A Newsroom investigation shows the well-known funds manager had gone big on Signature Bank – money it will never see again. But it says other funds are down as well. Jonathan Milne reports.
Many KiwiSaver and managed funds have money in the two collapsed US banks.
The big North Shore-based funds manager Fisher Funds had gone big on Signature Bank before its failure this week – that's about $80 million it will never see again. It also has $74m invested in First Republic Bank, which is looking shaky.
It's thought to be the biggest NZ loss in a bank collapse since the NZ Super Fund lost almost $200m in taxpayers' money in the demise of the Portuguese Banco Espirito Santo, in 2015. But other KiwiSaver and managed superannuation funds are also hard-hit: based on the most recent disclosures, ANZ had $41m in failed Silicon Valley Bank, and Milford Funds had $16m there.
READ MORE: * NZ fund’s $6m exposure to bank collapse amplifies calls for local protection * Markets shudder as bank collapse leaves Silicon Valley reeling
The wobbles in the banking sector continue: this week investors have been selling down Japan's banks and, overnight, new concerns emerged about Credit Suisse – a much larger European bank. Bank shares, which had rallied over the past couple of days, have dropped 4 percent overnight on the broad KBW Nasdaq Bank index. Credit Suisse is down 24 percent.
Fisher Funds chief investment officer Ashley Gardyne says other funds, with an average 7 percent exposure to US banks, will be down more than his ones. Their investors will now be watching nervously to see if US stocks recover – but there's no hope for the Signature and Silicon Valley bank investments.
There is a question for investment managers like Fisher Funds as to whether they were sufficiently diversified.
"Because of our investing style, we typically have less exposure to the banks than most of our peers ... But unfortunately, the situation is, we do have an exposure to Signature Bank, which has had an impact." – Ashley Gardyne, Fisher Funds
Newsroom analysis shows 27 of their 45 funds included Signature Bank; some like the Marlin Global fund had as few as 22 international investments. Most fund managers would hold hundreds of companies, and therefore have less exposure to any single company failing.
As an example, 4.81 percent of the $87m Fisher Funds International Growth Fund was comprised of Signature Bank stocks that are now valueless; another 3.54 percent of that fund was in First Republic Bank.
Fisher Funds also acquired Kiwi Wealth and its 13 funds in December; Fisher laid off Kiwi Wealth’s senior investment managers and parachuted in its own people to make the key decisions. The Kiwi Wealth funds had no exposure to Signature or Silicon Valley banks, and have only small holdings in First Republic – investors in Kiwi Wealth may be thanking their stars Fisher’s managers haven’t had more time to “rebalance” their portfolios.
Gardyne says Fisher Funds had reduced its Signature Bank holdings since the last disclosure statements in October; KiwiSaver funds shouldn’t have more than 0.6 percent exposure now.
That was just through routine rebalancing, he says, not through any particular foresight about the trouble coming their way. Gardyne isn’t saying, but that should reduce the direct losses from that bank’s collapse from $103m to about $80m.
"There was no indication," he says. "We review the banks and this bank's result was very strong; it actually came out a couple of days ago, late last week, reconfirming the balance sheet and the deposit position. So there wasn't anything in the fundamentals that suggested that this would happen.
"It's been a pretty tough week for US banks – I think the worst week since the GFC. The index was down about 16 percent, and US$130 billion or so wiped off the value of US banks. Most globally diversified investors do have a pretty significant exposure to US banks.
"Just as leaders in public health have plans for managing pandemics, or leaders in disaster management have plans for responding to sudden floods, I think fund managers should have plans for the collapse of a major institution in their portfolio." – Fisher Funds investor
"Because of our investing style, we typically have less exposure to the banks than most of our peers. So we are significantly underweight on banks, which, which tends to help. But unfortunately, the situation is, we do have an exposure to Signature Bank, which has had an impact."
Investors learned a little more on Thursday morning: one of Fisher Funds' investment vehicles is a New Zealand-listed company called Marlin Global which, as Newsroom reported earlier this week, had 3.3 percent of its portfolio in Signature Bank.
One Aucklander whose KiwiSaver is with Fisher says there will always be the risk that a particular holding is wiped out; the assurance he’s seeking is that the fund manager is well diversified, and has a plan for such contingencies.
"Just as leaders in public health have plans for managing pandemics, or leaders in disaster management have plans for responding to sudden floods, I think fund managers should have plans for the collapse of a major institution in their portfolio."
He argues that funds managers are quasi-public institutions, because they are responsible for managing government-backed KiwiSaver funds. “I don’t think Fisher Funds had done anything markedly different, so they haven’t lost my trust at this point. These things will happen – no decision-making is perfect.”
"The history around the world is that as soon as banks are at risk of going under, yes, shareholders lose some money, but the banking system itself is kept intact. And overall, it recovers. So I'm not overly worried about what we've seen so far." – Sam Stubbs, Simplicity
On the most part, them’s the breaks in the markets. Few in the industry are pointing fingers; they're quietly saying, 'there but by the grace of God …'
Sam Stubbs, who founded competing KiwiSaver provider Simplicity, says the indexing of most funds to the S&P 500 means most KiwiSavers will have some Silicon Valley Bank or First Republic Bank in their portfolios. The loss to the average KiwiSaver member in a growth fund will be about $20 per $100,000; those in conservative funds will lose about $10 per $100,000.
What may cause greater alarm to KiwiSaver members and other investors is the overall market dip, and the ensuing uncertainty. Because of that same S&P 500 indexing, most diversified funds will typically have about 7 percent of their money in banks. The KBW Bank index fell 12 percent on Monday (US time), rallied by 3.2 percent, then dropped 4 percent again overnight Wednesday.
New Zealanders had $90b under management in KiwiSaver funds last year – so that’s $820m wiped off our retirement savings in a couple of days.
"The history around the world is that as soon as banks are at risk of going under, yes, shareholders lose some money, but the banking system itself is kept intact," Stubbs says. "And overall, it recovers. So I'm not overly worried about what we've seen so far."
Right now, the signals are that the US Treasury’s speedy intervention has reassured the markets and those losses will be recovered – but as we know from the bank collapses that precipitated the Global Financial Crisis, it could go either way.
