What a Captured Flag Taught Me About Portfolios

Article #480

On the wall outside one of our meeting rooms in Hawke’s Bay hangs a faded Italian flag, framed and protected. A New Zealand soldier took it from the car of an Italian officer who surrendered to him in North Africa, and carried it home at the end of the war. It came to us through Trade Me. The seller, the soldier’s daughter, was looking for someone who would treat it with respect; her family, she explained, had no particular interest in it. I do. Behind the frame sits our correspondence and a record of her father’s service through the desert campaign. Each time I walk past it, I reflect on him, on what he carried home, and on the men who did not.

Kingdom of Italy flag (1861-1946), bearing the Savoy shield. Hung at Stewart Group Hastings

This week falls within the anniversary of the Second Battle of El Alamein, which opened on 23 October 1942 and proved to be the turning point of the war in North Africa [1].

A campaign too easily forgotten

North Africa is one of the more underappreciated chapters of the Second World War. Public memory, perhaps understandably, gravitates to the great set-piece moments we still tell stories about, including the Battle of Britain, the Dam Busters, the famous bombing raids and naval engagements. North Africa is, by comparison, a forgotten campaign. Yet for New Zealand forces, it was the longest and most important land campaign of the war. The 2nd New Zealand Division, under Bernard Freyberg, fought from 1941 through to the Axis surrender in Tunisia in May 1943 [2]. The cost was severe. By the end, almost 14,000 New Zealanders had been killed, wounded, or taken prisoner [3]. Keith Elliott and Te Moananui-a-Kiwa Ngārimu were awarded the Victoria Cross, while Charles Upham earned a bar to his existing VC. [4] Ngārimu’s was posthumous, awarded for his actions at Tebaga Gap in Tunisia in March 1943 [5].

I’ve been reading Saul David’s recent history of the campaign, Tunisgrad [6]. The title is a deliberate echo of Stalingrad, and the parallel is more than rhetorical. Tunisia was an attritional, brutal phase of the war that effectively destroyed Axis power on the African continent. By the time it ended in May 1943, more than a quarter of a million Axis troops had been taken prisoner [7]. New Zealand units, including the 28th (Māori) Battalion, were instrumental in the final push [8]. The campaign succeeded not through any single moment of brilliance but through grinding, disciplined, collective effort.

Supply lines and lost vehicles

That phrase, grinding, disciplined, collective effort, has a personal resonance for me. My uncle’s father, Mick, drove trucks through the campaign. Long-haul supply runs across hundreds of kilometres of empty desert, the same featureless terrain stretching away to the left and to the right, hour after hour. He told stories of vehicles ahead and behind that simply vanished, lost, misdirected, captured after wandering unwittingly into enemy lines. The desert did not care whether you were brave or careful. It swallowed people whole.

Even the highest-ranking commanders were not safe. In April 1941, Lieutenant-General Richard O’Connor, the architect of Operation Compass, the man who had just destroyed an Italian army many times the size of his own, was lost to the desert in exactly the way Mick described. His unescorted staff car ran into a German patrol at night. He spent more than two years as a prisoner of war [9]. One of Britain’s most capable early-war generals, removed from the campaign after encountering enemy forces in the dark.

What that tells you about the campaign is what stays with me. North Africa was won by men like Mick, hauling fuel, water, ammunition and food day after day across terrain that could swallow you in an afternoon. It was a war of logistics. The headlines went to the Upham VCs, and rightly so. But the campaign was won by the truck drivers, the signallers, the engineers, the cooks, and the riggers. The unglamorous work that, together, kept everything else possible.

Photographs of Mick Harper and his fellow servicemen during the North African campaign. From his personal collection.

The investor’s mistake

I see the same pattern, again and again, in the way investors approach their capital.

In 2025, emerging markets were the top-performing asset class in Mercer’s table of investment returns [10]. The year before, it was something else. The year before that, something else again. The financial press, the broker community, and a fair share of advisers spend extraordinary energy trying to identify next year’s winner ahead of time. Portfolios get reshaped around the standout of the moment. The steady holdings that quietly do their job (international bonds, defensive equities, infrastructure, cash, sometimes even the unloved local market) get treated as dead weight. Investors look at them with disdain and ask why they aren’t pulling their weight.

This is, I believe, the central error of contemporary investing. Winners are hard to find in advance. Winners are not consistent. Persistence studies of actively managed U.S. funds show that sustained outperformance relative to peers is difficult to maintain [11]. A portfolio that constantly chases the leader is, in effect, fighting the last war.

Source: S&P Dow Jones Indices LLC, CRSP. Data as of Dec. 31, 2025. Chart is provided for illustrative purposes. Past performance is no guarantee of future results.

A portfolio built like a campaign

A well-constructed portfolio looks rather more like the El Alamein order of battle than a Victoria Cross citation. It contains assets that, individually, may never make headlines but which, together, hold the line when conditions turn. Diversification is the discipline of accepting, in advance, that you cannot pick the winner every time, and structuring accordingly. Each holding has a job to do. The bond allocation isn’t there to outperform equities; it’s there to absorb the shock when equities sell off. The international exposure isn’t there to beat the local market; it’s there to ensure that when the New Zealand economy struggles, you aren’t entirely captive to it.

The investors I’ve seen do well over decades are not the ones who called emerging markets right in 2025 or technology in 2020. They are the ones who held a sensible mix, rebalanced when they had to, and resisted the urge to chase. Their portfolios looked, frankly, a little boring. That was precisely the point. Their wealth compounded quietly while flashier portfolios round-tripped through booms and busts. Separately, research by Brinson and colleagues found that asset-allocation policy explained most of the variation over time in the pension portfolios’ returns [12].

History repeats because human nature does. The temptation to swap a steady asset for something flashier is the same temptation that, in another context, has had armies betting on single decisive engagements rather than the patient grind. Discipline wins campaigns. Discipline builds wealth. The mechanisms are different; the underlying principle is the same.

What the flag reminds me of

There is a further lesson here, and it is harder to express. The soldiers who fought at El Alamein and through Tunisia were, in the main, ordinary people. They were not, for the most part, looking for glory. They were looking to do their job, survive, and come home to their families. The freedom and the global prosperity we enjoy today rests on what they did and on what those who did not come home gave up.

When I look at that flag, I’m reminded that the work of building something durable, whether a free society or a family’s financial future, is rarely glamorous. It is mostly about turning up, doing the right thing in front of you, and trusting the plan even when no single day feels decisive. Those who appreciate history understand that history repeats, and that lessons from one domain can illuminate another. The principles of disciplined risk management, broad diversification, and patience are not financial inventions. They are something far older.

This Saturday, as you read this, spare a thought for the soldier who carried that flag home, and for the thousands who didn’t. Then, if you’re reviewing your portfolio, ask yourself whether it’s built like a campaign or like a gamble. Built like the former, it will, in time, give you and your family what those soldiers fought for, a chance at a stable and prosperous future.

Lest we forget.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

References 

1.“A 5-Minute History of the Battle of El Alamein,” Imperial War Museums. https://www.iwm.org.uk/history/second-world-war/north-africa-campaign/history-of-battle-of-el-alamein

2. “The North African Campaign,” NZ History (Manatū Taonga, Ministry for Culture and Heritage). https://nzhistory.govt.nz/war/the-north-african-campaign

3. “The North African Campaign,” NZ History. https://nzhistory.govt.nz/war/the-north-african-campaign

4. “NZ Victoria Cross recipients,” NZ History. https://nzhistory.govt.nz/page/nz-victoria-cross-recipients

5. Whai Ngata, “Ngārimu, Te Moananui-a-Kiwa,” Dictionary of New Zealand Biography, Te Ara, The Encyclopedia of New Zealand. https://teara.govt.nz/en/biographies/5n9/ngarimu-te-moananui-a-kiwa

6. Saul David, Tunisgrad: Victory in Africa (William Collins, 2025).

7. Saul David, Tunisgrad: Victory in Africa (William Collins, 2025).

8. “Tunisia and victory,” NZ History. https://nzhistory.govt.nz/war/the-north-african-campaign/tunisia

9. “Richard Nugent O’Connor,” Encyclopædia Britannica. https://www.britannica.com/biography/Richard-Nugent-OConnor

10. Mercer, “2025 Table of Investment Returns.” https://www.mercerfinancialservices.co.nz/mercer-magazine/investments/2025-table-of-investment-returns.html

11. S&P Dow Jones Indices, “U.S. Persistence Scorecard, Year-End 2025.” Copy hosted by Aries Advisors. https://www.ariesadvisors.com/files/persistence-scorecard-year-end-2025.pdf

12. Brinson, Hood & Beebower, “Determinants of Portfolio Performance,” Financial Analysts Journal, 1986; Brinson, Singer & Beebower, “Determinants of Portfolio Performance II: An Update,” Financial Analysts Journal, 1991.

Until the Pips Squeak

Article #479

Squeezing the lemon

During the December 1918 election campaign, Sir Eric Geddes promised to squeeze Germany until you could hear the pips squeak [1]. Germany never paid anything like the bill. Squeezing is easy to promise. The juice is another matter.

More than half a century later Denis Healey borrowed the image. In Lincoln in February 1974, as Labour's shadow chancellor, he promised to squeeze property speculators until the pips squeaked. The press turned that into squeezing the rich, and the line has stood for the rich in general ever since [2].

Labour had committed itself to a wealth tax. Healey spent five years as Chancellor trying to design one. Looking back in 1989, he admitted he could not draft one that would raise enough revenue to be worth the administrative cost and the political hassle [3].

In the meantime Britain ran out of money. On 28 September 1976 Healey was at Heathrow, bound for the IMF annual meetings, when sterling slid. He turned back to the Treasury and announced that Britain would seek a record $3.9 billion loan. The Letter of Intent, signed on 15 December, committed the government to deep cuts in public spending [4][5].

The squeezer had become the squeezed. Within three years of promising to squeeze the speculators, the Chancellor was negotiating terms with Britain's creditors. It is worth remembering as New Zealand heads to the polls on 7 November.

What is on the table

The Green Party proposes a 2.5% annual tax on net assets above $10 million, covering property, shares and bonds, with the family home exempt. Alongside it sits a 33% capital acquisitions tax on inheritances and gifts worth more than $1 million, paid by the person receiving, with family homes and family farms exempt [6].

The revenue would fund a $10,000 tax-free threshold and a 45% top rate above $160,000, which the Greens say would cut tax for 96% of New Zealanders [6].

They are not alone. Te Pāti Māori want a targeted wealth tax on the wealthiest 3%, at 1.5% on net assets above $2 million, 2% above $5 million and 2.5% above $10 million [7]. Opportunity proposes an annual land tax of 1.75% on urban land and 0.5% on rural land [8]. Same instinct, different coat. Across the left, the reach is for a levy on what you hold rather than what you receive.

And here is the irony. Opportunity is the kingmaker in the latest 1News Verian poll, on 8%, so its plan is not idle talk [9]. Yet Gareth Morgan, who founded the party now called Opportunity, argued on 10 October that “Wealth taxes kill entrepreneurship” and called the tax plans of Labour, the Greens and now Opportunity regressive for New Zealand [10]. The man who once campaigned to rid the country of cats now seems keen to see off his own creation.

Who could deliver it

Before anyone panics, a reality check. National, ACT and NZ First oppose wealth, inheritance and comprehensive capital gains taxes [11]. Labour has ruled out a wealth or inheritance tax. Its own centrepiece is a 28% tax on gains from the sale of investment and commercial property, excluding the family home, applying only to gains made after 1 July 2027 [12].

Under MMP, the Green package could only arrive as the price of a coalition, and then only in whatever form the negotiation produces. Election night tells you the direction. The coalition talks tell you the substance.

A valuation is not cash

There is a hard truth under all of this. A wealth tax is levied on a valuation. It is paid in cash.

Take an owner with $20 million of net assets, most of it a business built over two generations. Under the Green rules the first $10 million is free. The second $10 million attracts 2.5%. That is $250,000 a year, every year, due whether the business had a record year or a bad one. The business does not pay it. The owner does, from income already taxed, from borrowing, or from selling a slice of the thing that employs people.

A lower threshold bites harder. Take a family company worth $14 million, with the family home left out. The Greens tax the $4 million above their line, which is $100,000 a year. On Te Pāti Māori's published tiers, treating each band as a marginal rate, the same company faces about $245,000 a year. Their published summary leaves open whether the family home counts towards the $2 million base.

Then someone has to value it. Listed shares are easy. So, mostly, are an orchard or a commercial building in Hastings, because a valuer can work from recent sales. A private trading company is not. Nor is a minority shareholding in a family business or a partnership interest. Every annual valuation is an argument with Inland Revenue waiting to happen.

As the old line goes, you may call a cat a fish, but it can’t swim. You may call a valuation wealth, but it can’t pay the bill.

The Greens’ own costings assume 28.5% of the super-rich tax is never collected, lost to avoidance and minimisation, on advice from the Parliamentary Library informed by Treasury [13]. When the people designing a tax concede that more than a quarter leaks away before it starts, the rest of the brochure is a wish.

The proposed inheritance tax has the same flaw in a different coat. Because the person receiving pays, a son or daughter who inherits a $3 million share of a family business could face a bill in the hundreds of thousands of dollars. The asset does not come with that cash attached.

The scoreboard

The OECD found 12 member countries had a net wealth tax in 1990 and only four by 2017. Repeals were usually justified on efficiency and administrative grounds, and the taxes often failed to meet their redistributive goals [14].

Norway is the case study everyone reaches for. In 2022 a rise took its top combined rate to 1.1%. That year more than 30 billionaires and multimillionaires left, according to Dagens Næringsliv [15]. Capital has legs. Its owners have passports.

The Netherlands has just learned the same lesson the quick way. In February the lower house passed a law taxing the annual rise in value of shares, bonds and crypto at 36%, whether or not anything was sold. A petition gathered more than 61,000 signatures and coalition senators preferred a tax on sale. The cabinet has now proposed taxing shares and bonds only when they are sold, from 1 January 2028 [16]. Tax the cash, not the valuation.

Source: Regen-Fin

The grain of truth

The counter-case deserves a fair hearing.

New Zealand has no general capital gains tax and no inheritance tax [11]. A salary earner pays tax on every dollar from the first. A long-term property or share investor can see large gains taxed lightly or not at all. That is a genuine gap, and these parties are at least trying to fill it with a number rather than a slogan. The OECD itself accepts that where capital is lightly taxed, or inheritances are not taxed, a net wealth tax may play a substitution role [14].

The administration case is not all one way either. Research in Fiscal Studies puts the central cost of running a well-designed UK wealth tax at about 0.1% of taxable wealth for taxpayers and 0.05% for the tax authority [3]. That counts the cost of collecting the tax, not the cost to the owner of finding the cash.

But a wealth tax is the hardest tool for that job. A capital gains tax is levied when cash changes hands. Even Labour's narrower version bites only on sale. A wealth tax is levied when it does not. It taxes the paper, year after year, and leaves the owner to find the money.

Whose interest is being served

For families, the practical question is not who you vote for. It is whether your structure works under more than one government.

Who holds what. How it would be valued, and by whom. Where the cash would come from in a lean year. Whether the succession plan still works if a 33% tax falls on the next generation. Whether a trust settled decades ago still serves the people it was meant to.

Do not restructure in a panic for a policy that may never pass. But do know your position, your structures and your succession plan before election night hands the file to a coalition room. Those are planning questions, and they are better answered calmly before a policy lands than in a rush after it.

Healey learned the lesson over five years. The pips squeaked, but it was the Treasury that ran out of juice. Grow the pie first, then argue about the slice.

Position for your goals, not for a caucus vote. When the noise gets loud, seek advice and wise counsel.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

References 

1. Langworth, R. (2014). Squeeze Germany until the pips squeak. Churchill Project, richardlangworth.com. On Sir Eric Geddes, First Lord of the Admiralty, and the 1918 election. The Cambridge speech of December 1918 is recorded at phrases.org.uk.

2. Healey, D. Speech at Lincoln, 18 February 1974, reported in The Times, 19 February 1974 (as quoted in Wikiquote: Denis Healey). Often misreported as “tax the rich until the pips squeak”. See also LabourList (October 2015), 10 of the best Denis Healey quotes.

3. Burgherr, D. (2021). The costs of administering a wealth tax. Fiscal Studies, 42(3-4), 677-697 (quoting Denis Healey, 1989). https://doi.org/10.1111/1475-5890.12276

4. Pickford, S. (9 December 2016). Britain’s big bailout, December 15, 1976. The World Today, Chatham House.

5. OMFIF (28 September 2016). When Britain went bust. https://www.omfif.org/2016/09/when-britain-went-bust/

6. 1News (21 June 2026). Greens propose wealth, inheritance taxes to fund income tax changes. https://www.1news.co.nz/2026/06/21/greens-propose-wealth-and-inheritance-taxes-to-fund-income-tax-changes/

7. 1News (26 August 2026). Te Pāti Māori launches new tax policy, says most would pay less. https://www.1news.co.nz/2026/08/26/te-pati-maori-launches-new-tax-policy-says-most-would-pay-less/ and Deloitte New Zealand (September 2026). Election tax policies, part three.

