News and Events

Brash replies to critics of Huljich KiwiSaver
13/03/2010

Don Brash, Executive Chairman of Huljich Wealth Management, writes in response to recent allegations in the media. The article was published in The Weekend Herald on 13 March 2010 under the headline 'No comparison to finance companies'.

View the article, 'No comparison to finance companies'. (Don Brash, "No comparison to finance companies", The New Zealand Herald, 13 March, 2010.)

Brash replies to critics of Huljich KiwiSaver

Over the last few weeks, there have been repeated attacks on the Huljich KiwiSaver Scheme, and on the integrity of the directors of Huljich Wealth Management. 

Most critics have focused on the fact that, during 2008, the company's managing director and principal shareholder, Peter Huljich, contributed $150,000 of his own money to the Huljich KiwiSaver Scheme without that fact being disclosed in Huljich Investment Statements. While the Investment Statements accurately reflected the increase in the Huljich KiwiSaver unit prices, the compensation payment was not distinguished from investment income. 

Mr Huljich has accepted responsibility for not keeping his board informed on the matter, and tendered his resignation as managing director and chief investment officer. The independent directors do not condone this failure, and accepted his resignation. New audited accounts and a new Investment Statement have been issued, and that is entirely appropriate. 

But in assessing the situation, several points need to be borne in mind. 

First, no Huljich KiwiSaver member lost money as a result of Peter's action. In fact, many were made better off at Peter's expense. His decision was made at a time when many were clamoring for compensation to be paid in other situations. It is therefore grossly inaccurate to liken his action to the actions of the directors of Blue Chip or the many finance companies which have failed in recent times. In those cases, people lost real money. 

Second, if any of our members feel that they were materially misled by our Investment Statements, they are absolutely entitled to transfer to another KiwiSaver Scheme; there is no exit penalty for doing so; and we are writing to all members advising them of that right. 

Third, others acknowledge that it is common practice for fund managers to compensate clients when they incur losses as a consequence of mistakes by fund managers. It has already been reported that fund managers are known to affect their "performance" by waiving fees. I'm not making excuses for the lapse in our case, just observing that all performance measures have their deficiencies. 

Fourth, compensation totaling some $150,000 was made because Peter felt morally, and possibly legally, responsible for some poor investment decisions, not to "boost performance". Can I prove that? Not conclusively of course - motives are never provable. But it's worth noting that the first payment, of less than $9,000, was part of a much larger payment of $1.3 million paid by Peter to those in the Huljich Unit Trusts because he felt responsible to compensate them for a poor investment decision. If he had wanted to "boost performance" in the KiwiSaver funds, spending $1.3 million for a benefit to the KiwiSaver funds of less than $9,000 was a very expensive way of achieving that.  (The Unit Trusts were subsequently closed, partly because at the time there was little interest in investing in them and their "performance" was never advertised.) 

Finally, two of the strongest critics of the Huljich KiwiSaver Scheme in the media, Gareth Morgan and Carmel Fisher, are, of course, direct competitors and it's a surprise to me that the media have been willing to carry their repeated attacks. If the managing director of Vodafone wrote an article attacking Telecom's XT network, I very much doubt if the media would carry it as balanced comment, even with a tiny paragraph at the end disclosing that conflict of interest. 

One of those critics, Gareth Morgan, has been particularly lacking in impartiality in his comments. His motives for calling for the winding up of a major competitor and his attempts to push the Securities Commission into action appear obvious.

When he questions my experience, he omits to mention that he has a similar background. We both have doctorates in economics and, to the best of my knowledge, no formal qualification in funds management; we both spent some years working at the Reserve Bank; we've both spent a good part of our careers providing economic and investment advice; and we've both had some experience in investment management. 

While Dr Morgan's experience in investment management has been over a longer period than mine, it's worth noting that, over calendar 2009, during which the Huljich KiwiSaver Scheme received no compensation payments at all, that Scheme was among the very best-performing KiwiSaver schemes in the market (as measured by the Morningstar performance tables). By contrast, the Scheme run by Gareth Morgan was one of the worst performing schemes over the same period. All fund managers know that past performance is absolutely no guarantee of future performance, but it is certainly inappropriate for Dr Morgan to imply that he is the only person in the industry that knows what he is doing. 

I suggest that all of us need to continue to improve our game. The directors of Huljich Wealth Management are absolutely committed to doing that, and to meeting the highest standards of integrity and transparency for the future, for the benefit of all KiwiSaver members. We welcome Government proposals to ensure that all KiwiSaver providers meet the same high standards.

Don Brash
Executive Chairman
Huljich Wealth Management

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