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Orbis’ Stuart Place is riding from Melbourne to the Moon and Back to fund a treatment for the “monster of a disease” that his youngest son was born with. The investment industry is rallying behind him.
NZ gags fund performance ads
In a highly unusual move, the Financial Markets Authority (FMA) has cracked down on fund managers advertising post-COVID boom-time annual returns.
The regulator has warned managers that advertising any “phenomenal” returns garnered over the 12 months to March 31 could “mislead investors”.
Global share markets bounced back spectacularly from the brief COVID-induced shock early last year that saw indices rapidly fall 30 per cent or more to the March 23 nadir.
From the low-point, which almost exactly coincided with the end of the NZ financial year, equity benchmarks have recovered in record quick-time, spitting out 12-month returns ranging from about 28 per cent for the S&P/NZX 50 to more than 50 per cent for a US dollar version of the MSCI world index, according to figures from Mercer.
The Mercer statistics show even higher returns for NZ and unhedged global small cap indices of almost 100 per cent and 76 per cent, respectively, while the main Australian index was up almost 45 per cent in NZ dollar terms over the 12 months to March 31 this year.
According to a FMA release this morning, fund managers talking up the statistically unusual return period could fool investors into conflating luck with skill.
“The FMA is concerned investors being marketed returns for the 12-month period through social media, websites and other channels, without context, may be misled into thinking they are typical market performance or that particular managers have significant, repeatable skill,” the statement says.
KiwiSaver providers, fund managers and financial advisers should all refrain from, or withdraw existing, advertising returns covering the problematic period returns, the regulator says, “through any channels, including period-specific promotion on websites”.
The FMA says regulated entities must also “ensure the content and tone of required or otherwise regular investor and customer communications, does not place undue emphasis on, or commentary equating to promotion of, performance over the 12-month period. This includes written or verbal communications.”
Paul Gregory, FMA director investment management, said the regulator would monitor firms that continue to promote the 12-month to March 31 returns for potential breaches of “the fair dealing provisions contained in the Financial Markets Conduct Act”.
“We will also be concerned for the interests of any members who joined the provider’s scheme or switched into higher-risk funds during the promotion period,” Gregory said.
He said the FMA had been consulting with industry bodies on the novel regulatory approach over the last week or so.
“Encouragingly, some fund managers with growth products share our concerns and have already told us they will not be promoting performance focused exclusively over this 12-month period,” Gregory said.
The FMA released draft guidance on financial product advertising standards last year, which will require providers to tone down any performance boasts, especially over short periods. Submissions closed on the FMA ad plan mid February with the final guidance due out soon.
Last week (April 21) the regulator released another signed-off guide that encourages managers and supervisors to review fund and KiwiSaver fees for ‘not unreasonableness’ at least once a year.
– Investment News NZ