8. Opportunity Party (May 2026). Tax Reset policy. https://cdn.opportunity.org.nz/documents/policy/Opportunity%20Policy%20-%20Tax%20Reset.pdf, and 1News (30 June 2026). Explainer: What are the Opportunity Party’s policies? https://www.1news.co.nz/2026/06/30/explainer-what-are-the-opportunity-partys-policies/

9. 1News (13 October 2026). Poll: Hipkins and Luxon now neck and neck, Opportunity on track for 10 MPs. https://www.1news.co.nz/2026/10/13/poll-hipkins-and-luxon-now-neck-and-neck-opportunity-on-track-for-10-mps/

10. Morgan, G. (10 October 2026). Opportunity’s tax plan joins Labour, Greens as regressive for NZ. Newsroom. https://newsroom.co.nz/2026/10/10/gareth-morgan-opportunitys-tax-plan-joins-labour-greens-as-regressive-for-nz/

11. KPMG New Zealand (August 2026). Election 2026 party tax policies tracker (updated to 6 August 2026), and Grant Thornton New Zealand (2026). Tax policy at the crossroads: growth, simplicity and redistribution in Election 2026.

12. Deloitte New Zealand (August 2026). Election tax policies, part two (Tax Alert), and interest.co.nz (June 2026). Labour finance spokesperson Barbara Edmonds says the only tax policy Labour will campaign on is its capital gains tax.

13. interest.co.nz (2026). Natalia Albert says finally the Green Party has mostly got its tax policy right (28.5% of the super-rich tax assumed uncollected, on Parliamentary Library advice informed by Treasury). https://www.interest.co.nz/public-policy/139129/natalia-albert-says-finally-green-party-has-mostly-got-its-tax-policy-right

14. OECD (2018). The Role and Design of Net Wealth Taxes in the OECD. OECD Tax Policy Studies No. 26. OECD Publishing, Paris.

15. IFC Review (April 2023). Europe’s super-rich abandoning Norway at record rate as wealth tax rises slightly (citing Dagens Næringsliv).

16. IMI Daily (16 September 2026). Netherlands retreats from 36% unrealized gains tax, will propose sale-based model instead; and DutchNews.nl (30 September 2026). The box 3 tax changes: what they are and what they mean for you.

Betting on the Wrong Team

Article #478

Buying in Christchurch because you can't afford Auckland sounds like a canny move. But renting where you live while your investment sits somewhere else carries a risk most people never properly account for.

The logic is seductive, and on the surface it looks almost elegant. You live in Auckland. You want to get into the property market. The Auckland median house price currently sits at $950,000 [1], a figure that has made entry feel like a cruel joke for first-time buyers for years. But Christchurch? Christchurch you can manage. The average Christchurch property value is $804,850 as of August 2026 [2] — a meaningful gap. So you buy there, tenant it out to cover the mortgage, and rent yourself in Auckland. Rentvesting, they call it, and the strategy has a growing number of advocates.

The trouble is, a surprising number of people who adopt it are making a subtler mistake than they realise. They think they are hedging their exposure to the property market. They are not. They are placing two separate bets, and one of them is quietly working against them.

Source: Opes Partners

Source: Opes Partners

The wrong side of the TAB

With the Bledisloe Cup kicking off at Eden Park this weekend, the TAB odds tell an interesting story: All Blacks at $1.22, the Wallabies at $4.00 [3]. The ABs are overwhelming favourites and almost unbackable; you'd need to stake nearly five dollars just to make one. So you eye the Wallabies instead. Both tier one nations. Same corner of the world, same game, broadly similar talent. The Wallabies have been improving. At $4.00, they start to look tempting. The potential payoff is larger, the narrative is compelling, and it feels like genuine value, a smart contrarian bet on a credible alternative.

But rugby doesn't do partial results. One team wins, one team loses. There is no credit for geographic proximity, no points for picking the right hemisphere. If the All Blacks win and you backed the Wallabies, you have not hedged anything. You have simply lost.

Property works the same way. As an Auckland renter, rising prices hurt you directly: every time the market runs, the gap between what you can afford and what you need widens. Your Christchurch investment is not tracking that exposure. It runs on its own fundamentals: a different local economy, different employer base, different migration pressures, and the long-unfolding story of the post-earthquake rebuild.

Source: Opes Partners

Source: Opes Partners

Click to learn more about NZ property market

The correlation problem

In investment terms, a hedge only works if the two positions are genuinely correlated. Auckland and Christchurch property are not that. Median Auckland values are down 26.9% from their peak, while Christchurch is down 1.32% and has been edging upward [1,2]. The two markets are moving on different timetables, driven by different forces. The correlation between them is low enough that owning one does not reliably protect you against the other; both can work against you simultaneously.

Over the past two decades, Auckland has experienced extraordinary price appreciation driven by supply constraints, population growth, and land scarcity that simply do not apply in Christchurch. The Canterbury rebuild added significant housing stock to the city. The dynamics are different. The risk profile is different. Buying one as a proxy for the other is, at best, a partial solution and, at worst, a false sense of security.

The real cost of remote landlording

Being a landlord costs more than being an owner-occupier. Significantly more. And doing it from another city costs more still. Property management fees typically run at eight to ten percent of rental income before letting fees, which can add another week or two of rent each time a tenant turns over [4]. A leaking tap in your own home costs you an hour. The same tap in a Christchurch rental managed from Auckland costs a callout fee, a plumber's rate, and a property manager's coordination time.

Add landlord insurance, rates, body corporate levies if applicable, and the compliance obligations under the Healthy Homes Standards [5]. Meeting insulation, heating, and ventilation requirements in older rental stock can run to several thousand dollars. These are not optional, and they are not cheap.

Then there is the tax asymmetry that catches many people off guard. Net rental income is taxable at your marginal rate [6]. The rent you pay in Auckland is not deductible in any form; it comes straight out of after-tax dollars. The average weekly rent is $650 in Auckland and $550 in Christchurch [1,2]. The real comparison is not $550 received versus $650 paid. It is $550 received, less expenses and tax, versus $650 paid from net income with no relief whatsoever. That gap is wider than most spreadsheets suggest.

Vacancy is the silent killer. Every week the property sits empty, the mortgage runs without the rent. From Auckland you cannot simply drive past, tidy the garden, and get it listed. You wait. Your property manager moves at their pace, not yours.

The risk nobody puts in the plan

The most underappreciated risk is personal circumstance, and the risk nobody likes to plan for. Life changes. Relationships shift. Jobs move. Children arrive and schooling zones start to matter. When the day comes that you need to own the roof over your head, you will be selling a Christchurch asset into whatever market conditions exist at that moment, then trying to buy into an Auckland market that has been doing its own thing for years. The timing is entirely outside your control.

None of this means rentvesting is a bad idea. For some people, in some situations, it remains a perfectly sensible first step onto the ladder; better to build equity somewhere than nowhere. But it should be entered as what it actually is: an investment position with real, specific, and knowable risks. Not a clever workaround that sidesteps the hard questions.

The property market does not reward good intentions. It rewards good planning. And good planning starts with being honest about which team you are actually backing, and whether the odds genuinely make sense for the result you need.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

References 

1. Opes Partners, Auckland Property Market (2026): Average House Prices, 16 September 2026. https://www.opespartners.co.nz/property-markets/auckland

2. Opes Partners, Christchurch Property Market (2026): Average House Prices, 22 September 2026. https://www.opespartners.co.nz/property-markets/canterbury/christchurch

3. TAB New Zealand, Bledisloe Cup match odds.

4. RentManager, How Much Do Property Managers Charge in NZ? (2026 Fee Breakdown), updated 14 August 2026. https://rentmanager.nz/blog/how-much-do-property-managers-charge-nz

5. Tenancy Services, Healthy homes compliance. https://www.tenancy.govt.nz/healthy-homes/healthy-homes-compliance/

6. Inland Revenue, Pay tax on your rental income, updated 1 April 2026. https://www.ird.govt.nz/property/renting-out-residential-property/residential-rental-income-and-paying-tax-on-it/pay-tax-on-your-rental-income

Into the Tenth Year: the Froth, the Fear and What I Got Wrong

Article #475

This week Canny View rolls into its tenth year under that masthead. I had been writing and being interviewed for a good while before the name went up in print, but the masthead has its own anniversary, and this is it. Ten years is also the period our industry uses to judge anything worth judging, so rather than mark the occasion with sentiment, let us mark it by looking at the decade just gone.

Rewind to 2016. John Key was Prime Minister and would resign within three months. The Official Cash Rate had just been cut to 2 percent, a record low at the time. Bitcoin was about US$600. KiwiSaver held roughly $35 billion. New Zealand, after a remarkable run, had been one of the best performing developed sharemarkets in the world over the preceding decade.

AI was a research topic, not an investment theme, and rockets were the business of governments. Had you suggested the most talked about launch company of the coming decade would be firing satellites into orbit from a paddock at Mahia, you would have been humoured and offered another drink.

The settled view then was that returns would be thin for years. It was wrong, as it usually is. The scoreboard since then is a useful reminder of how poorly certainty ages.

The scoreboard

Including dividends, a dollar invested in United States shares in September 2016 is worth roughly four times what it was. Morningstar puts the return of US equity funds at 13.3 percent a year over the decade to December 2025, the most profitable ten years in the category's history.

View fullsize

Source: Trading View

The NZX 50 almost doubled, reaching 13,757 at last close*. Respectable. But the market that led the developed world to 2016 spent the ten years after it well behind.

Then there is Rocket Lab. Launching from Mahia, listed on the Nasdaq, and worth around NZ$80 billion. One company, built here and launching from here, is worth two fifths of every company on our own sharemarket combined, while sitting outside it.

Leadership rotates without warning and never announces the handover. That is the whole argument for owning the world rather than the paddock you happen to live in.

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Source: Stuff

What we lived through to get there

Four times your money looks serene on a chart, yet it was not serene to live through: the late 2018 slide, the 2020 crash that took a third off global markets in thirty-three days, the 2022 bear market when shares and bonds fell together, and this year’s crypto unwind and Middle East tension. Each one was a headline. Not one was a reason to dismantle a properly built portfolio.

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Source: CRSP Market Deciles 1-10 Cap-Based Portfolio (total returns in USD). All US exchanges rebalanced quarterly.
Data provided by the Center for Research in Security Prices (CRSP), University of Chicago.

Edmund Burke wrote in 1790 that because half a dozen grasshoppers make the field ring with their importunate chink, while thousands of great cattle chew the cud in silence, we should not imagine that those who make the noise are the only inhabitants of the field.

Two hundred and thirty six years on, the grasshoppers have a podcast and a following. The cattle still say nothing.

The habit gap

Here is the finding that should stop every investor cold. Morningstar examined 23,000 American funds over the same ten years. The funds returned 9.9 percent a year; the average dollar invested in them earned 8.7 percent. That gap is not fees and not fund performance. It is timing: buying after the good news and selling after the bad. Across the decade, it cost investors about US$3.8 trillion.

The encouraging half is that the gap shrank wherever temptation was hardest to indulge. Investors in broadly diversified all-in-one funds captured almost all of their return; those in index funds gave up 0.1 of a percentage point. That is not evidence that advisers rescue people mid-panic. It is evidence that the gap was smallest where the structure had already removed the decision: broad diversification, rebalancing on a date rather than a feeling, and contributions that arrive whether or not you fancy investing.

Architecture, not heroics. Less doing, more owning.

Bitcoin, meme coins and the black dog

Bitcoin has been the decade's most spectacular chart, from about US$600 to a peak of US$126,209 in October 2025, and its clearest lesson in the gap between an asset's return and an investor's return. Crypto ETFs listed since January 2024 returned 8.5 percent a year to 30 June 2026, yet the average dollar in them lost 5.8 percent a year, a gap of more than fourteen points. Money arrived after Bitcoin had climbed and left after it had fallen. Beneath it sits the meme coin, priced on nothing but the hope that the next person is willing to pay more.

Chasing it has been like chasing a black dog in the night: money pouring after something you cannot quite see, arriving after the climb and leaving after the fall. Calling something digital gold does not make it gold.

Where I got it wrong, and where the design spared me

Very few of our macro calls have gone badly wrong across the decade, and that is not luck dressed as skill. Do not mistake us for a passive firm. We work very hard, but the work goes into engineering, not forecasting. The plan is engineered on evidence, tested and rebuilt, and everything flows from it.

Nor are the portfolios index trackers. They lean deliberately on the dimensions the research has borne out over decades: company size, relative price, and profitability, the work of Fama and French and what followed it. That is a design decision, made on evidence and held, rather than a view on next quarter. We are active in the design and the planning, not in the stock picking or the market timing. My job is to engineer, not to predict.

The errors that cost were process errors. Choosing who you build your business with is pivotal, and I have twice chosen badly: one supplier over-promised, one developer under-delivered. Neither cost much money, but both cost time, and time compounds into the money you never got around to making. The lesson is the old one: it is either up to standard or down to price.

Then two judgement calls, neither about markets.

I hoped our love affair with residential property would cool. It has not, despite the asset delivering one of its more sobering decades. The average New Zealand house is down 15 to 17 percent from its 2021 peak in dollar terms and 28 to 31 percent adjusted for inflation, twice as deep as the post-global financial crisis trough of 16 percent. Here is the part that stopped me: in real terms, Cotality has the average house worth about what it was in mid-2016. A full decade, and in purchasing power the family home has gone precisely nowhere. And still we treat one leveraged, undiversified, illiquid asset in one small corner of the world as a retirement plan.

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Source: CoreLogic

The House Price Index (HPI) measures the movement in house prices throughout New Zealand, providing an indicator of capital growth. The data is compiled and published by CoreLogic. Data from 1990 is available in the key graph data file.

The second was not a market call at all. I assumed my father would age gracefully. He died at 76. Every retirement plan I build carries a longevity assumption, and I had quietly applied a generous one to my own family without examining it. I see the same blind spot in households: people can often recite every detail of the money: salaries, perks, KiwiSaver contributions, cover held through work, yet cannot say when they last had a check-up, or what their cholesterol, PSA, or calcium heart score might be. We measure what is easy to measure and quietly assume the rest will hold, but the plan assumes years you may not be given, so spend some of them while you can.

Beyond those, I have been fortunate to take counsel from some beautiful minds with big hearts, which is rather the point of this column.

What has not changed

A client without a documented plan is a client without a map: the journey is perhaps exciting, but the destination is unknown and chosen by no one. When the values are known, the decisions are easy. Clients who could tell me what the money was for held their nerve in March 2020; those who could only tell me what it was worth generally did not. We are in the goal achievement business, not the market beating business, and beating the market while missing your goals is a poor trade.

A fiduciary's job is not to keep you comfortable. It is to speak the unspoken truth and sit opposite you when the noise is loudest. Some of the most valuable advice of the past decade fitted into two words: do nothing.

Evidence favours patience. Like a freshly poured beer, you do not drink it while it is all head. Let the froth settle. The investors who did best over the decade were rarely the cleverest in the room. They were the ones who repeatedly did the dull thing when it felt wrong.

Whatever you have built so far is the smaller half of the story. What matters is what is still in front of you, and whether it is engineered rather than merely hoped for.

* NZX 50 as at close on  Thursday, September 17 2026 = 13,756.59

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

Cheap Money has a Maturity Date

Article #474

In January 1672, Charles II stopped paying his creditors. 

The Stop of the Exchequer was announced as a temporary suspension. A delay, not a default. The distinction mattered a great deal to the Crown and not at all to the people who were owed the money. A borrower who cannot pay on the day they promised has defaulted, whatever the announcement calls it. 

The goldsmith bankers of Lombard Street, who had lent the Crown the money, were ruined. English government credit took a generation to recover. What eventually replaced it was something better than a king's promise: a funded national debt, the Bank of England in 1694, and a Parliament standing behind the borrowing rather than a monarch who could walk away from it. 

Over the century that followed, Britain outlasted Louis XIV and then Napoleon, both of whom governed larger and wealthier countries. Britain did not win because it was richer. It won because it could borrow more cheaply, for longer, and go on borrowing when its rivals could not. Creditworthiness turned out to be a weapon. 

The price of borrowing is not set by announcement. It is set at auction, by whoever turns up with capital and a choice about where to put it. Central banks can turn up too, and for a decade they did. But the auction reasserts itself the moment the official bid is withdrawn.

The OCR is not the whole story 

On 2 September the Reserve Bank lifted the Official Cash Rate to 2.75%, with annual inflation at 4.1% in the June quarter, driven largely by fuel prices flowing from the Middle East conflict [1]. 

The OCR sets the short end. It does not set the rate on a five-year term deposit, a two-year fixed mortgage, or a ten-year bond. Those price off wholesale rates, and wholesale rates are set in a global auction New Zealand does not run and cannot influence. 

A great many borrowers are turning up to that auction at once. 

Germany is funding a substantial military expansion by borrowing, with no corresponding retreat from its welfare state. Britain plans to expand its own. The bill for both goes to the same auction. The pattern repeats across the West, while the technology companies raise enormous sums to build artificial intelligence data centres. 

Nor is this only a Western habit, and China is the clearest case of a number that is not what it is announced to be. Beijing's headline deficit for 2026 is 4% of GDP. Once the CNY 4.4 trillion of local government special purpose bonds and the CNY 1.3 trillion of ultra-long special treasury bonds sitting outside that headline are counted, the consolidated deficit reaches a record 9.1% of GDP [2]. National debt is set to rise by close to CNY 14 trillion this year alone. 

The rate matters more than the level. Mark Williams, chief Asia economist at Capital Economics, calculates that China's total debt outside the financial sector has doubled as a share of GDP since 2010 and now tops 300%, putting its indebtedness, in his words, in a league of its own. The comparison most readers expect runs the other way. Broad American debt, public and private, has fallen as a share of GDP since 2010, to around 265% [3]. Nearly 40% of China's is owed by the public sector, local government financing vehicles included [3]. 

