Gareth Morgan: GMI sale 'to benefit charity'

Relevant offers

Money

Roest jalied for six-and-a-half years Kara Hurring guilty in accidental millionaire case KiwiSaver manager lifts bonus target Tax ups cost of Australian holidays Kiwibank cuts more mortgage rates Days numbered for cheques, but not over 'Puppet master' controlled $10m Hurring unaware of $10m error, court told Court told of gambling chips mystery Consumer laws get retooled

New Zealand economist and philanthropist Gareth Morgan will pump the proceeds from the sale of his $1.5billion funds management company to Kiwibank back into charity.

Just how much state-owned Kiwibank paid for Gareth Morgan Investments (GMI) was not disclosed yesterday, but market speculation has it at about $50 million.

The company manages $1.5b largely on behalf of private clients and KiwiSaver members, making it one of New Zealand's biggest fund managers.

The Morgan Foundation puts its money in social investments around the world to relieve poverty. In New Zealand it funds research to improve the level of public understanding of key issues ranging from global warming to financial literacy."The proceeds would provide a significant boost to that work," Morgan said.

He was also part of a consortium that bailed out the ailing Wellington Phoenix football club last year.

Morgan said he would remain a director of the company, which runs Gareth Morgan Kiwisaver, and a key member of the investment strategy team.

GMI was established in 2000, initially to manage the investment of Morgan's personal fortune before taking on private clients and starting a KiwiSaver scheme in 2006. Morgan said all money associated with his interests would remain with GMI.

Kiwibank chief executive Paul Brock said GMI would run as a stand-alone operation and be branded as the bank's wealth management division.

The fund includes more than $800m from about 1200 private clients and $650m of KiwiSaver funds for more than 57,000 savers.

Morgan said he had initiated the sales process after becoming weary of a company which had grown to have 50 staff.

"I don't want to run 50 people – I can handle 10," he said.

"Too much of my time has been taken up with non-core activities. I simply wanted to deal with investment strategy."

Divesting that responsibility got that monkey off his back, he said. "The backing by Kiwibank ensures that the business has a strong and credible succession plan." .

Chris Douglas, at funds researcher Morningstar, said the merger would provide critical mass to drive Kiwibank's KiwiSaver fund.

The deal would allow GMI to win more clients though Kiwibank's nationwide branch network and customer base. In return, Kiwibank had acquired a funds management business as well as a private client portfolio.

"It looks to be a reasonably complementary union, especially when you also look at the fact that both are New Zealand-owned," Douglas said.

GMI would boost the profile of Kiwibank's KiwiSaver fund with Gareth Morgan as a recognised and marketable brand. "A key part of the Gareth Morgan KiwiSaver has been the brand of Gareth Morgan."

Douglas said it was difficult to put a sale value on a fund because of the wide array of variables, such as the quality of the investors and investments held.

Morgan said the sale to Kiwibank was a calculated move and the bank had signed up to seven values he held dear, which revolved around accountability to the client and fiduciary duty.

Morgan is an outspoken critic on portfolio investment management in New Zealand.

In September 2010, he withdrew his KiwiSaver fund from Morningstar's analysis and laid a complaint against the firm with the Advertising Standards Authority.

He was critical of what he saw as Morningstar's failures in its reporting methodology. Morningstar rejected the claim.

Morgan re-emphasised yesterday that GMI was the only KiwiSaver manager that had adhered to GIPS, the global investment portfolio standard.

"Seventy per cent of fund managers in the [United States], Australia and the [United Kingdom] do it, and we are the only ones in New Zealand."

- © Fairfax NZ News