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What world does Adams live in? - $A5b Aussie fund manager

The government is kicking the Chorus [NZX: CNU] can down the holiday road, Investors Mutual senior portfolio manager Simon Conn says.

His firm, which manages $A5 billion of funds, has more than four million Chorus shares and has holdings in SkyCity, Mighty River Power, Fletcher Building and Z Energy.

He has raised his concerns over Chorus’ regulation shocks with Prime Minister John Key, who has passed his letter to Communications Minister Amy Adams.

Mr Conn says Ms Adams’ office has replied, saying that she’s aware of his concerns but she will not be able to reply fully until Parliament resumes in late January.

“I don’t know what world these people are living in but late January is a month away – I could have sold every New Zealand stock I’ve got by then and invested the money in a favourable regulatory jurisdiction, like Australia.”

Will he sell out and cut his losses before January?

“I don’t know; it’s a daily proposition,” he says.

Asked if he has sold out of other New Zealand companies, he says: “I’d rather not divulge that.”

The Commerce Commission's final copper broadband pricing decision, released on November 5, has sparked a series of posturing comments between Chorus and the government, provoked a well-organised PR campaign by the telecommunications industry and prompted Chorus to withdraw its dividend guidance and file a High Court appeal of the commission's decision.

Mr Conn says he wants the government to act, to implement a regulated asset base model over the telecommunications sector which delivers a reasonable return, and guarantee investors they will earn a reasonable rate of return on the UFB spend.

“It’s costing New Zealand credibility at a time when you could be making a lot of hay.”

As reported earlier today, Chorus has re-engaged with internet service providers over plans for cheaper, faster fibre, while earlier in the week two analysts weighed the impact and timing of Chorus having to undertake possible capital raising.

Over the last 12 months, Chorus [NZX: CNU] has been one of the worst performers on the benchmark NZX50, with its share price dropping about 50%.

For more read today's National Business Review print edition.

dwilliams@nbr.co.nz

More by David Williams

Comments and questions
9

$5 billion AUM is pretty small in the scheme of things - Investors Mutual doesn't even make this Investor Daily list (1) of the top 23 Australian funds.

Investor Mutual themselves promote their "conservative value-based investment style with a long-term focus", so Simon Conn, not one of the two principals (2) could perhaps wait a few weeks for news on what is a long term play.

Simon's purview seems actually seems to be the IML Small Cap fund (3), which is overweight in utilities and light on telecommunication. I'm not, strangely, seeing Xero in the top ten holdings, a classic small cap success story. And it's amusing (and sad) that Chorus is seen as a small cap stock anyway.

Meanwhile our own $25 billion fund, ACC, is investing. (4)

(1) http://www.investordaily.com.au/20223-australian-investment-managers-climb-global-rankings

(2) http://www.iml.com.au/IML/main/index.php?select=profile&type=General&PID=11

(3) http://www.iml.com.au/IML/pdf/latest/2013_11_IMCAPS.pdf

(4) http://www.nbr.co.nz/article/chorus-shares-rally-after-vote-confidence-milford-acc-ups-stake-dc-150031

Not sure why you are trying to poke holes in this guy's credibility by talking about things that aren't that relevant, i.e. AUM, what fund he manages, etc. Raising and managing $5bn is a lot more than managing nothing.

Good on him for expressing his concerns on behalf of IML to our government and following through on it. Our regulatory regime is of great concern presently for anyone wanting to invest in this country.

BTW, while completely irrelevant to the actual article - XERO would not show up in the valuation screens of a "conservative value-based investment style with a long-term focus."

I also note that IML have won numerous awards through the years including best performing Australian share fund last year which to most people is more important than the actual size of the fund. (but again kind of irrelevant to the actual point of the article)

Lance your comments criticising Simon Conn sound petty. I think you are missing the point. The opinion of investment professionals from overseas is worth listening to when they appear to have committed investments in NZ and they have valid arguments. It is not appropriate for John Key and the national government to interfere and over-rule the country's official independent regulator when it makes decisions. However, Simon is correct that NZ's hostile regulatory landscape is deterring foreign investment and raising our risk premium. Erratic government policy on a host of overseas investment opportunities in NZ - including Canadian Pension Fund Investment Board's blocked investment in Auckland Airport, Rio Tinto/Tiwai Point smelter subsidy, Crafar Farms sale, Mighty River Power/Meridian Energy sales, Telecom/Chorus split and Chorus/UFB investment program (to name a few) - all confuse and alienate valuable foreign investment for a small isolated capital-import-dependent country like NZ. It is great to see lobbying and dialogue from investors like Simon who are engaging with our government rather than exiting NZ or avoiding us in the first place. We need to be seen to be responsive and welcoming to people who are trying to understand our culture and influence it. Some NZ government decisions on cases mentioned above look third world to overseas investors. Simon's point about a regulated asset based model has been considered international best practice for decades in parts of the world to try avoid pitfalls NZ has experienced recently.

What a dumb way to lobby a government.

His demands are the worst kind of corporate bullying that reminds me of when the Yanks owned Telecom and screwed the NZ public with the full support of Minister Williamson et al. Perhaps this government has finally learned that lower prices, innovation and better service are economically more valuable than creating monopoly rents for offshore shareholders!

Repeatedly screwing offhsore - not to mention onshore - shareholders is a certain road to poverty.

When you look at the utilities that have been stuffed by post-sale regulation or legislation - Telecom/Chorus, AIA, Vector, Contact - it's little wonder the market's reacted the way it has to MRP and Meridian. Sadly, this means there's little point in trying to sell Genesis - the only way the government will be able to flog it off is by giving it away.

Why is the NBR publishing stories about fund managers that failed their clients by not anticipating the pricing changes that were signalled in December 2011?

Is not a better headline here "Aussie fund manager takes a punt with 4m Chorus shares and gets it wrong" or "Fund manager can't keep pace with Commerce Commission press releases" or "Investor thinks ComCom should ignore legislated pricing changes signalled well in advance"?

No surprises here that a Chorus investor is having a whine about their bet going wrong. Is the NBR now their agony aunt?

Well having just had coffee with a couple of we older people who are doing our best to manage our investments the signals and response from Government on both sides of the house and conflicting commentary from two NZ fund managers on Chorus over the last few weeks has left us all wondering where we are heading. Perhaps it is time for our hard earned money to exist the market and to go on holiday with our banks. To both sides of the house please stop giving mixed messages to investors and for once collectively support NZ Inc.

“I don’t know what world these people are living in but late January is a month away”

Wellcum to Nu Zillund, mate, where the country shuts down not for a day like in the US, but for a whole month. We’re all camping at the beach having a barbie and a few beers, and soaking up that world famous in Nu Zillund kiwi lifestyle. The kids are swimming in the sea and Deb’s out the back chatting with the girls. Choice eh? Cya in 6 weeks.