The numbers are not small. OECD central governments issued USD 17 trillion of bonds in 2025 and are projected to issue USD 18 trillion this year. Corporates added USD 6.8 trillion. All of it lands in a market where central banks, having spent a decade as the buyer of last resort, have stopped buying [4]. Local government sits in the same queue, one step removed, borrowing through agencies that price off the sovereign. 

Source: Global Debt Report 2026 | Click to view the full report

More bonds offered, not proportionately more buyers at the same price, so the yield must rise to attract the capital. German ten-year yields are at their highest since 2011, Japanese yields have crossed 3%, and British gilts are at their highest since the financial crisis [5]. 

The honest counter-argument 

It would be tidy to say that governments and technology companies are crowding everybody else out, and leave it there. It would also be a little too tidy. 

Corporate borrowing did reach a record in 2025, USD 13.7 trillion raised across bond and syndicated loan markets, passing the 2021 peak. Nine large technology companies accounted for USD 122 billion of it, around 45% of all bond issuance by technology firms worldwide and more than three times the annual average since 2000. Yet the OECD's own assessment is that this came to no more than 15% of investment grade issuance by non-financial firms in the United States, and was absorbed without market-wide friction [6]. Capital markets are deep, and the pool is not fixed in the way the word crowding suggests. 

There is also a competing explanation for the move in yields that has nothing to do with supply at all. The oil price shock has reignited inflation expectations, and investors demanding more compensation for inflation will lift yields whether or not another bond is ever issued. 

Both explanations are probably doing some of the work. That is usually how markets behave, and anyone offering a single clean cause is selling something. What is not in dispute is the direction of travel, or that a borrower refinancing in 2029 will pay whatever the market asks in 2029, regardless of which explanation was correct. 

There is a second detail in the OECD data worth sitting with. Issuers have been shortening their maturities. In 2025 the ratio of bonds issued at thirty years and beyond, compared with those issued at one to five years, was the lowest since at least 2008 [4]. Short borrowing is cheaper today. It also means the debt comes back around sooner, and more often. That is a decision to pay less now, in exchange for finding out later. 

Cheap money has a maturity date 

A higher yield is not felt today. It is felt at maturity. 

Nearly 80% of what OECD governments borrow this year is not new spending at all. It is refinancing debt that already exists [4]. Borrowers who locked in cheap fixed rates a few years ago keep them right up to the day the debt rolls off and must be refinanced at whatever the auction is charging then. It will bite hardest where the debt is largest and the maturities shortest. Heavily indebted institutions are not repriced gradually. They are repriced in instalments, on a timetable set years ago by people who are frequently no longer there. 

Source: Global Debt Report 2026 | Click to view the full report

New Zealand is not exempt. In March, Fitch revised New Zealand's outlook to negative while affirming the AA+ rating, forecasting general government debt at 56% of GDP by June 2027 and citing delayed fiscal consolidation [7]. Six days later the Local Government Funding Agency received the same revision, automatically, because as a government-related entity its rating is equalised with the Crown's [8]. LGFA provides most council borrowing in this country, Hastings included. 

Everyone drinks from the same pond.

Sovereigns, councils, banks, businesses, then the household. Different straws at different depths, the same water. Nobody in Taihape voted on the German defence budget. It is in the swap rate all the same, and the swap rate is in the mortgage at renewal. 

Milton Friedman's advice was to keep your eye on one thing only, how much government is spending, because that is the true tax. Thatcher put it less gently, that we have been ruled by men who live by the illusion that you can spend money you have not earned without eventually falling into the hands of your creditors. Whatever one makes of the politics, the arithmetic has not been repealed. The auction is where the bill arrives, and it arrives with interest. 

What this means for the investor 

For anyone with savings, this cuts both ways. 

After a decade of being told the coupon was a rounding error, it is worth having again. Income that had effectively disappeared from conservative portfolios has come back, and for retirees drawing on capital that is a meaningful improvement rather than a technical one. 

But a yield is not a gift. It is compensation, and the whole question is compensation for what. Credit quality, term, currency, and who stands behind the issuer. A bond paying more than the one beside it is priced that way for a reason, and the reason is rarely generosity. When someone offers a return well above the market for what they describe as much the same risk, one of those two claims is wrong, and it is not usually the return. 

Nor is the answer to reach for duration simply because longer bonds pay more today. Term is a risk, not a free lunch, and the investor who buys a long maturity to capture an extra sliver of yield has taken a view on the next decade of inflation whether they meant to or not. 

Bonds belong in a well-engineered portfolio. Not every bond belongs in yours. All bonds are equal, as Orwell might have put it, but some are more equal than others. 

Charles II discovered that credit, once lost, is not bought back. It is earned back, slowly, and usually by someone else's generation. The investor who reaches for yield without asking what it is paying for learns a smaller version of the same lesson. That question is easier to answer when the person answering it is bound by duty to put your interests before their own.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

References 

1. Reserve Bank of New Zealand (2 September 2026). OCR increased by 25 basis points to 2.75%. https://www.rbnz.govt.nz/news-and-events/news/2026/09/ocr-increased-by-25-basis-points-to-2-75 

2. China Power Project, Center for Strategic and International Studies (2026). Making Sense of China's Government Budget. https://chinapower.csis.org/making-sense-of-chinas-government-budget/ 

3. Fortune (11 May 2026). Forget US debt, China's total borrowing is in a league of its own. https://fortune.com/2026/05/11/us-debt-china-total-borrowing-public-private-gdp-ratio-lgfv/ 

4. OECD (2026). Global Debt Report 2026: The investor base for government and corporate bond markets. https://www.oecd.org/en/publications/global-debt-report-2026_e9d80efd-en/full-report/the-investor-base-for-government-and-corporate-bond-markets_e68b90b3.html 

5. CNBC (3 September 2026). Global bond yields rising: Treasuries, JGB, Bunds. https://www.cnbc.com/2026/09/03/global-bond-yields-rising-treasuries-jgb-bunds.html 

6. OECD (2026). Global Debt Report 2026: Corporate debt market outlook in a transforming world. https://www.oecd.org/en/publications/global-debt-report-2026_e9d80efd-en/full-report/corporate-debt-market-outlook-in-a-transforming-world_cf86a220.html 

7. Fitch Ratings (20 March 2026). Fitch revises outlook on New Zealand to negative; affirms at AA+. https://www.fitchratings.com/research/sovereigns/fitch-revises-outlook-on-new-zealand-to-negative-affirms-at-aa-20-03-2026 

8. New Zealand Local Government Funding Agency (26 March 2026). Credit Rating Outlook Revised to Negative by Fitch Ratings. NZX announcement. https://announcements.nzx.com/announcement/469979 

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When the Ram Touches the Wall

Article #473

Picture the young family who’ve saved for years. They pay the builder their deposit, the framing goes up, and then the phone stops being answered. The company’s in liquidation. The director walks away, the guarantee dies with the business, and they’re left with a half-built home and almost no recourse. 

That collapse has a second victim you don’t see – the honest builder down the road who quoted the job properly, priced in his tax, and lost the work to a rival who never intended to pay his way. 

The idea of walking away from your debts is as old as commerce itself. The Romans had a grim phrase, murum aries attigit – the ram has touched the wall. A battering ram was tipped with a heavy bronze or iron ram’s head, and once that head struck the city wall, the defenders could expect no mercy under the customs of war – the siege was over, and quarter was no longer owed. The image was one of a point of no return. Yet modern commerce has inverted that ancient severity. The ram touches the wall, the debts fall due, and the aggressor strolls off to trade next week under a fresh name, the old company left as rubble for the creditors to pick over. 

The numbers tell the story. Over 3,000 companies have gone into liquidation in the past year, leaving company failures at levels not seen for more than a decade. Construction still accounts for the largest share, with 764 liquidations; hospitality remains under pressure too, with 422 failures, up 42%. Inland Revenue is now the applicant behind roughly 70% of winding-up applications, as the leniency of the Covid years gives way to a long overdue reckoning. 

Source: Waterstone Insolvency

Here is the moral hazard. During Covid, the Labour government asked Inland Revenue to go easy, and at the time that was fair and humane. Businesses were shuttered by decree, cash flow evaporated overnight, and a temporary forbearance kept many good firms alive. But leniency without an end date breeds zombie firms – businesses trading on, not paying their GST or their PAYE, quietly undercutting the honest operator who cannot possibly compete with someone who simply isn’t paying their way. Audits went uncompleted for years, enforcement was paused, and the tax owed built quietly in the background like water behind a dam. 

And who ultimately foots that bill? You do. Every dollar of GST and PAYE that a ghost firm never pays is a dollar the honest taxpayer must cover, whether through higher taxes tomorrow or services forgone today. GST, remember, is money the firm has already collected from its customers on the Crown’s behalf; PAYE is money already deducted from its workers’ wages. When a ghost firm fails to hand it over, it has not merely gone broke, it has spent money that was never its own. The zombie firm does not just wound its competitor, it quietly picks the pocket of every citizen who does pay their way. 

The distortion runs deeper than a single lost contract. When a firm can undercut the market by the margin of its unpaid tax, it sets a false price for everyone. Honest competitors are forced to choose between matching an impossible number or losing the work. Some cut corners to survive; some cut their own obligations; a few simply give up. In this way the rot spreads outward from one bad actor, and the market slowly learns that paying your way is a competitive disadvantage. That is precisely the lesson a healthy economy cannot afford to teach. 

I noted one in the list of failed firms that had gone to the wall, having proudly offered a lifetime guarantee on its workmanship. It sounds reassuring, and no doubt it won the firm plenty of work. But a lifetime guarantee is only as good as the lifetime of the company. When the business is gone, so is the promise, and the customer is left holding a worthless piece of paper, or a whispered word gone with the wind. 

Click to browse the New Zealand Gazette for appointments and release of liquidators

The remedy is not cynicism, but vigilance. So the burden falls back on you, the customer, to do your due diligence. It is not the headline price that counts; it is the fine print. As a mentor of mine puts it, pay attention to the fine print: it is far more important than the selling price. So ask the questions. Is your builder a Registered Master Builder? Does the firm carry serious credit accreditation and a clean Centrix credit history? Are they carrying forms of debt they cannot service? These are not rude questions, they are prudent ones, and the reputable operator will welcome them. 

Damien Grant, the principal of insolvency firm Waterstone, sees the same pattern from inside the system. “One of the challenges of doing business in New Zealand is that it is too easy for firms not to pay their PAYE or GST, and they can do so for years before the IRD moves to liquidate them,” he says. “Many of these zombie firms continue on well beyond the point at which they should have ceased trading.” 

The result, he argues, is twofold: honest firms are forced to compete against businesses carrying an unfair tax advantage, and when those businesses finally fail, the unpaid bills and wider economic damage are larger than they needed to be. 

And we close here. When you’re handing over your deposit, or your life savings, the cheapest quote can prove the most expensive decision you ever make. This is where a fiduciary matters – someone whose duty is to tell you the unspoken truth, not to sell you comfort. Do the homework before you sign, because when the ram touches your wall, it is already too late. 

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

References

1. RNZ, “Last call: 3000 hospitality businesses gone in a year as business feels the crunch”, 1 September 2026. Centrix reported 3,092 company liquidations in the past 12 months, up 14 percent year-on-year, with construction recording 764 liquidations and hospitality recording 422 liquidations, up 42 percent. 

2. McDonald Vague / LawNews, “Dealing with the spike in IRD-induced business liquidations”, 26 June 2025. McDonald Vague reported that Inland Revenue accounted for seven out of every ten liquidation applications in the referenced period. 

3. interest.co.nz, “Liquidations are rising, but the real problem isn’t Inland Revenue enforcement”, 18 April 2026. The article reported 365 winding-up applications in the first quarter of 2026, the highest first quarter in a decade, and noted Inland Revenue’s significant role in March 2026 applications. 

4. Newsroom, “Inland Revenue audit surge is tapping deep, deep well of unpaid tax”, 4 June 2026. Newsroom reported that Inland Revenue’s boosted compliance activity followed a period of Covid-era leniency and that compliance returns remained strong, suggesting persistent tax gaps. 

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The Trains Ran but the Dividends Did Not

Article #472

In August 1845 the index of British railway shares stood at 1,984. By April 1850 it was 673. [1]

What makes the Railway Mania worth remembering is not that it was a swindle, largely it was not. The technology was real, and what the money built is still there.

Parliament authorised thousands of miles of new line and the network more than tripled by 1850. At the peak, railway construction ran close to seven percent of national income, roughly half of all capital formation in the country. About a third of the authorised lines were never built. The rest ran for a century and a half. [2]

The story was right. The shareholders were still ruined. Clergymen, widows, country solicitors, Charlotte Bronte. People not greedy so much as correct about the future and wrong about the price. Something similar has just finished happening in China.

What China was promised, and what it delivered

Ten years ago, the story almost wrote itself. China would overtake the United States, and its currency would take a seat among the world’s reserve currencies. On 1 October 2016, the renminbi was fast tracked into the IMF’s Special Drawing Rights basket. [3]

The growth half largely came true. China’s economy grew from roughly USD 11 trillion in 2015 to USD 19.63 trillion in 2025, and is expected to cross USD 20 trillion this year. [4] Seventy percent in a decade, off an already enormous base.

The other half did not. It did not overtake the United States, which reached USD 30.77 trillion in 2025, and the IMF has quietly cut its own 2030 projection for China from USD 27.5 trillion to USD 23.1 trillion. [4] [12] Still, anyone who bought the growth story in 2015 was not badly wrong about growth. The mistake was assuming that national growth would translate cleanly into shareholder return.

Source: Statista | Largest economies worldwide 2026

What the shareholders got

For the period to 31 July 2026, the MSCI China Index returned minus 2.13% a year over five years and 4.88% a year over ten. These are net returns, after the withholding tax a foreign investor actually pays. Compounded, the five-year result is a cumulative loss of about 10.2%. [5]

Over the same periods, the MSCI All Country World Index returned 10.85% and 12.32% a year, while emerging markets returned 8.03% and 9.19%. [5] Put simply, a dollar in the world index grew to about USD 1.67. A dollar in China became about USD 0.90.

China did not merely lag the Americans, which is the comparison everyone reaches for. It lagged the emerging world it was supposed to be leading.

Nor is the ten-year figure as flattering as it looks. It was rescued by two strong years at the end.

Explore the full MSCI China Index Factsheet HERE

The middle of the period is where the damage was done. The index fell 21.72% in 2021, 21.93% in 2022 and 11.20% in 2023. [5] Together, those three losing years compounded to a cumulative loss of nearly 46%. A dollar invested at the start of 2021 was worth about USD 0.54 by the end of 2023.

The recoveries of 2024 and 2025, at 19.42% and 31.17%, look handsome in isolation. They are the arithmetic of climbing out of a hole. A 46% fall needs an 85% gain simply to get back to even.

Note what the ride cost. Over those five years, the index carried an annualised standard deviation of 27.89%, against 15.07% for the world index, and a Sharpe ratio of minus 0.08 against 0.53. [5] In plain English, China delivered nearly double the volatility and still a negative return. Investors were not paid for the risk. They paid for it.

An investor who bought at the loudest point fared worse still. The Shanghai Composite peaked at 5,166 on 12 June 2015 and, eleven years on, has not been back. [9]

The currency that never arrived

The reserve-currency promise is the cleaner failure, because it was measurable from the start. In the first quarter of 2026, the renminbi accounted for 1.99% of global foreign exchange reserves, down from 2.18% at the end of 2024 after dipping to 1.92% in the third quarter of 2025. The US dollar sat at 57.13%, and the euro at 20.03%. [6]

The IMF attributes most of the latest uptick to exchange-rate valuation rather than to reserve managers buying, and COFER revises prior quarters as reporting is corrected. [6] The useful reading is the broad trend, not the second decimal place: flat to down across a decade of ambition. Reserve managers proved unwilling to hold a currency they could not move freely.

New Zealand's exposure was in the order book

For New Zealand, the direct investment loss was probably not the main story. Very few New Zealanders held Chinese shares directly. Our exposure arrived through customers rather than the share register, which is harder to rebalance because nobody runs an annual review on their order book.

Wine is the clean example. Shipments to China rose 47% in the year to mid 2025, to $56 million, against total wine exports of $2.10 billion. [7] Volumes are climbing again this year, but prices are falling, with a bulk wine price war running through Marlborough as a record harvest looks for a home. [8]

The saviour story turned out to be champagne without the fizz. The litres arrived. The dollars did not.

The point runs past wine. A grower or packhouse built around one fast-growing market holds a concentrated position as real as any portfolio holding, and far less liquid. Plantings take years to come into production, and cool stores, packing lines and market accreditation are not reallocated over a weekend.

Worse, that exposure correlates with everything else on the balance sheet. Land value, the borrowing secured against it, the labour bill and forward sales all move in the same direction. When the market that was going to take everything decides to pay less, the hit lands everywhere at once.

The order book is the least diversified asset most owners have, and the only one they rarely review as an investment risk. If the business is already a concentrated bet on one market, the owner’s portfolio has no business becoming a second concentrated bet on the same story.

