection of trust company behaviour in the area where they collected their richest gravy, managed funds, family trusts and estates.

Typically, a fund manager would appoint a trust company to attest to the manager's abiding with its deed on such funds as bond funds, or cash funds. The trust company confirmed compliance with the deed.

As no fund manager of any value would benefit by cheating on such funds, the trustee fee, of say 0.1% on a $100m fund would be $100,000, requiring someone with the skill level of a primate, to tick the boxes and collect the fee. This was a task that took hours a year, not weeks. As Darwin had suggested, primates and humans can be closely aligned.

It was money, not so much for jam, but for an old recipe describing how to make jam. Value? Coins, not bank notes.

But the real gravy was, and is, in managing estates and family trusts. The charges are revolting and the skill level confirms that Darwin was right.

Incredibly, the unadvised, or poorly advised public allowed trust companies to set their fees not on the value or time requirements of their role, but as a percentage of the value of the estate or trust. Do I hear 1%? No, 2%? No, 2% plus various ancillary fees such as "admin fees".

People with no or little value to add were paid like valuable fund managers. They were rarely, if ever, accountable for the outcomes. Readers can develop their own thoughts on the value added, compared to the fees charged.

Because the fees were collected in advance, and set per annum at a fixed rate, there was (and is) no incentive to clean up estates efficiently, and because the fees applying to managing a family trust are collected annually, there often was no alignment with the interests of the family trust beneficiaries (to wind up the structure and pay the beneficiaries).

The trust company sector was, and is, divorced from the desired marriage between settlor wishes and beneficiary entitlements. Settlors need to be precise in documenting their wishes if the trustee fee grab is to be minimised. The current practices are offensive, in my opinion.

I recall helping a wheelchair bound beneficiary sack the trustee who had persuaded a senile mother in her 90s to sign up a document giving the trust company, Perpetual, tens of years of annual fees. (The beneficiary won only when the threat of a media campaign scared the company). Such a long-term income stream comes from a "testamentary" trust. Never ever!

Well all this may seem like history, but it is relevant today.

In recent days I have fielded calls from furious beneficiaries encountering deliberate, inexcusable delays, and in one case denying beneficiaries the right to seek a transfer of assets equally to the beneficiaries, rather than the selling of the assets (with all the vendor fees) and distributing cash.

My advice has always been never to use a trust company without first discussing the alternatives with a lawyer. Be specific about what the wind-up should involve, or what grants are to be made. Never be advised by the trust company.

I have long advocated that most trusts and estates can efficiently and at low cost be managed or executed by family & friends, perhaps with access to paid legal or accounting advice when there was uncertainty about legal processes.

In general, this advocacy has succeeded. Far fewer of those I meet sign up with a Trust Company if they have any credible alternatives.

Simple, honest, competent lawyers are generally immeasurably better, and cheaper, than trust companies. 

Caring, alert, competent family and friends are an even better choice, nearly always producing better outcomes, more cheaply and quickly.

Trust companies themselves surely know they are in a sunset industry. Artificial Intelligence can, and will, be the catalyst that should turn dusk into darkness, the sooner, the better.

Gaining advice on how to arrange management of a trust or an estate is not financial advice and therefore should be available from any seasoned financial adviser.

Such an adviser surely would have witnessed many times the trust company fees that far, far exceed value-add.

Do we need court law to put an end to ridiculous fees?

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One client would argue stridently that not all law firms will add value when preparing wills or administering estates.

She recently petitioned Parliament to consider new law requiring much more transparency, when lawyers prepare a will and arrange to administer the estate.

She had encountered greed, inefficiency and intransigence from a law firm. She did not have the power to expel the law firm and move to a more appropriate source of help, though she was a principal beneficiary.

Parliament has rejected her petition.

This may look like a parliamentary group of people protecting what others may see as "the club".

Administering (executing) a will is generally done quickly and well by law firms, with transparency available throughout the process.

When there are exceptions the Law Society should be judgemental and come down heavily on greedy or poor performers. Such operators do not deserve to be protected. Greed should be a justification for exclusion from “the club”.

The worst performers draft the will, appoint themselves as executor, and do not explain adequately their fees and their processes. They then help themselves for as long as they can drag out the process.

It is for that reason that I prefer all draft wills to be independently inspected before any agreements are signed.

A lawyer's certificate should never be a free ticket for any passing gravy train.

Who remembers the days when conveyancing charges were a standard 2.5% of the value of the property?

In the 1980s a $100,000 house scored twice the revenue of a $50,000 house despite there being no difference in time, effort or expertise needed, no incidental costs, and virtually no liability for the lawyer.

To repeat, a lawyer's university certificate, just like an appointment as a trustee, should never be a free ticket to a passing gravy train.

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New Issues

Contact Energy is expected to issue a new subordinated capital bond in October. We expect the bond to have a term of around 6 years, with a possible interest rate of around 6.00% per annum. 

Kiwi Property Group has announced it is considering an offer of 7-year, fixed rate, senior, secured green bonds. We expect it will offer an interest rate of around 6.00% per annum. The offer opens on Monday 19 October. 

Investors who are interested in either of these potential bonds are welcome to contact us with their CSN and an indication of the amount they may wish to invest. We will then contact them once further details are available.

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Travel

Our advisors have an extensive travel schedule coming up over the next quarter, including the following dates:

21 October – Auckland (Albany) – Edward Lee (FULL)

22 October – Auckland (Ellerslie) – Edward Lee

29 October – Christchurch – Johnny Lee (FULL)

17 November – Christchurch - Chris Lee

18 November (am) – Christchurch – Chris Lee

18 November (pm) – Ashburton – Chris Lee

19 November – Timaru – Chris Lee

Chris Lee