Maori settlement groups achieve higher returns on assets, pay lower dividends, ANZ says
Maori iwi groups that have received settlements from the Crown achieved a higher average return on assets than New Zealand's biggest listed companies, but paid out a lower level of dividends, according to research by ANZ Bank.
The first settlement for historical grievances under the Waitangi Tribunal process took place in 1989, and more than 80 iwi have so far reached agreements ahead of the 2020 deadline with total claims worth more than $1 billion. The total assets of all post-settlement entities were valued at about $6 billion in an Iwi Investment Report published by TDB Advisory in December.
ANZ Bank reviewed the accounts of 31 post-settlement iwi and hapu with a combined asset base of $4.6 billion, and found the average pre-tax return on assets was 8.2 percent, ahead of the 7.7 percent average return for New Zealand's 30 largest listed companies and the 5.6 percent return for the country's five largest listed property trusts in the same period, it said in its Te Tirohanga Whanui Iwi Investment Insights report released today.
Still, just 12 of the iwi reported dividends in the most recent year, with the average distribution equating to 2 percent of equity, below the 7.4 percent rate for the 30 largest listed New Zealand companies, and the 4.6 percent rate for the five largest listed property trusts, the report said. Just 17 iwi had a documented approach to making distributions to their parent entity and for 13 iwi, the majority of their assets were held at the parent level, and so there was no real concept of a commercial dividend, the report said.
"The task - of delivering sustainable distributions, whilst continuing to grow the commercial asset base within an acceptable level of risk - is a job far easier said than done," the report said.
The report recommended iwi formalise a distribution policy that manages the expectations of the parent entity and allows for the reinvestment of commercial returns to help compound growth for future distributions.
ANZ noted that iwi were moving from asset holdings in cash and managed funds into more direct and active investment over time. Some $2.2 billion of the assets were held in property, $542 million in managed funds, $454 million in fisheries, $417 million in private equity, $414 million in agriculture, $295 million in cash, $187 million in forestry and $105 million in tourism.
"Iwi are looking for opportunities to invest locally, and in a capital constrained environment where we increasingly look overseas for investment, that is a great story for New Zealand," said ANZ head of Maori relationships David Harrison. "We are seeing more collaboration among iwi, not just in sharing information, but also to gain the scale needed to target bigger deals."
ANZ noted that iwi had low debt to equity ratios with average bank debt to total assets of 14 percent, lagging behind the 24.5 percent average rate for the 30 largest New Zealand listed companies and the 31.6 percent rate for the five largest listed property trusts.
"Most iwi have capacity for more borrowing and the use of some bank debt can help increase acquisition options, raise returns on equity, and accelerate growth," the report said.
ANZ Bank New Zealand, a unit of Australia & New Zealand Banking Group, is the country's largest lender to the property, agricultural and fisheries sectors.