The grain of truth

The other side deserves its best case. Chinese shares are cheap: 14.09 times trailing earnings against 23.24 for the world index, 10.97 times forward earnings against 17.13, and a dividend yield of 2.26% against 1.59%. [5] Shanghai also posted its strongest year since 2020 and touched decade highs in March 2026. [9]

The trouble is that cheapness has been available the whole way down. China traded at a discount for most of the decade, and for much of it the discount widened. That did not stop 2021, or 2022, or 2023. A low multiple is not a floor. It is the market pricing risk, and sometimes it prices that risk correctly.

Nor should the recent strength be mistaken for a full recovery. The rest of the world ran hard over the same stretch, so China has closed no gap, and the five-year number is still negative after it. Selling today solely because of the last five years would repeat the 2015 error in reverse. The direction changes. The mistake does not.

Evidence favours patience. Let the froth settle before committing, like a freshly poured beer you do not drink while it is all head.

The fiduciary question

The plain question is who was telling you the story, and what they were holding while they told it. Growth narratives sell funds, conference tickets and column inches. That is not a conspiracy; it is how incentives work. But none of those people were in your portfolio when the five-year number came in negative.

A fiduciary has the less enjoyable job of saying that a good story and a good investment are not the same thing, and that the gap between them is where most money is lost.

A frog in a well

Sun Tzu put it plainly. A victorious army wins first and then goes to battle, while a defeated army goes to battle first and then looks for the victory. [10] The asset allocation is settled before the market does anything.

Calling economic growth a return does not make it a return.

The trains ran. The dividends did not. Both things were true at once in 1850, and both have been true again.

So before the next irresistible story arrives, seek advice and wise counsel. Remember what Zhuangzi wrote some twenty-three centuries ago: a frog in a well cannot be talked with about the sea, for he is confined to the limits of his hole. [11]

The frog was not wrong about his well. The well was real. It simply was not the ocean.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

References

1. Campbell, G. and Turner, J.D. (2012). Dispelling the Myth of the Naive Investor during the British Railway Mania, 1845-1846. Business History Review, 86(1). Railway share price index at 1,984 in August 1845, falling to 673 by April 1850.

2. Arnold, A.J. and McCartney, S. (2022). Managerial Failure in early Victorian Britain: Network and capital expansion during the Railway Mania. Business History. Network reached 6,621 miles by 1850, tripled since 1844; railway capital formation near 7% of GDP in 1847; about a third of authorised lines never built.

3. International Monetary Fund. Currency Composition of Official Foreign Exchange Reserves (COFER), dataset notes. The renminbi has been separately identified in COFER from 2016Q4, following its inclusion in the Special Drawing Rights basket on 1 October 2016.

4. International Monetary Fund, World Economic Outlook, as compiled by Statista and Worldometer. China nominal GDP of USD 19.63 trillion (2025) and an estimated USD 20.85 trillion (2026); United States USD 30.77 trillion (2025).

5. MSCI (2026). MSCI China Index (USD) Index Factsheet, data as at 31 July 2026. Net returns in USD: MSCI China five year minus 2.13% and ten year 4.88% annualised; MSCI ACWI 10.85% and 12.32%; MSCI Emerging Markets 8.03% and 9.19%. Annual net returns 2021 minus 21.72%, 2022 minus 21.93%, 2023 minus 11.20%, 2024 19.42%, 2025 31.17%. Fundamentals: MSCI China P/E 14.09, forward P/E 10.97, dividend yield 2.26%; MSCI ACWI P/E 23.24, forward P/E 17.13, dividend yield 1.59%. Five year annualised standard deviation 27.89% against 15.07% for MSCI ACWI; five year Sharpe ratio minus 0.08 against 0.53.

6. International Monetary Fund (1 July 2026). IMF Data Brief: Currency Composition of Official Foreign Exchange Reserves, World Aggregates, First Quarter 2026. Renminbi 1.99% (from 1.95% in 2025Q4), US dollar 57.13%, euro 20.03%. Earlier briefs give the renminbi at 2.18% in 2024Q4 and 1.92% in 2025Q3. COFER revises prior quarters as reporting is corrected.

7. New Zealand Winegrowers (2025). Annual Report 2025. Exports to China up 47% to $56 million; total wine exports $2.10 billion.

8. Vino Joy News (July 2026). China's white wine boom has triggered a Marlborough price war.

9. Shanghai Stock Exchange data via CEIC and Trading Economics; Global Times (January 2026) reporting the Shanghai Composite's 18.41% gain in 2025 and its return to decade highs.

10. Sun Tzu, The Art of War, Chapter 4, Tactical Dispositions. Rendered by Thomas Cleary as: a victorious army first wins and then seeks battle; a defeated army first battles and then seeks victory.

11. Zhuangzi, Outer Chapters, The Floods of Autumn (Qiushui), 4th century BCE. James Legge translation: a frog in a well cannot be talked with about the sea, he is confined to the limits of his hole.

12. ChinaPower Project, Center for Strategic and International Studies (2026). Unpacking China's GDP. IMF projection for China in 2030 revised from USD 27.5 trillion (April 2023) to USD 23.1 trillion (April 2025).

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We've Seen This SpaceX Movie Before

Article #469

Last month I warned readers: when the noise gets loud, ignore it; seek advice and wise counsel instead. 

The noise around SpaceX's IPO has been deafening. It priced at USD 135, ripped above USD 225 within days, and briefly made Elon Musk the world's first trillionaire on paper [1]. Then reality hit. 

I said the evidence favours patience. Let the froth settle before committing, like a freshly poured beer; you don't drink it while it's all head. 

Here's how it settled. SpaceX has crashed straight back to Earth through its own listing price. More than USD 1 trillion, around NZD 1.7 trillion, has been wiped from its value. From a June peak of USD 225 it closed at USD 114.92 on 6th August, below even its USD 135 listing price. Musk's paper fortune has fallen by more than USD 500 billion [1] [2] [3]. The company posted a consolidated net loss of USD 4.9 billion last year, swollen by its xAI acquisition, yet trades at more than 100 times sales [2].  

The analysts can’t even agree with one another. Bullish desks pinned targets north of USD 250; HSBC has just opened coverage at USD 115, roughly where it trades; Morningstar reckons fair value sits lower still [2] [3]. When the experts disagree by that margin, you’re not looking at analysis. You’re looking at a story, and stories are priced by mood. 

Around 23,000 Kiwis bought in to SpaceX through Sharesies, mostly in the after-market, well after the smart money had taken its seat [1]. By then, the offer-price allocation had happened offshore and the wild ride from USD 135 to USD 225 (and back) was well underway. Those who felt they were getting in early were, in truth, the exit liquidity for those who actually had. 

To those investors, I would gently say: none of this is new. 

USD 114.92 - SpaceX Closing Share Price on 6th August 2026

Buying for Blue Skies 

Our own market taught this very lesson just over a decade ago. You don’t need a crystal ball; only a memory.  

In 2014, listings came thick and fast. Travel-software firm Serko and measurement-device maker ikeGPS both floated at $1.10. Both quickly traded below their issue price, with ikeGPS down more than 18 percent on debut [4]. As one fund manager astutely put it: the market had been paying for blue sky three months earlier, and simply wasn't paying anymore [4]. The hype had outrun the businesses. Serko, to its credit, later found real success. Yet even now it trades below the heights the froth once implied, proving that even a ‘good’ company bought at a hyped price can still disappoint for years.  

It brings to mind something an old horse trainer once told me: “When they start, they've got the money and I've got the experience; when they leave, I've got their money and they've had the experience.” 

News articles on Serko and ikeGPS in 2014

The Quiet Opposite 

In the same 2014 rush, an old Hawke's Bay apple and logistics business called Scales came to market at $1.60, the very bottom of its indicative range, and had such a subdued debut it too slipped below its offer price in the first few days [5] [6]. No blue sky, no celebrity founders; just apples, coolstores, cargo, with about two-thirds of the business rooted right here in the Bay. Tellingly, the private equity seller kept a 20 percent cornerstone stake rather than bolting for the exit; skin left in the game, not cashed out at the top [6].  

IPOs floated by private equity usually attract scepticism, and the inevitable doubters lined up. They were wrong. Net profit came in some 87 percent above the float forecast, and shares today sit near record highs around $6, several times the issue price [7] The overlooked apple grower quietly outran the blue-sky darlings that had stolen the headlines on listing day. 

What separates the winners from the wreckage is simple: what you are buying, and who is selling and why. When insiders cash out at the peak, you are not the early investor. You are the exit. 

Scales YTD Share Price (December 2025 - August 2026)

The Devil in the Details 

There's a sting in the tail many day-one chasers never see coming. It’s buried in fine print, which as I always say, matters more than the selling price.  

New Zealand has no general capital gains tax, so most assume share profits are tax-free. Alas, not always. A “stag” buys a float purely to flip on the pop. Buy shares mainly to sell them, and Inland Revenue treats the gain as income, taxed at your rate, up to 39 percent. Buy to hold, and the same shares may not be taxed at all. Intention is everything [8]. Many who chased SpaceX bought the after-market and are now underwater. They’re carrying the flipper's tax intention without the flipper's profit, and are unable to offset the loss. 

There's a further wrinkle for anyone with a decent offshore holding. Once your overseas shares pass a cost threshold, proposed to double from NZD 50,000 to NZD 100,000 from the 2026–27 tax year, the foreign investment fund rules can tax a deemed slice of the value each year, whether or not you sold anything [9]. A newer method taxing only realised gains exists, but it is narrow and does not apply to ordinary listed shares like a US-listed SpaceX [9]. These settings are still working through Parliament and turn entirely on your circumstances. None of this is tax advice, but it is exactly the sort of thing you ought to check before you act. 

Choosing Patience over Hype 

Betting on a day-one pop with no real idea what you own is not investing; it is a coin toss with a tax bill. The alternative is not timidity, and the lesson is not anti-technology. High-growth tech can reward the patient, diversified investor handsomely. It is anti-hype. 

A disciplined, evidence-led approach can still be flexible and tactical, positioning around genuine opportunity when the evidence supports it, without chasing froth or mistaking a hyped listing for a considered decision. Scales was the quiet reward for buying a business; the blue-sky floats of Serko and ikeGPS were an expensive lesson in buying a story. SpaceX is that same lesson in a shiny new package. 

There is even a footnote of hope for the burned. Facebook fell more than 50 percent below its 2012 float price within four months, then clawed it all back within about fifteen as earnings caught up. A badly priced float can find a floor and recover in time… but that’s cold comfort to whoever paid top dollar on day one, and certainly no substitute for buying well in the first place [3] 

When the noise gets loud, the best investors don't chase the rocket. They read the audited accounts, understand who is selling and why, and let time and compounding do the work.  

In short: they seek advice and wise counsel. It may behoove others to consider doing the same.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

REFERENCES

1. NZ Herald / Newstalk ZB, "Share crash wipes $1.7 trillion from the value of Elon Musk’s SpaceX, crimps thousands of Kiwi investors" (July 2026) 

2. Yahoo Finance, "SpaceX Stock Just Violently Crashed Below Its Opening-Day Price" (July 2026) 

3. BeInCrypto, "SpaceX Stock Crash Wipes $500 Billion From Musk’s Fortune" (July 2026) 

4. NZ Herald, "ikeGPS plunge may show tech IPO party over" (July 2014) 

5. Scoop / BusinessDesk, "Scales shares edge lower on NZX debut" (25 July 2014) 

6. NZ Herald, "Scales shares set at bottom of range for IPO" (July 2014) 

7. NZ Herald / Direct Capital, "Scales’ Golden Apples"; Stockopedia SCL share data (2026) 

8. Inland Revenue, "Share investments": ird.govt.nz 

9. Inland Revenue Tax Policy, "Foreign investment fund changes" information sheet (May 2026); Budget 2026 FIF threshold proposal 

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Wholesale Investor Rules: Calling a Cat a Fish

Article #468

Abraham Lincoln liked to ask how many legs a dog has if you count the tail as one. Four, he said: calling the tail a leg doesn’t make it a leg. New Zealand’s wholesale investor rules have spent a decade calling tails legs. Last week a Christchurch courtroom finally counted.

On Friday 24 July the High Court placed six companies in Bernard Whimp’s Chance Voight group into liquidation. Associate Judge Dale Lester found a pattern of obfuscation, incompetence and evasion, an entirely unsustainable model, and a scheme that could only pay existing investors by finding new ones. Founded in 2021, the group had raised more than $54 million from perhaps 230 people to pour into property-based wholesale debt promising returns of 10 to 13 per cent a year. By September 2025 it sat on a negative net asset position of $11.8 million. The evidence, the judge said, was overwhelming.

One detail is almost too good. Whimp asked the court to delay the hearing until he could unlock money from his late father’s estate, which, he said, would in turn fund a $110 million land development. The judge was unmoved, calling the request a microcosm of how the whole group had been run. Quite. You cannot conjure a solvent business from a deceased estate any more than you can pull a rabbit from an empty hat, though plenty have tried. Meanwhile a related Whimp entity had drawn some $9.2 million in “management fees”, around 24 per cent of all money invested, even as the group booked a $5.5 million trading loss in a single half-year. Fees, in other words, for failure.

Here is what should trouble every reader. Chance Voight’s investors were, in the main, aged 65 and over, and the first liquidators’ report found many had only a limited grasp of the risks. Yet each had been certified a “wholesale” investor: sophisticated enough, in law, to need no protection at all.

You can call a cat a fish, but you can’t teach it to swim.

The mechanism is simple. The Financial Markets Conduct Act lets companies raise money without disclosure, licensing or supervision, provided the investors are wholesale. Under the “eligible investor” rule, anyone can claim that badge so long as a financial adviser, chartered accountant or lawyer signs to agree. Tick the box, and every retail protection evaporates. And this was no discreet, professional affair: the court noted Chance Voight was marketed in regional and local newspapers, on Facebook and at in-person promotional events, the mass channels of the retail world, not the closed room of the true professional.

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A long process for a too-low bar 

The regulator has been uneasy for years. When the FMA took a test case to force issuers to verify the investors sent their way, it lost: Justice Fitzgerald found the permissive regime was a feature of the law, not a bug. But she put her finger on the fault. The problem, she observed, was not so much the content of the certificates as that certificates with patently defective grounds, or none at all, were being confirmed regardless. It is the confirmation process that is falling down; and if it cannot protect investors, the balance struck in the legislation may need resetting, a matter, she said, for Parliament and not the court.

That was the judiciary handing the problem to the politicians. This month, at last, they picked it up. Commerce Minister Cameron Brewer has released an MBIE consultation, part two of the plan to lift our capital markets, that concedes what advisers have muttered for years: our settings are an international outlier, “unique” and “relatively permissive,” with “some evidence” that inexperienced investors are getting into wholesale offers. Its options read like a reply to Fitzgerald: a more objective eligibility test, a cap on how much an eligible investor can put at risk, a requirement that applicants take independent financial advice, restrictions on wholesale advertising, and, squarely, real onus on the professional confirmer, with an infringement offence for inadequate certifications.

Click above to read more on Wholesale Investors from the Financial Markets Authority

What still needs attention 

Those are the right levers, and they should be pulled. None of this is an argument for tearing the regime down. Genuine sophisticated investors exist, and raising capital from them without the full disclosure burden is a legitimate and valuable part of a working market. MBIE rightly notes that certificates lasting only two years already make life needlessly costly for real professionals. The point is narrower. The bar has been set too low, left to rot, and waved through by people with every incentive not to look too closely. Consider that none of the thresholds, $5 million in net assets, a million-dollar investment history, a $750,000 minimum subscription, has been adjusted for inflation since the Act took effect in 2013. Thirteen years of asset-price growth, house prices above all, has done the widening for Parliament: the same numbers now capture people they were never meant to reach. The bar did not get more generous; the country simply ran up more nominal dollars against a line that never moved. Last year the FMA referred 22 accountants and eight lawyers to their professional bodies over the misuse of these very certificates.

Two gaps deserve more than the paper gives them.

The first is the advice layer. A retail adviser must put the client’s interests first and prove a recommendation is suitable: goals, cash flow and appetite for risk, all understood and documented, the file running to fifty pages. A wholesale-only adviser owes a bare statutory duty to give priority to the client’s interests, but needs no FMA licence, follows no Code of Professional Conduct, and never has to establish that the advice was suitable. The relationship can be purely transactional: take the $5 million, place it in a syndicate, move on. If you think professional advice is expensive, try the amateur variety.

The second is the Crown’s own hand. Of the roughly 70 managed funds on Invest NZ’s “acceptable” list for Active Investor Plus migrants, against nearly $1.5 billion of committed capital, all but a handful are wholesale, and few are household names. Invest NZ’s own disclaimer states that inclusion is not an endorsement or recommendation by it or the Government. We invite wealthy newcomers to make this country home, steer them onto a state-curated list, then wash our hands of what follows. All care, no responsibility. A wealthy migrant, a surgeon, a farmer, someone who simply inherited well, may know nothing of geared, illiquid property debt, yet is stamped “wholesale” on a net-asset figure alone. Funds on a Crown list should answer to retail-grade disclosure, not hide behind the wholesale tag.

Underneath it all sits a regulator half in the dark. The IMF warned back in 2017 that there was insufficient data to assess the risks in our wholesale sector; nine years on, the FMA has admitted it still has very little sense of the size, structure or practices of that market. You cannot police what you have never measured.

Two centuries ago the little port of Kōrorareka, on the same Bay of Islands coast that cradled New Zealand’s first capital, was infamous as the Hell Hole of the Pacific, a settlement beyond the reach of any law. We renamed it Russell, gentrified it, and told ourselves the lawlessness was history. But a regime that lets an operator gather tens of millions from retirees on a one-page certificate nobody properly checks, through advisers who owe them little and a regulator the courts say owes them nothing, has not left the frontier behind. One judge has wound the companies up. Another has told Parliament what to fix. Submissions close on 25 August. Make sure the reform closes the loophole, rather than merely repaints the saloon.*

* Stewart Group does not provide advice to investors under the wholesale investor rules. We took that decision years ago, in the view that all investors deserve full disclosure and a fiduciary relationship. 

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Further Reading: For those interested in the wholesale investor discussion, this guide provides a practical overview of the key differences between retail and wholesale investors, including eligibility criteria, investor protections and regulatory requirements.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

REFERENCES

1. “Court slams Whimp entities into liquidation; Kerr bankrupted in the UK.” David Chaplin, Investment News NZ, 26 July 2026.

2. “‘Unsustainable’ Chance Voight companies put into liquidation.” NBR, 24 July 2026 — judgment of Associate Judge Dale Lester; Teneo’s John Fisk, Lara Bennett and Malcolm Hollis appointed liquidators; comments of FMA enforcement head Margot Gatland.

3. David Chaplin, “Wholesale investment: there’s a hole in the market.” BusinessDesk, 21 July 2026.

4. “Government looking at wholesale investor loophole.” Good Returns, 17 July 2026; “Government seeks feedback on loophole exposing unsavvy investors to risky deals.” NZ Herald, July 2026.

5. Ministry of Business, Innovation and Employment, capital markets reform discussion paper (part two), July 2026. Submissions close 25 August 2026.

6. First interim liquidators’ report on the Chance Voight group (PwC), 2026 — investor age profile and limited risk understanding; “management fees” of $9.2m, some 24% of funds invested; $5.5m half-year trading loss; negative net assets of $11.8m at 30 September 2025.

7. Financial Markets Authority, [2025] NZHC 2723 — judgment of Fitzgerald J (18 September 2025) on the confirmation process and the balance struck in the legislation.

8. Financial Markets Authority — referral of 22 accountants and eight lawyers to their professional bodies over misuse of eligible investor certificates.

9. International Monetary Fund, Financial Sector Assessment Programme, New Zealand, 2017; FMA review of custody arrangements, 2026.

10. Invest New Zealand / Immigration New Zealand, Active Investor Plus visa: list of acceptable managed investment schemes and non-endorsement disclaimer.

11. Financial Markets Conduct Act 2013, Part 3 and Schedule 1.

12. “Kōrorareka — the Hell Hole of the Pacific.” Te Ara / NZ History, Ministry for Culture and Heritage.

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Scotland the Brave - The Darien Scheme That Worked

Feature Article

A Canny View reader asked an excellent question after last month's column: what was the alternative? What would have happened if the Darien project had been successful?

Whilst I don't hold myself out to be a historian, I do find alternative history enjoyable reading, with its endless what-ifs.

Last month's piece (If you missed it, read here) took up Scotland's catastrophic 1698 bet on a trading colony in Panama, the one that bankrupted the nation and led, within a decade, to its loss of sovereignty to England. The lesson, plainly, was about concentration risk: bet a fifth of your wealth on one thing, and you had better be ready for the day it doesn't work.

But what if it had worked? Indulge me a moment.

It is 1698. William Paterson's vision holds. Disease is mastered through better drainage and stricter quarantine. The Spanish, having sized up Caledonia's defences, choose negotiation over assault. The English, sensing they cannot beat the Scots to the Isthmus, partner instead of obstruct.

Within a decade, Caledonia is the trading hub of the Americas. Goods from Canton and Manila are landed on the Atlantic side, hauled across a few miles of jungle, and reloaded onto ships bound for Edinburgh and Amsterdam. The Company of Scotland pays a 40% dividend in 1710. It pays one again in 1715.

Scotland enters the 18th century rich. There is no bankruptcy. No loss of sovereignty. Edinburgh, not London, becomes northern Europe's financial centre. Adam Smith, born in 1723, writes The Wealth of Nations in a country that does not need to borrow England's economic theory; it has its own.

The story doesn't stop there. The Acts of Union, in our real history, were the price Scotland paid for the Darien bankruptcy. Take the bankruptcy away, and the union never happens. So when Queen Anne dies in 1714 and the English Parliament invites George of Hanover to take the throne, the Scottish Parliament is free to make its own choice, and reaffirms the Stuart line. James Francis Edward becomes James VIII of Scotland. His son Charles Edward never has to invade in 1745, because his father is already sitting in Edinburgh.

Which means no Battle of Culloden in 1746. No Disarming Act. No proscription of Highland dress, no systematic dismantling of clan structures. Which means no Highland Clearances. Which means the great Scottish diaspora of the 19th century, the one that founded Dunedin in 1848 and put Scottish names on half the farms in Hawke's Bay, never happens, or happens at a fraction of the scale.

A successful Darien does not just save Scotland's sovereignty. It rewrites the demographic map of New Zealand.

And by the late 19th century, when the world's powers turn their attention to cutting a canal through the Isthmus, the Scots have been there for two hundred years. They have the local knowledge, the capital, and the political will. The canal opens, somewhere between 1890 and 1905, under Scottish ownership. One of the world's great chokepoints, the gate between the Atlantic and the Pacific, is not American. It is Scottish.

Speaking for myself, I highly doubt either my maternal or paternal ancestors would have made the journey from Perthshire, Scotland.

Paterson gets a statue on Princes Street. And every Scot who didn't subscribe is haunted, for the rest of their life, by what they missed.

This is the harder lesson.

The bet that pays off gets remembered as vision. The same bet that fails gets remembered as folly. The two bets were identical.

Imagine two funds in 2020. Both concentrate. Both bet on a small basket of high-conviction names. Five years later, one is celebrated as a genius and the other is torn apart in print. The portfolios looked identical at the start. The strategies were the same. What differed was which way the dice landed.

This is survivorship bias, and it is the great mischief-maker of finance. We study Buffett, not the thousand value managers who concentrated and lost. We celebrate the founder who bet the company and won, not the ten who bet and quietly disappeared. The lesson taught is that conviction beats prudence. The lesson untaught is that survival beats both.

When concentration works, you don't learn the right thing. You learn that the rules don't apply to you, and you bet bigger next time. The next Darien is always larger than the last.

What does this mean for a Canny investor at the kitchen table?

It means diversification is not, as the fund manager class sometimes implies, a strategy for the meek. It is the structure that lets you stay in the game on the day the dice land wrong. And sooner or later, they will.

The business owner whose company is 80% of their wealth is not bold; they are exposed. The retiree leveraged into a single Hawke's Bay property is not bold; they are exposed. The investor who has refused to trim a winner that now dominates the portfolio is not bold; they have simply been right so far. That is all.

The Scots who didn't subscribe in 1698 missed a fortune in the world I just imagined. In the world we actually got, they kept theirs.

Across enough rolls of the dice, the second outcome is the one that matters. The first is the one you read about.

We always enjoy the dialogue with our Canny View followers, so please keep up the great feedback, and we'll do our best to accommodate.

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

Turning Fifty: The Inflection Point

Article #464

I turned 50 on the second of July. That includes nearly 30 in the workforce, 26 years as a financial adviser, 20 as a husband and 18 as a father. Do the maths and I'm roughly two-thirds through my optimal earning window, if we call 65 the end of the innings. It’s made me stop and do the thing I always ask of clients: take an honest look at where I am now, and where the next 15 years are heading.

Most of us never think about the shape of our earning life, but it follows a pattern. The 20s are for learning a trade, finding your feet in a profession, perhaps marrying, often still paying off the student loan. The 30s bring children, a mortgage and the long grind of deepening a career. By the 40s the income finally lifts and a little pressure comes off. Then the 50s and 60s arrive, and many people start thinking about the golden years to come. Here’s the rub: a fit and healthy 65-year-old has not just finished their best earning years; for many, the earning stream has stopped altogether. The way we’re living these days, those earnings now need to carry us all the way through to our 90s. That’s three decades of withdrawals from a jar you stopped filling, so you need to put a lot of cookies in that jar to sustain yourself for 30 years.

For most of human existence, 50 was the end of the road. In 1900, life expectancy for men in New Zealand sat in the late fifties [1]. A man of 50 in those days really was winding down, because he was nearly done. The Victorians built their whole idea of a life stage around it - you worked until your body gave out, and the gap between the two was mercifully short. Today, a healthy 50-year-old can reasonably expect another 35 years or more, and an increasing number of us will see ninety [1]. We’ve held on to the old instinct that 50 is the beginning of the end, while living an entirely different reality. The body tells us we have arrived. The maths tells us we are barely halfway.

Source data: New Zealand cohort life tables: March 2025 update | Stats NZ

This is where I see good people stumble, though rarely through recklessness. The kids are nearly gone, the mortgage is finally in retreat, and “finally” becomes the word of the moment. Finally, we can do a few things for ourselves! The bucket list, the holidays, the trips deferred for 20 years while school fees and braces and first cars ate every spare dollar. It feels earned, and it feels good, because it is and it does. Behavioural research calls this ‘present bias’; a hard-wired habit of overweighting the reward we can have today against the one we must wait for [2]. But that freed-up cash flow is being enjoyed at the precise moment it should be doing its hardest work. The next 15 years from 50 are prime accumulation time, not the victory lap people imagine them to be.

Most balance sheets tend to be the same at 50: top-heavy with lifestyle assets. The house, the cars, the bach with its rates, maintenance and insurance quietly eroding spare cash or savings each year. It has been the Kiwi dream for as long as I can remember, and there is nothing wrong with wanting that dream. But while the numbers look perfectly reasonable on the surface, the cash flow underneath is poor. The assets that produce real income and liquidity - the ones that will still pay you when your salary stops - are too small to move the needle in this scenario. You’re carrying a great deal of weight that does not work for you, and worse – it's costing you to hold it.

This is where knowing values is crucial. At 50, you need to be clear on what matters and what you must build over the next fifteen years – because every goal is built on cash flow, and cash flow comes from the assets you have accumulated. Get the values right and the rest follows in a straight line. Leave them vague and you’ll inevitably keep spending on what feels good now, instead of what carries you through your 70s, 80s and 90s. The order in which your returns arrive in the early retirement years can make or break a 30-year drawdown, and a poor first few years while you are drawing down does damage that a good average return never quite repairs [3].

It can feel uncomfortable to take such a frank look at your present and future, but it’s fairly straightforward. Do your lifestyle assets fit what you are trying to build? Are you protecting your peak earning stream as the engine that funds everything else? Is your cash flow working backwards, servicing debt on things that do not compound, or forwards, building assets that do?

The gap between what New Zealanders expect to retire on and what they have set aside remains stubbornly wide. It widens fastest for those who assume there is still plenty of time [4]. At 50, most people can still materially change their later years by engaging and making a few incremental course adjustments. These changes don’t have to be dramatic, but they do need to be early. A small correction to a flight path early in the journey lands you in a completely different place.

Often, the best co-pilot on such a journey is a professional financial advisor. And if you think professional advice is expensive, try using an amateur – see what it costs you. Unfortunately, the most expensive amateur you can ever hire is usually yourself; timing the market with optimism and a spreadsheet doesn’t tend to get the same results as methodical, proven strategies and a steady pair of hands at the wheel. Time in the market is the one advantage you cannot buy back later at any price [5].

This is the fiduciary truth of it, and it is the part I care about most after 26 years. Seeking wise counsel at 50 is not an admission of weakness. It’s the best way to understand your own position; we’re all the worst judges of our own blind spots, but an unbiased third party can see the whole scene with clarity.

A good adviser is not there to take the holidays away. They are there to make sure the holidays at 70 are still possible.

50 is the inflection point where you can still move the dial in a way you simply cannot at 65. The runway is shorter than it was, but you’ve got a good bit of tarmac left before earnings come to a stop. The question is not whether the time for preparation has passed (it hasn’t), but whether you will use what remains of it. A burden shared is a burden halved.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

• We do not hold or advise on any private credit or private equity investments.

---

REFERENCES

1. Stats NZ. (n.d.). Life expectancy. https://www.stats.govt.nz/information-releases/new-zealand-cohort-life-tables-march-2025-update/

2. ScienceInsights. (n.d.). What is present bias? How it shapes your decisions. https://scienceinsights.org/what-is-present-bias-how-it-shapes-your-decisions/

3. Sequence of returns risk: Why the order of returns matters in retirement. The Long Math. https://www.thelongmath.com/articles/investing-and-financial-literacy/sequence-of-returns-risk/

4. Te Ara Ahunga Ora. (2022). Annual report 2022. https://assets.retirement.govt.nz/public/Uploads/Annual-Report/TAAO-RC-Annual-Report-2022.pdf

5. Dai, W., & Dong, A. (2023, October 31). We found 30 timing strategies that “worked”—and 690 that didn't. Dimensional Fund Advisors. https://www.dimensional.com/sg-en/insights/we-found-30-timing-strategies-that-worked-and-690-that-didnt

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Private Assets: You're Not Joining the Club, You're Funding It

Article # 463

Private. Special. Exclusive. Three words that do a lot of heavy lifting in finance. They frame private equity and private credit as access and privilege. Yet beneath the velvet-rope marketing sits a familiar set of trade-offs: high fees, illiquidity, and a lack of transparency. For decades that rope kept ordinary investors out. It was quietly removed, and nobody sent a memo.

Historically, these markets belonged to pension funds, endowments and family offices with eight figures to commit and twelve years to wait. Ordinary investors didn't get a seat at the table. They are now being offered one, through KiwiSaver growth funds, UK Long-Term Asset Funds dropped inside tax-advantaged ISAs, and the family trust portfolios they signed off on last year [1]. The FMA confirmed in April that most KiwiSaver providers expect to materially lift their private asset allocations over the next three years, aligning with global investment trends [2]. The industry calls it democratisation. Governments call it unlocking growth.

This week the trend turned local and concrete. Simplicity committed $30 million to a new Kiwi deep tech and health sciences venture fund, becoming a cornerstone investor [3]. The fund holds a small number of early-stage companies, including pre-revenue biotech automating cancer-cell therapy manufacturing. It is not fully funded on day one; it is a capital-call vehicle, drawn down over the life of the fund. The parent is US-headquartered, and the capital base includes migrant investors using it as a pathway to residency. None of that is hidden, and backing clever Kiwi innovation is a perfectly defensible thing to do. But it is a useful reminder of what this asset class is once you look inside the wrapper: a long-dated, illiquid, concentrated bet that you cannot easily value or exit.

About that 40-year outperformance

In January, Tony Robbins told millions of viewers on The Diary of a CEO that private equity has outperformed every stock market globally for 40 years, and that ordinary investors have been locked out [4]. He is right on the data. The data, however, deserves a closer look before you remortgage the bach.

First, it has been cherry-picked by survivorship. The funds that blew up quietly drop out of the long-run series, so what you are shown is the record of the survivors, a bit like judging parachutes by interviewing the people who landed. Second, much of the return is leverage, not skill; borrow heavily against a stable business and you amplify the good years, and the bad. Third, and least discussed, is the illiquidity premium. You are tying your money up for a decade or more in a speculative bet on a handful of companies you cannot sell when you want to. You would expect to be paid more for taking on more risk and less liquidity. That extra return is not evidence of genius; it is the rent on your patience. Strip out dead funds, borrowed money and locked-up capital, and the heroic outperformance narrows sharply, and that is before fees [5].

What Robbins is less keen to dwell on is that he co-owns CAZ Investments, which buys stakes in private equity management companies, and that he personally holds stakes in 95 PE firms; the firms themselves, not the funds [6]. He collects the "2 and 20" on each: two percent of assets every year, plus twenty percent of profits above a hurdle [4]. Draw your own conclusions about the shape of those incentives.

The cycle, and the cautionary tale

On the credit side, JPMorgan chief Jamie Dimon used his April shareholder letter to flag what the more enthusiastic salespeople tend to leave in the bag: the credit cycle still exists [7]. Lending standards loosened during the boom. Covenant-lite deals became common in private credit too [8]. When the cycle turns, losses will not stay gated.

In August 2024, the Government placed Du Val Group, an Auckland property developer, into statutory management. This is only the third time that lever has ever been pulled, following Equiticorp in 1989 and Allan Hubbard's vehicles in 2010 [9].

The Du Val Mortgage Fund had been marketed as wholesale-only at around 10% per annum, pitched as comparing favourably to bank term deposits. That label is not a marketing flourish but a regulatory category: an offer made only to wholesale investors is excluded from the disclosure regime built to protect ordinary investors, so there is no product disclosure statement and no entry on the public Disclose register [9]. Roughly 120 to 150 investors are now owed close to $306 million [9]. When investors tried to sue the FMA for failing to protect them, the High Court ruled in Lindeman Investments v FMA that the regulator owes no duty of care to individual wholesale investors [10]. The safety net does not stretch that far, and by design: the wholesale regime switches off most of the retail protections long before any loss is incurred.

Every newborn, a private asset owner

Fisher Funds has committed more than $1 billion of KiwiSaver money to private equity, the largest publicly announced commitment to date [11]. Most other major providers also carry exposure, and per the FMA report most plan to lift those allocations over the next three years [2]. On Sunday, Christopher Luxon announced that, if re-elected, KiwiSaver would become compulsory from 2028, every newborn would be auto-enrolled with a $1,500 Baby Boost defaulted into a high-growth fund, and the combined contribution rate would reach 12% by 2032 [12]. Every newborn New Zealander would begin their financial life with a private asset exposure they did not choose, in a vehicle they cannot exit until at least 2090.

Structure is not the same as transparency

None of this makes private assets an inherently bad asset class. The issue is the layering, the marketing, and the question of who benefits from the door opening now. Where the exposure is plainly structured, a named partnership backing identifiable businesses with disclosed allocations, the picture is more straightforward than where it runs through layered offshore fund-of-funds with opaque manager economics. But structure on paper is not the same as transparency in practice. Diligent managers have tried to look through some of the better-regarded local vehicles and come up short on what is actually held and how it is valued. If the people whose job is to see inside cannot, the ordinary member certainly cannot. We do not invest our own clients in this asset class, for precisely these reasons. It would be premature to suggest New Zealand has quietly cracked private assets when the same transparency, valuation and liquidity questions remain.

Here is what matters most, and what the marketing almost never spells out: understand whether your commitment is fully funded on day one or subject to future capital calls. Some private equity is paid up front, with no further obligation, clean and simple. Much of it is not. A commitment of thirty cents on the dollar today can trigger calls for the remaining seventy cents in the years ahead. Your disclosed allocation now will not reflect your actual exposure tomorrow; as the calls arrive, your percentage holding and your real risk are multiplied. A trustee who signs off on what looks like a modest five percent allocation can find the true commitment is several times that once the fund draws down. I have watched exactly this happen to a community trust, where a decision made by earlier trustees carried obligations that only became visible years later.

For trustees, this is not simply an investment preference; it is a governance question.

Under the Trusts Act 2019, trustees of family and charitable trusts inherit a look-through duty [13]. Few today can name the private asset exposures they are responsible for, let alone the unfunded commitments sitting behind them. Asking the question is the first part of discharging the duty.

Four questions for any provider, adviser, or co-trustee:

1. What are the all-in fees across every layer?

2. How are the underlying assets valued: how often, and by whom?

3. Is the commitment fully funded, or subject to future capital calls?

4. In whose interest is the allocation being recommended?

The answers should be plain and confident. If they aren't, that itself is a flag you shouldn't ignore.

Robbins is right that private equity has outperformed historically. Dimon is right that the credit cycle still exists. What is less often spoken about is who benefits from unlocking the door now, and why.

Private. Special. Exclusive. Useful words for the fee machine; less useful for the person handing over their money. You are not joining the club; you are funding it.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

• We do not hold or advise on any private credit or private equity investments.

---

REFERENCES

1. Financial Conduct Authority (UK). Long-Term Asset Fund regime, FCA Handbook COLL 15. HM Treasury (2025). Inclusion of LTAFs in stocks and shares ISAs. gov.uk.

2. Financial Markets Authority (2026, 15 April). Private assets in managed funds: Investment landscape and valuation practices. Accompanying media release: “FMA anticipates KiwiSaver providers will increase investment in private assets.” Source: FMA.

3. Simplicity (2026, 24 June). “Simplicity backs ambitious Kiwi innovators with $30m investment.” Details: $30m cornerstone commitment to Bridgewest Venture Fund I (Deep Tech and Health Sciences Fund). Provider disclosure context: Booster, Milford, Generate, Pathfinder, ANZ Investments and others carry private asset allocations across growth and high-growth options.

4. The Diary of a CEO with Steven Bartlett (2026, 15 January). “Tony Robbins: No One Is Ready For What’s Coming.” Details: transcript references Robbins’ stakes in 95 private equity firms, the firms, not the funds, receiving the “2 and 20” on each.

5. Bain & Company (2025). Global Private Equity Report 2025. Details: fee conventions of 1–1.5% management plus 10–20% carry above a preferred return. Supporting context: MSCI, Chicago Booth Review and NBER research on buyout outperformance of roughly 3–5% per year over public market equivalents, with debate over the role of leverage, survivorship bias and the illiquidity premium.

6. CAZ Investments. Firm overview and GP-stakes strategy. Robbins, T., Zook, C. and Mallouk, P. (2024). The Holy Grail of Investing. Simon & Schuster.

7. JPMorgan Chase & Co. (2026). Annual Letter to Shareholders 2025. Author: Jamie Dimon. Released April 2026. Source: JPMorgan Chase & Co.

8. Reserve Bank of New Zealand (2026, May). Financial Stability Report. Details: private credit market concerns. Source: Reserve Bank of New Zealand.

9. Financial Markets Authority (2024, 21 August). “Du Val Group: statutory management ordered.” Source: FMA. Supporting coverage: BusinessDesk (2025, 4 August), “A year since raids, FMA yet to prosecute over Du Val collapse.”

10. Lindeman Investments Limited v Financial Markets Authority [2025] NZHC. Judgment date: 11 July 2025. Summary source: Cooney Lees Morgan, “The FMA safety net has limits when it comes to wholesale investor groups.”

11. NZ Herald, The Prosperity Project (2025, 4 August). “The rise of KiwiSaver investing in private equity and what it means for you.” Details: Fisher Funds committing more than $1 billion of KiwiSaver funds to private equity.

12. New Zealand National Party (2026, 21 June). “National To Further Boost Kiwis’ Financial Security.” Details: press release, annual conference, Lower Hutt. Coverage: NZ Herald, RNZ, 1News, Newsroom and Scoop (21–22 June 2026). Estimated fiscal cost: $1.1 billion over four years.

13. New Zealand Parliament (2019). Trusts Act 2019, ss 30–31.

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We Need to Talk About Envy

When a newspaper tells you how to hate someone, it reveals more about itself than its target.

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Article #462

“Envy was once considered to be one of the seven deadly sins before it became one of the most admired virtues under its new name, ‘social justice’.”

Thomas Sowell, The Quest for Cosmic Justice (1999) [1]

Last week the New Zealand Herald reported, plainly, that Elon Musk had become the world’s first trillionaire after shares in SpaceX leapt as much as 30% on debut, the largest initial public offering in history. [2,3] That is the news. What happened next is the story.

Canada’s Globe and Mail ran an opinion piece under the headline: ‘SpaceX IPO makes Elon Musk the first trillionaire. Here’s how to properly hate him.’ After a day of ridicule, the paper swapped it for the more respectable ‘Is that a bad look for capitalism?’ and tacked on a note conceding the original ‘did not meet The Globe’s editorial standard.’ [4] The mask slipped, then was hastily refitted. But we all saw the face beneath.

Closer to home, the chorus is familiar. Oxfam Aotearoa tells us four New Zealand billionaires hold more wealth than 1.8 million of their countrymen, and calls it ‘obscene.’ [5] Academics line up on talkback to lament inequality. Polls are cited showing most New Zealanders want the ultra-rich taxed more, and we are reminded that Musk alone is worth almost as much as every New Zealander combined [6,7]. The sentiment is always the same: someone has too much, and that is a problem to be corrected rather than a phenomenon to be understood.

Musk is not, in fact, the first trillionaire. Under Robert Mugabe, Zimbabwe's central bank printed a hundred-trillion-dollar note that on its first day was worth about US$30, and within weeks nothing at all; at the peak, prices doubled every day [8]. In that sense, many Zimbabweans became trillionaires on paper yet still could not buy a loaf of bread. That is the distinction worth dwelling on.

A trillion earned by building what people want is the opposite of a trillion conjured by a collapsing state: one is value created, the other value destroyed.

I want to make the unfashionable case. Not for Musk the man, he hardly needs my help, but for what the exception represents: the rare individual who turns the stuff of science fiction into things we use every day without a second thought, the smartphone in your pocket, the satellite that carries your call, the online payment that clears in seconds, the electric car at the lights, the cloud software that runs the small business down the road.

Consider the funnel. Many people have ideas. Fewer act on them. Fewer still build something that turns a profit. And a vanishingly small number, statistical outliers, take an idea and deliver it at scale. New Zealand has produced our own precious few: the Mowbray siblings, whose toy and consumer-goods firm Zuru, started in a shed in 2003, now tops the Rich List at an estimated $20 billion; Trade Me, Xero, Rocket Lab, the family-owned Gallagher Group, which grew from a Waikato farm shed and the world's first electric fence into a security firm operating in some 160 countries, and Fisher & Paykel Healthcare, built and headquartered here and exporting respiratory care to around 120 countries [9,10,11].

And the same pattern holds inside the companies we reduce too easily to a single famous name. Gwynne Shotwell joined SpaceX as its eleventh employee in 2002 and helped build it, as president, into the company that just floated; she now sits, according to Forbes, among the richest self-made women in the world, with a stake estimated at around US$2.5 billion [12]. The builders are plural, and the rewards often follow competence more than celebrity.

Here is the part the zero-sum brigade often misses: the same SpaceX listing that minted the world's first trillionaire also turned more than 4,400 current and former staff into millionaires, by the New York Times' reckoning – some 400 of them past the $100 million mark. The reach went a long way down the org chart. One was a welder who joined in 2015 on about US$28 an hour and took part of his pay in stock; his holding is now worth close to a million dollars [13]. The trillionaire headline and the newly wealthy welder came from the very same event. The pie did not get carved up. It got bigger.

The question for New Zealand is whether we are willing to learn from that. The NBR Rich List has swelled 23-fold in forty years to a record $129 billion, with Rocket Lab's Sir Peter Beck alone leaping from about $650 million to $11 billion in a single year as his company's shares soared [14]. And yet our productivity has barely moved in thirty years. We are very good at debating how to carve the pie, and strangely uninterested in baking a larger one.

None of this is new. Andrew Carnegie and John D. Rockefeller were the titans of their age, reviled in their time as robber barons, cartoonish villains of the popular press. The cartoonists drew them as bloated octopuses with the nation in their tentacles. Carnegie ground out his fortune in steel and, in his later years, gave most of it away, seeding free public libraries across the world, more than 2,500 of them, eighteen in New Zealand alone [15]. Rockefeller's money built the University of Chicago and funded the medical research that helped tame yellow fever and hookworm [16]. The resentment faded. The libraries, the universities, the cures remain. That is the part the wreckers never see: the wealth was temporary, but the institutions it built endured, and we are still drawing on them a century later.

Great fortunes gather, they crest, and in time they disperse through families, philanthropy, taxation and the simple passage of generations. Marriages fail and children inherit and quarrel; fortunes fracture along fault lines no one planned for. Jeff Bezos parted with roughly a quarter of his Amazon stake in a single divorce [17]. Wealth scatters faster than any succession plan can contain it. No one takes it with them. They are only ever the custodian of their wealth for the span of their life, and perhaps a generation or two beyond, if they are fortunate.

I make the same point to those who fret about foreigners buying New Zealand farms and businesses. A buyer cannot pack up a farm, or a company, and carry it home in a box to their country of origin. The land stays. The business stays. The jobs, the buildings and the economic activity all remain here, in New Zealand. The buyer is a custodian, nothing more. So too with the great fortunes: the enterprises outlast the individual, and we are the beneficiaries.

And here is what the envious rarely pause to weigh: the cost of building any of it. The outlier does not arrive at scale by working office hours. Musk's own biographers record the toll: Walter Isaacson, who shadowed him for years, documents a leader hands-on in redesigning rocket components and welding design to production, while Ashlee Vance describes the hundred-hour weeks and nights spent sleeping on factory floors [18,19]. He risked ruin, repeatedly; Tesla and SpaceX both came within weeks of collapse in 2008, and he poured in his own money to keep them breathing. For every founder who makes it, a great many do not: they mortgage the house, burn the savings, lose the marriage, and end up with nothing but the lesson. Most of us, honestly, would not want that life if it were handed to us, and that is no shame. But it ought to buy a little humility before we throw stones over the fence at grass we have decided, from a distance, must be greener.

Some will say the fortune was really built on government largesse: the contracts, the green credits [20]. But the credits were no handout. Every carmaker operated under the same zero-emission rules; the money came from rival manufacturers who lagged on electric cars, not from the taxpayer; and Tesla profited simply because it built cleaner cars faster than anyone else. The same scheme runs in Europe and China. That is not a subsidy. That is winning the game everyone was playing.

As for the calls to tax such people into their place, success is already taxed, and handsomely. That is how it works. But a culture that treats achievement as a crime to be punished rather than a feat to be studied will get less of it. The numbers bear it out: resentment is not a growth strategy.

There is a fiduciary truth in all of this, the same one I return to with clients. Tearing others down builds nothing. The job, mine, yours, the nation’s, is stewardship: to grow what we are given, to think in decades rather than headlines, and to leave more behind than we found. A country that celebrates its builders is a healthier place than one that polices its winners. Glass half full beats glass half empty, every time.

So before we are told, yet again, how to properly hate someone for the sin of succeeding, it is worth asking the more useful question. Not how do we cut them down to size, but what will we leave standing when we are gone?

Winter never lasts; the snows always melt.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

REFERENCES

1. Thomas Sowell, The Quest for Cosmic Justice (1999), source of the epigraph.

2. New Zealand Herald, ‘Elon Musk becomes world’s first trillionaire as SpaceX shares jump’ (June 2026).

3. RNZ, ‘SpaceX launches US$2 trillion market debut, the largest IPO in history’ (June 2026).

4. The Globe and Mail, Chris Gay, ‘SpaceX IPO makes Elon Musk the first trillionaire. Here’s how to properly hate him’ (headline since amended with editor’s note, June 2026).

5. Oxfam Aotearoa, statement on billionaire wealth concentration in New Zealand (2026).

6. RNZ / Talbot Mills poll, ‘New Zealanders support more taxes on ultra-rich, new poll shows’ (Wellbeing Economy Alliance Aotearoa; 68% backed higher taxes on the ultra-rich, 2026).

7. RNZ, ‘Elon Musk only marginally less wealthy than all New Zealanders combined’ (June 2026).

8. Reserve Bank of Zimbabwe / BBC, the Z$100 trillion note, issued 16 January 2009, worth about US$30 on its first day; one of history’s worst hyperinflations, with prices doubling daily at the November 2008 peak.

9. Zuru / NBR Rich List 2026, founded by Nick, Mat and Anna Mowbray in 2003; estimated at $20b, the top spot on the 2026 NBR Rich List.

10. Gallagher Group, Hamilton-based, family-owned; from the world’s first electric fence (1938) to integrated security solutions in around 160 countries.

11. Fisher & Paykel Healthcare, New Zealand-headquartered respiratory-care manufacturer; sells in around 120 countries, with roughly 1% of revenue from domestic sales (publicly listed; majority institutional ownership).

12. Forbes, ‘America’s Richest Self-Made Women’ (2026 list), featuring SpaceX president Gwynne Shotwell.

13. The New York Times, reporting via Hill.com analysis that SpaceX’s IPO would turn more than 4,400 employees into millionaires, including a welder hired in 2015 (June 2026).

14. NBR Rich List 2026, 40th edition; total listed wealth a record $129b (up from $102.1b), a 23-fold rise in 40 years; Rocket Lab’s Sir Peter Beck up from ~$650m to ~$11b (reported via RNZ / NZ Herald / Scoop, June 2026).

15. Carnegie Corporation of New York, historical record of Carnegie free public library endowments.

16. Rockefeller Foundation / University of Chicago, record of Rockefeller’s ~$36m founding gift to the University of Chicago and Foundation-led campaigns against hookworm and yellow fever (first yellow-fever vaccine, 1935).

17. Bezos / Scott divorce (2019), widely reported transfer of roughly a quarter of Jeff Bezos’ Amazon stake to MacKenzie Scott.

18. Walter Isaacson, Elon Musk (2023), on Musk’s hands-on engineering role across his companies.

19. Ashlee Vance, Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future (2015), on the 100-hour weeks and factory-floor work ethic.

20. RNZ, ‘How much of Elon Musk’s wealth comes from government help? Virtually all of it’ (June 2026), cited here as the claim being answered; on ZEV regulatory credits, see the Union of Concerned Scientists and CNBC explainers (credits are traded between automakers, not paid by the taxpayer).

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IMAGE CREDITS

• John D. Rockefeller depicted in the political cartoon 'The Trust Giant's Point of View' by Horace Taylor in 'The Verdict, ' 1900

• “Standard Oil Octopus” - Keppler, Udo J., 1872-1956, artist. Published September 1904

• Carnegie Free Library, Thames - Coromandel Heritage Trust. Photograph by David Wilton.

• Auckland City Libraries – Tāmaki Pātaka Kōrero, Sir George Grey Special Collections (AWNS-19080716-13-6)

The Era of the Colossal IPO, and the Small Investor

Article #461

In August 1602, the Dutch East India Company pinned up posters in Amsterdam announcing that any resident of the Low Countries could buy a share in their new venture. By month's end, 1143 investors had put in roughly 6.4 million guilders. One was a maid named Neeltgen Cornelis. She put in 100 guilders, around half a guilder a day in wages, more than half a year's earnings. The world's first IPO had its first ordinary shareholder.

Four centuries later the dance is the same, but the music is louder. Within 12 months we'll likely see the three largest technology listings in history, landing one after another.

SpaceX lists on the Nasdaq today under SPCX, in what is set to be the largest IPO in history. The company has raised USD 75 billion, pricing 555.6 million shares at USD 135 each, at a valuation approaching USD 2 trillion. For context, the previous record-holder, Saudi Aramco in 2019, raised USD 29.4 billion. Retail orders alone reportedly exceeded USD 100 billion. Elon Musk retains 85 percent of the voting control and stands on the verge of becoming the world's first trillionaire. Roughly 30 percent of the offer has been earmarked for retail through Robinhood, Schwab, Fidelity, E*Trade and SoFi, an unusually generous allocation designed to put ordinary investors at the front of the queue from day one.

https://www.statista.com/chart/36315/largest-ipos-of-all-time/

The mechanics deserve a look. The raise implies a free float in the low single digits, perhaps three to four percent of the company. The retail offer is distributed through institutions including Goldman Sachs as lead, with Morgan Stanley, Bank of America, Citigroup and JPMorgan in support. Musk's 85 percent voting control comes through a dual-class structure that the New York and California state pension funds have publicly criticised as 'extreme'.

The numbers behind the headline are sobering. SpaceX posted a Q1 2026 net loss of USD 4.3 billion on revenue of USD 4.69 billion. The Connectivity unit (Starlink) made USD 1.19 billion, while the Space unit lost USD 619 million and the AI unit lost USD 2.5 billion.

Starlink is single-handedly carrying the company.

The S-1 also claims a USD 28.5 trillion total addressable market, and includes a vesting condition for 1 billion of Musk's performance shares that requires SpaceX to establish a permanent human colony on Mars with at least 1 million inhabitants. This is a remuneration trigger.

OpenAI is queueing up directly behind. The ChatGPT maker confidentially filed in late May at a USD 852 billion valuation, with Goldman Sachs and Morgan Stanley leading, targeting a September quarter listing. But there is a tell. The Wall Street Journal reports CFO Sarah Friar has told colleagues the company may need more time, while CEO Sam Altman has been eager to push ahead. The CFO, the person responsible for the numbers, is the one urging caution. OpenAI has reportedly missed multiple internal revenue and user targets, and its lead is now under threat from Anthropic, whose tools are being adopted across the workforce at pace. OpenAI is going public partly because it needs to, having committed more than USD 1.4 trillion to physical infrastructure. The phrase 'stolen a charity', used by Musk in the recently dismissed trial alleging OpenAI improperly converted from a nonprofit research lab, will hang over the prospectus regardless of the verdict. Anthropic is preparing its own listing.

Three deals, perhaps USD 200 billion of equity issuance, in a single year. As a fiduciary, not as a fan of rockets or large language models, my answer is the same as it would have been to a client asking about the South Sea Company in 1720. Probably not, and almost certainly not at the open.

The unromantic data

Jay Ritter at the University of Florida, known in finance circles as 'Mr IPO', has been cataloguing initial public offerings since 1980. US IPOs have, on average, trailed the broader market by roughly two percentage points a year over the three years after listing. Almost two thirds underperform.

Dimensional Fund Advisors found the same in a study of more than 6,000 US IPOs from 1991 to 2018. Dimensional's response is instructive. Their funds deliberately wait, sitting out the first year or so after a listing so that the early froth settles, the lock-ups expire, and at least one to two years of audited public-company financials accumulate before they buy. Dull, patient, and on the evidence, profitable.

Read Dimensional’s study HERE.

Two New Zealand parables

We do not have to travel to Starbase, Texas for the lesson. Two recent local listings sit at opposite ends of the IPO spectrum.

Napier Port listed in August 2019 at $2.60 a share, rose sharply on debut, touched $4.28 by year-end, and today trades in the low $3 range with a steady dividend stream. Not spectacular, but it is what a 150-year-old infrastructure business with predictable cargo volumes is supposed to look like. Decades of audited accounts. A board that knew what it owned. A business you can model on the back of an envelope.

My Food Bag tells the other story. It listed in March 2021 at $1.85, the largest New Zealand IPO by amount raised since 2014. The prospectus glittered. Retail investors, including many existing customers, were warmly invited. The shares fell on day one and kept falling. Today they trade around 29 cents, an 85 percent loss for anyone who bought at issue. A classic private equity exit, with the existing owners taking $51 million in repaid shareholder loans and a $7.1 million pre-listing dividend off the table on the way out. The question not asked loudly enough was the only one that mattered: who is selling, and why now?

The fiduciary filter

Three principles we keep returning to when a client asks about a hot IPO. First, wait for the audited financials. The Dimensional approach of holding off until at least two years of statutory accounts exist as a listed entity is not market timing, it is risk management. Pre-IPO numbers are produced under different incentives.

Second, read who is selling. Founders and venture funds with five-year-old positions do not list out of generosity. Lock-up provisions and use of proceeds tell you more than the forward revenue projection. Third, recognise the window. Ritter's research shows IPOs cluster in optimistic markets and underperform most when issued in those hot windows. Three trillion-dollar AI and aerospace deals queued up in a single year is the textbook definition.

And so, to Amsterdam

Neeltgen Cornelis did rather well. The VOC paid its first dividend in 1610, mostly in spices, and continued paying for the better part of two centuries. But she bought into a business with existing ships, warehouses, a 21-year charter and a recognisable revenue model.

She was not buying a million Martians.

The colossal IPOs of 2026 may yet reward their early shareholders handsomely. Some will. Most, on the historical evidence, will not. When the noise gets loud, seek advice and wise counsel.

Or, if you prefer the older formulation - ask the person who has read the prospectus three times and is still not buying.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

REFERENCES

1. Bloomberg Evening Briefing Americas, 11 June 2026, 'The world's first almost-trillionaire'. SpaceX priced 555.6 million shares at USD 135 each, raising USD 75 billion. Retail orders reportedly exceeded USD 100 billion.

2. Bloomberg Evening Briefing Americas, 20 May 2026, 'SpaceX Files Publicly for Nasdaq IPO Under Symbol SPCX'.

3. The Economist, World in Brief, 21 May 2026, 'SpaceX reaches for the stars'.

4. Morning Brew, 21 May 2026, 'SpaceX shows its finances and future in IPO filing'. SpaceX S-1 prospectus, 20 May 2026: Q1 2026 revenue USD 4.69 billion, net loss USD 4.3 billion; Musk 85 percent voting control; Mars 1 million inhabitants vesting condition; total addressable market claim USD 28.5 trillion; retail distribution via Robinhood, Schwab, Fidelity, E*Trade, SoFi.

5. BusinessDesk (WSJ syndication), 21 May 2026, 'OpenAI is preparing to file for an IPO very soon'. CFO Sarah Friar reportedly told colleagues OpenAI may need more time; Anthropic growing faster on workforce tool adoption.

6. CNBC and Wall Street Journal, 20 May 2026, 'OpenAI to confidentially file for IPO as soon as Friday', valuation USD 852 billion.

7. Ritter, J.R., 'Initial Public Offerings: Underpricing', 1980 to 2025 dataset, University of Florida, Warrington College of Business.

8. Black, S. and Green, K., 'IPOs: Profiles Are High. What About Returns?', Dimensional Fund Advisors, 2019, study of 6,000+ US IPOs 1991 to 2018.

9. RNZ, 'Will your My Food Bag investment ever recover?', May 2025.

10. NZX disclosures, Napier Port Holdings (NPH) and My Food Bag Group (MFB), historical share data.

11. Worldsfirststockexchange.com, Dutch National Archives, VOC charter 20 March 1602, Article 10.

The GDP Trap: Why Technology Sceptics Keep Getting It Wrong

Article #457 - A Canny View on Capital, Productivity and the AI Moment

I was in Wellington last month, watching my son play rugby. Between the lineouts, the bagpipes, and the cheering crowds, I found myself deep in conversation with some of the opposing team's parents (as you do). One of them, it turned out, reads this column. She'd been listening to a podcast during the week and wanted to pick my brain on something that had been bothering her: the idea that technology, the internet, and now AI doesn't move the needle on GDP. Was I convinced? Did I think AI would go the same way?

I told her I'd think about it properly and write it up. So here we are.

The argument is that the internet failed to shift GDP. Productivity growth stayed stubbornly flat through the digital revolution, and AI will likely disappoint in the same way.

Tidy. Plausible. But - wrong.

Start with the measure itself. GDP is the bluntest instrument in the economist's toolkit. It counts what gets transacted, not what gets created. It captures the volume of economic activity, but not the quality of the decisions that drive it. It has no mechanism for measuring time saved, stress reduced, options expanded or freedom gained. Judging technological progress through GDP alone guarantees you miss the point entirely.

Economist Robert Solow noticed this as far back as 1987, when he observed that the computer age appeared everywhere except in the productivity statistics – a phenomenon that became known as the Solow Productivity Paradox.¹ History eventually proved him right, just on a longer lag than the critics expected. Technology hadn’t failed. GDP was simply a poor timekeeper.

Technology is an enabler, not a product

Take the motor vehicle. The combustion engine restructured how people moved, how goods flowed, and how entire societies organised themselves. The GDP figures didn't move immediately in response to this technological feat. Infrastructure had to be built. Habits had to change. Supply chains had to be reimagined, and entirely new industries – fuel, insurance, hospitality, suburban housing – had to emerge. But once those conditions were in place, the uplift was extraordinary. We produced and shipped volumes of goods that would have been incomprehensible to the previous generation. The technology compressed time, distance and cost simultaneously, and returned something more valuable than efficiency: freedom. Freedom of movement, of choice, of attention. We enjoy freedoms our grandparents couldn't have imagined, and GDP only partially accounts for why.² The full value of what technology returns to human life has always been larger than what the national accounts can see.

The internet followed the same pattern: in its infancy, productivity statistics disappointed. Critics pointed to flat lines - exactly the lines we hear cited about AI today. Sceptics declared the revolution oversold. Then, suddenly, everything changed.

Amazon didn't just create a retail channel. It rewrote the rules of commerce, warehousing, logistics and consumer expectation. Google didn't just organise information, it fundamentally altered how knowledge was accessed and shared. The internet became the incubation platform for industries that couldn't previously exist: the gig economy, streaming, fintech, e-commerce, social media, and the vast ecosystem of software-as-a-service that now underpins nearly every business on the planet.³

GDP followed. It always does, eventually - the error is expecting it to lead.

Which brings us to AI, and the real question…

Transformation, or novelty?

The evidence points firmly to the former. AI is not an application. It is infrastructure. Just as the internet built a platform beneath entire industries, AI is now embedding itself beneath every workflow, every decision, every process across every sector simultaneously. Its speed of adoption is faster than any previous general-purpose technology, reaching 100 million users in months rather than the decades it took electricity or the telephone to achieve comparable penetration. The McKinsey Global Institute estimates AI could add between $13 and $22 trillion to the global economy annually by 2030, with generative AI alone contributing $2.6 to $4.4 trillion across industries each year.⁴

Businesses dismissing it as a "nice to have" remind me of Spencer Johnson's parable, “Who Moved My Cheese?”⁵ It describes how those who refuse to adapt are left behind not through any single dramatic moment, but through the slow, steady movement of the world around them. The cheese has moved. It is moving right now. Yet, some are still debating whether it will move at all.

For those of us who allocate capital on behalf of clients, this is not an abstract debate. It is a practical and urgent one, and it cuts to the heart of how we should think about investment discipline in a period of structural change.

History will likely repeat… eventually.

The data clearly tells us that active managers – those who believe they can outthink the market, pick winners and time the turns – have a consistently poor record of doing so. The SPIVA Scorecard, published by S&P Dow Jones Indices, shows that over a 15-year period, nearly 90% of active fund managers underperform their benchmark index.⁶

Across global markets, including Australia and New Zealand, the findings are consistent. The crystal ball is no clearer in professional hands than in the layman's. The complexity of markets, the speed of information and the weight of costs conspire to make consistent outperformance not merely difficult but statistically improbable.

A robust, evidence-based framework protects clients from the most persistent and costly mistakes in investing: reacting to noise, chasing narratives, and confusing confidence with competence.

Understanding AI and its long-term implications is not about picking technology stocks or timing a wave – that’s where you can get into trouble, à la NFTs and other failed hype stocks.

It is instead about recognising when the world is changing structurally, and ensuring that clients are positioned to participate in the full arc of that change over time – through diversified, low-cost and disciplined portfolios. The opportunity is not in predicting which companies win, but in making sure clients are in the game when the GDP finally catches up – because eventually, it will.

The woman I spoke with in Wellington already sensed this. She wasn't asking whether AI was real. She was asking whether the people managing her money understood it well enough to make sound decisions on her behalf – which is exactly the right question to be asking.

Technology enables. Capital follows. The data has never told us otherwise. The sceptics may be right on timing, but history suggests they are wrong on direction.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

---

REFERENCES

1. Solow, R. (1987). We'd better watch out. New York Times Book Review. The observation, "you can see the computer age everywhere but in the productivity statistics", gave rise to what economists termed the Solow Productivity Paradox.

2. Crafts, N. (2004). Steam as a General Purpose Technology: A Growth Accounting Perspective. Economic Journal. Documents the long lag between transformative technology adoption and measurable economic uplift, a pattern repeated across industrial revolutions.

3. Brynjolfsson, E. & McAfee, A. (2014). The Second Machine Age. W.W. Norton & Company. Argues that digital technology's economic impact was systematically underestimated because GDP fails to capture consumer surplus and free digital goods.

4. McKinsey Global Institute (2023). The Economic Potential of Generative AI. McKinsey & Company. Estimates generative AI could add $2.6 to $4.4 trillion annually across industries, with broader AI contributing $13–$22 trillion by 2030.

5. Johnson, S. (1998). Who Moved the Cheese? G.P. Putnam's Sons. A business parable on adaptability and the cost of resisting inevitable change.

6. S&P Dow Jones Indices (2026). SPIVA U.S. Scorecard, Year-End 2025. Over a 15-year horizon, 90% of large-cap active managers underperformed the S&P 500. Consistent findings are reported across global markets including Australia and New Zealand.

Iran, Oil, and Your Retirement Savings: Separating the Signal from the Noise

Article # 447

The New Zealand media has had a busy week connecting the US and Israeli strikes on Iran to your wallet. Some of it is legitimate. Some of it is noise dressed up as financial guidance. Knowing which is which - now that’s useful.

Let's start with what’s real.

The Strait of Hormuz: A known pressure point

The Strait of Hormuz is a roughly 33km-wide chokepoint between the Persian Gulf and the Gulf of Oman. Around 20% of the world's daily oil supply and a similar share of global liquefied natural gas trade passes through it every single day, mostly bound for China, India, Japan, and South Korea.¹

This waterway has been a pressure point for decades. Iran mined it during the Iran-Iraq War in the 1980s, prompting direct US military intervention in what became known as the Tanker War (during which more than 500 vessels were damaged or destroyed).² In December 2011, Iran threatened closure in response to Western sanctions, triggering the deployment of a US-British-French naval flotilla. In 2019, tanker seizures and attacks on shipping spiked tensions again. In June 2025, Israel's strikes on Iranian nuclear facilities prompted Iran's parliament to pass a motion recommending closure, though that did not materialise into a full blockade.³

The point is this: the Strait of Hormuz has been a geopolitical instrument for Iran for more than 40 years. Successive US administrations, allies, and global energy markets have navigated those threats repeatedly. Every episode generated alarming coverage. Yet every episode passed. That does not make the current situation trivial, but it does provide context that breathless headlines rarely bother to include.

New Zealand's real exposure

Importantly, New Zealand has direct and specific economic exposure to this conflict.

According to the Meat Industry Association (MIA), nearly all of New Zealand's red meat exports to the Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE) travel through the Strait of Hormuz. In 2025, that trade was valued at $298 million, including $166 million in chilled exports, which are the most time-sensitive.⁴

Supply chain firm Kotahi, which handles freight on behalf of Fonterra and Silver Fern Farms, has confirmed that all major shipping lines have suspended services through the strait, with some 4,000 containers of New Zealand export cargo currently in transit.⁴

Fuel prices are also a legitimate concern. New Zealand no longer imports crude directly from the Middle East, but petrol is priced in a global market. Brent crude spiked more than 8% when trading opened after the weekend strikes.⁵ Analysts at JPMorgan and Citigroup have warned that sustained disruption could embed a significant geopolitical premium for weeks.

The New Zealand Ministry of Foreign Affairs and Trade has noted that rising fuel costs do not just show up at the pump. They pervade the economy through transport, logistics, and consumer prices – and may force the Reserve Bank to respond with always-dreaded interest rate adjustments.⁶

One lesser-discussed exposure: approximately one-third of the world's fertiliser trade also passes through the Strait of Hormuz, meaning prolonged disruption could eventually flow through to agricultural input costs. This is directly relevant to a primary-export economy like New Zealand's. ⁷

So yes, there are real and specific things worth monitoring here. Beyond fearmongering, we must consider geography and economic forces decades in the making.

Now for the noise...

Here’s where some of the coverage starts to serve the headline more than the reader.

At 7:56 am on Monday, 2 March, before Wall Street had even opened for the day, 1News published a piece headlined "Iran attack sparks warning for KiwiSaver, fuel, inflation."

Readers were told to brace for volatility, expect red ink in their KiwiSaver, and anticipate a flight to safer assets.⁸ By the time New Zealand investors had read that article over their morning coffee, absorbed the alarm, and perhaps reached for their phones to switch funds... Wall Street had opened, dipped 1.2%, and was already recovering. The S&P 500 closed that Monday virtually unchanged, finishing the session up just 0.04%.⁹

The warning had outrun the facts by an entire trading day.

Alarming coverage is produced in real time, often ahead of the facts. By the time reality arrives, in this case, a market that largely shrugged off the initial shock and bought the dip, most people have already absorbed the panic as truth and may have acted on it.

Advising the average investor to urgently check their KiwiSaver balance and consider switching funds is, for most people, bad advice dressed up as financial concern. This applies equally to any well-constructed investment portfolio underpinned by a comprehensive financial plan.

The latest data from the Retirement Commission puts the average KiwiSaver balance at $37,079 and the average member age at approximately 44.¹⁰ That means the typical New Zealand investor has roughly 20 to 25 years of accumulation ahead before they reach 65. Long-term KiwiSaver growth funds have historically returned between 7% and 9% annually.¹¹ Across that kind of horizon, even a meaningful short-term market dip is a rounding error in the final outcome.

The pattern markets have seen repeatedly, last June's brief Israel-Iran exchange being a useful recent reference point, is as follows:

1. Equity markets sell off sharply on geopolitical shock.

2. They recover once it becomes clear the worst-case scenario has not materialised.

3. Investors who switched to conservative funds during that episode locked in losses they then missed recovering as markets rebounded.

The same logic applies whether you hold KiwiSaver,  managed funds, or a direct share portfolio.

A comprehensive financial plan is engineered to withstand volatility. Abandoning it because of a week of alarming headlines is not a financial decision; it is an emotional one.

Four genuine reasons to review your investments

The right time to review your asset allocation or contribution settings is when your circumstances change — not when the news cycle does.

1. Has your income shifted significantly?

2. Are you approaching 65 and still in an aggressive growth fund that no longer reflects your timeline?

3. Has your risk tolerance genuinely changed — not because of a week of coverage, but because of a considered, honest look at your financial position and goals?

4. Are there changes to your broader financial plan that warrant a portfolio rebalance? These are all valid triggers for a conversation with your financial adviser.

But if your goals, your timeline, your income, and your broader financial picture are the same today as they were a fortnight ago, and for most people they are, the rational position is to stay the course.

A well-built investment portfolio is designed to absorb decades of global volatility. Many such portfolios have weathered the Global Financial Crisis, the COVID-19 crash, the 2022 rate shock, and last June's regional conflict. Each of those episodes generated similar headlines. Each time, disciplined investors who stayed the course came out ahead of those who did not.

When others are running from the fire

Warren Buffett has made a career of running towards financial fires, not away from them. Writing in the depths of the Global Financial Crisis, his philosophy spoke to financial discipline over the furore of the day: "Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down."¹²

The irony of a market downturn? Precisely when assets go on sale is when most investors want nothing to do with them; it’s when they are expensive and rising that everyone wants in. Buffett's instruction has always been the opposite: be fearful when others are greedy, and greedy when others are fearful. That’s not a comfortable stance when headlines are blaring an alarm. But discomfort and bad decision-making are not the same thing.

This is where a structured, disciplined rebalancing strategy earns its keep.

When equities fall, and fixed income or defensive assets hold their ground, a rebalancing framework triggers a deliberate, rules-based response: trim what has held up, add to what has fallen. Not because of a hunch. Not because of a headline. Because the plan said so before any of this happened.

That’s the discipline Buffett is describing. Not panic, not paralysis — but a pre-committed process that removes emotion from the equation and replaces it with structure. The investors who do best through periods like this are not the ones who predicted the conflict or called the bottom. They’re the ones who had a plan, stuck to it, and let systematic rebalancing do what it was designed to do.

Discipline pays off

The media's job is to make you read the next paragraph. Your financial plan's job is to compound quietly over decades. These two objectives are not aligned – and it’s worth remembering that when the very same article explaining why oil prices are rising pivots abruptly to urging you to check your KiwiSaver.

There is genuine news here worth following closely: shipping disruptions, petrol prices, fertiliser costs, red meat export disruptions, and what unfolds in the Strait of Hormuz over the coming weeks are all legitimately important to New Zealand households and businesses. Read those stories. Understand the exposure.

But when the coverage drifts into urging reactive investment decisions based on today's headlines, that is where you put the phone down, flick on the kettle, and make yourself a brew instead of making rash investment decisions.

Your future self will thank you.

---

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

• Article no. 447

---

References

[1] US Energy Information Administration. (2024). Strait of Hormuz — World's Most Important Oil Chokepoint. https://www.eia.gov/international/analysis/special-topics/World_Oil_Transit_Chokepoints

[2] Ratner, M., Lawson, A., & Brock, J. (2025). Iran Conflict and the Strait of Hormuz: Oil and Gas Market Impacts. Congressional Research Service. https://www.congress.gov/crs-product/R45281

[3] Times of Israel. (2026, March 1). Strait of Hormuz: Key Oil Route in Middle of Iran Crisis. https://www.timesofisrael.com/strait-of-hormuz-key-oil-route-in-middle-of-iran-crisis/

[4] Meat Industry Association NZ / Kotahi NZ. (2026, March 1). Statements on Strait of Hormuz shipping disruption. Reported in NZ Herald. https://www.nzherald.co.nz/business/us-iran-conflict-threatens-nz-red-meat-exports-via-strait-of-hormuz

[5] Franck, T., & Imbert, F. (2026, February 28). Markets Brace for Impact After US Strikes Iran. CNBC. https://www.cnbc.com/2026/02/28/markets-brace-for-impact-following-us-military-strikes-against-iran.html

[6] New Zealand Ministry of Foreign Affairs and Trade. (2025, July). NZ Economy Not Immune to Conflict in the Middle East. https://www.mfat.govt.nz/en/trade/mfat-market-reports/nz-economy-not-immune-to-conflict-in-the-middle-east-july-2025

[7] Stojanovic, U., & Bradshaw, T. (2026, March 1). Strait of Hormuz: If the Iran Conflict Shuts the World's Most Important Oil Chokepoint, Global Economic Chaos Could Follow. The Conversation. https://theconversation.com/strait-of-hormuz-if-the-iran-conflict-shuts-worlds-most-important-oil-chokepoint-global-economic-chaos-could-follow-277199

[8] Edmunds, S. (2026, March 2). Iran Attack Sparks Warning for KiwiSaver, Fuel, Inflation. RNZ / 1News. Published 7:56am. https://www.1news.co.nz/2026/03/02/iran-attack-sparks-warning-for-kiwisaver-fuel-inflation/

[9] CNBC Markets Desk. (2026, March 2). Stock Market Today: S&P 500 Ends Monday Just Above the Flatline, Rebounding from Sharp Declines. CNBC. https://www.cnbc.com/2026/03/01/stock-market-today-live-update.html

[10] Reyers, M. (2025, March). KiwiSaver Member Data — December 2024. Te Ara Ahunga Ora Retirement Commission / Melville Jessup Weaver. Reported in: Edmunds, S. What Average KiwiSavers' Balances Are at Your Age. RNZ News. https://www.rnz.co.nz/news/business/545015/what-average-kiwisavers-balances-are-at-your-age

[11] MoneyHub NZ. (2024). Average KiwiSaver Balance by Age. https://www.moneyhub.co.nz/average-kiwisaver-balance-by-age.html

[12] Buffett, W. (2008). Berkshire Hathaway Inc. Chairman's Letter to Shareholders. Berkshire Hathaway. https://www.berkshirehathaway.com/letters/2008ltr.pdf

Fonterra Sale: A Once-in-a-Generation Opportunity for Financial Balance

Article # 446

Fonterra's shareholder approval of the $3.2 billion capital return from the Mainland Group sale has now been rubber-stamped. Farmers are set to receive an average of $392,000 per operation—some larger operations receiving over $2-3 million.¹

The deal, which saw 88% support back in October when the $4.2 billion sale to French dairy giant Lactalis was approved, represents a watershed moment for New Zealand dairy farmers. Last week's special meeting confirmed the capital return arrangements through a scheme of arrangement, with settlement expected any time between now and the end of March.²

JHVEPhoto - stock.adobe.com

Around 60% of shareholding farms will receive at least $200,000, while some of the co-op's largest shareholders will receive over $2-3 million. Southland's Fortuna Group, with more than 4.4 million shares, will receive close to $9 million, while state-owned farmer Pāmu could receive $10 million.²

This reflects the sector's strategic maturity and forward-thinking approach to wealth creation beyond a single generation. It's a recognition that the most resilient farming families build diversified financial structures that can support their operations and families through all market cycles.

The balance of the sale proceeds is being retained by Fonterra to reinvest in its ingredients and foodservice businesses, with some cash used to retire debt or applied as working capital. Fonterra forecast its balance sheet metrics to stay in line with targets, being debt to EBITDA of less than 3x and gearing of 30-40%.²

Understanding Real Returns: The Smart Farmer's Perspective

Savvy farmers know headline numbers don't tell the whole story.

While the recent $10.16 per kilogram of milk solids farmgate price represents a nominal record,³ astute operators understand the critical importance of inflation-adjusted returns when assessing true profitability.

The previous high-water mark came in the 2013/14 season at $8.40 per kilogram.⁴ At first glance, this suggests farmers are now receiving approximately 21% more per kilogram than they did eleven years ago. However, this comparison becomes meaningless when examined through the lens of actual input cost inflation that has fundamentally transformed farm economics.

The rising cost of production

Between 2019 and 2024, the average total cost for milk production across major exporting regions increased by around 14%, with over 70% of that increase occurring since 2021.⁵ While on-farm inflation peaked at 10.2% in the year to March 2022,⁶ costs remained elevated through 2023 before moderating slightly in 2024. However, the cumulative impact since 2013 is huge.

The structural cost uplift is evident across every input category. From 2018-19 to 2024-25:

• Interest costs for an average dairy farm rose 86.5%, from $187,182 to $246,416 annually.⁷

• Insurance costs increased approximately 33% over five years, with insurance premiums now succeeding fertiliser and interest rates as a major cost pressure in 2024.⁸

DairyNZ estimates dairy operating expenses reached $8.16 per kilogram of milk solids in 2022/23, up sharply from $7.23 in 2021/22.⁹ The national break-even farmgate milk price for the 2024/25 season is $7.76 per kilogram of milk solids.¹⁰

Fertiliser costs saw some products skyrocket from $799 per tonne to $1,800 per tonne during the peak inflation period.¹¹ While prices moderated in 2024 (declining 4.2% in the sheep and beef sector),¹² the cumulative impact of years of price escalation remains embedded in farm cost structures. Additionally, feed costs for dairy farms rose 28.2% between 2020-21 and 2022-23.¹³

Added pressure from interest rates

While the Official Cash Rate has fallen to 2.25%, medium and longer-term fixed mortgage rates have been rising since December 2025. Wholesale interest rates have increased more than half a percentage point since November, with banks lifting 2-5 year fixed rates accordingly.

ASB's 2-year rate now sits at 4.95% and 3-year at 5.19%, while Westpac's 4-year rate has risen to 5.19% and 5-year to 5.29%.¹⁴ Markets are pricing in potential OCR hikes from mid-2026 as inflation sits at 3.1%, above the Reserve Bank's 1-3% target band.¹⁴

This dynamic creates renewed debt servicing pressure for farmers despite the falling OCR. The disconnect between short-term policy rates and longer-term borrowing costs reflects market expectations about future inflation and the eventual return to higher rates.

Smart farmers recognise this reality: $10 per kilogram milk price (while excellent in nominal terms) represents the outcome of working harder, investing more capital, and operating more efficiently within a structurally higher cost environment. When you strip away the nominal gains and examine purchasing power, farmers aren't substantially better off than they were at the previous peak. They've simply adapted to significantly higher operating costs.

The best operators understand that sustainable wealth creation requires thinking strategically beyond the farm gate. Relying solely on commodity price increases that barely keep pace with input cost inflation is not a wealth-building strategy, it's survival.

Extreme Volatility Demands Resilience

Recent price swings have been dramatic, rapid, and unpredictable – proving why wealth structures beyond farm gate are essential for multi-generational farming families.

The season opened in August 2025 with Fonterra forecasting a midpoint of $10 per kilogram with a wide range of $8-$11 per kilogram.¹⁵ For several months, this appeared achievable as prices held firm.

December’s dairy downturn

After nine consecutive Global Dairy Trade auction declines, Fonterra cut its farmgate milk price forecast for the second time in the season in December. It dropped from the season-opening midpoint of $10 per kilogram down to $9 per kilogram with a narrowed range of $8.50-$9.50.¹⁶ Whole Milk Powder prices had fallen 5.7%, having declined nearly 28% from their May peak.¹⁶

Market commentary was uniformly bearish, with analysts warning of sustained supply-side pressure and global milk flows outstripping demand. The outlook was grim. Farmers adjusted budgets, planned for lower cashflows, and braced for a difficult season.

Then, in a remarkable reversal, the market staged a recovery.

An unexpected upswing

Four consecutive positive Global Dairy Trade auctions saw prices surge back to September levels.¹⁷ Whole Milk Powder, which accounts for half the auction by volume and has the greatest influence on farmgate milk price, rose 2.5% to US$3,706 per metric tonne in late February. Skim milk powder increased 3% to US$2,973 per metric tonne, while butter surged 10.7% to US$6,347 per metric tonne.¹⁷

Last Friday (February 20, 2026) Fonterra responded to this market recovery by lifting its forecast again, just ten weeks after the December cuts. The co-op raised the midpoint from $9.00 to $9.50 per kilogram with a new range of $9.20-$9.80.¹⁸ CEO Miles Hurrell cited "recent improvements in global commodity prices combined with Fonterra's well contracted sales book."¹⁸

Additionally, Fonterra announced a special dividend of 14-18 cents per share from the entire fiscal 2026 underlying earnings generated by Mainland Group, payable following the completion of the sale to Lactalis.¹⁸

Volatility as a hard-learned lesson

This whipsaw journey (from $10, to $9, to $9.50) over the course of just four months illustrates the fundamental challenge facing farming families who depend entirely on commodity prices for wealth creation.

These aren't gradual, predictable shifts that allow for careful planning. They're rapid, material changes driven by global supply and demand dynamics that individual farmers cannot influence or accurately predict. In August, the outlook appeared strong. By December, it appeared dire. By February, it had recovered.

What will it look like in May? July? No one knows.

This volatility creates genuine financial planning challenges for families trying to build intergenerational wealth. How do you plan for retirement, fund the next generation's education, or structure succession when your primary income source can swing 10-20% in a matter of weeks?

Critically, even as Fonterra lifted its forecast, CEO Hurrell acknowledged that "global milk production remains above seasonal norms, meaning the risk of further volatility in pricing remains."¹⁸ In other words, yesterday's good news could reverse again next month. The unpredictability is structural, not temporary.

History guarantees there’ll be another downturn. You need to establish whether your family's financial security depends entirely on timing those cycles correctly, or whether you've built diversified wealth structures that can weather volatility while continuing to generate real returns.

Learning from the Best for Diversification

The most successful farming enterprises share one common characteristic: off-farm assets that aren't correlated to dairy commodity cycles.

The farm is the engine of wealth generation, but it shouldn't be the sole repository of wealth. Diversification creates financial resilience, provides genuine optionality, and reduces dependence on factors beyond the farm gate.

Strategic diversification into property, shares, managed funds, or other investments can provide income streams that aren't dependent on global dairy prices, exchange rates, or seasonal conditions. These assets have the potential to generate real returns above inflation. They can create genuine wealth growth, rather than simply keeping pace with rising costs.

Diversification also provides crucial liquidity that farm assets cannot deliver. When opportunities arise—whether that's acquiring neighbouring land, investing in new technology, or supporting the next generation's education—liquid investments can be accessed without forcing farm asset sales at potentially disadvantageous times. When emergencies occur, diversified wealth provides options and reduces stress.

This builds a comprehensive financial strategy that supports both farm and family for generations. The farm remains the core productive asset and the foundation of family identity and purpose – within a broader wealth structure providing stability, optionality, and genuine financial security through all market conditions.

Many farmers intend to reinvest this capital return into their farming operations.² This makes sense for operations with clear productivity improvements available. However, the most strategic approach balances on-farm reinvestment with genuine diversification beyond the farm gate.

There’s a question every farming family should ask: if we reinvest everything back into the farm, are we building wealth – or simply maintaining our exposure to a single asset class subject to extreme volatility and structural cost inflation?

Ensuring Quality Advice

As farmers contemplate deploying this imminent capital, the relationship with their financial adviser becomes paramount. This may be the largest single capital deployment decision many farming families ever make. Getting it right requires an adviser who is genuinely and legally committed to putting your interests first.

Will your adviser provide a written statement affirming that the advice relationship is of a fiduciary nature, where your interests unequivocally surpass those of the adviser?

Under New Zealand's financial advice regime, advisers are legally required to put their clients' interests first when giving advice and to prioritise their clients' interests over any conflicts.¹⁹ However, requiring your adviser to put this commitment in writing—in clear, unambiguous language—separates those who truly embrace fiduciary responsibility from those who simply meet minimum compliance standards.

Request a letter explicitly stating that all recommendations will prioritise your long-term financial wellbeing over commission structures, conflicts of interest, product preferences, or any other adviser considerations. This letter should confirm:

• That the adviser will put your interests unequivocally ahead of their own

• That they will disclose all conflicts of interest proactively

• They will recommend only investments and strategies that serve your long-term objectives

• Their compensation will be structured in alignment with your success

• They will provide ongoing accountability for the advice given

If an adviser hesitates or refuses to provide this written commitment, that tells you everything you need to know about where their priorities truly lie. The best advisers welcome this clarity because it aligns with how they already operate.

It’s not about distrust—it's about establishing crystal-clear accountability in what may be the most significant financial planning exercise of your farming career.

Payment is Imminent – What About a Plan?

The timeline has crystallised. With settlement expected between now and the end of March,² farmers have mere weeks before capital arrives. The Overseas Investment Office approval cited the $3.2 billion direct injection of capital to New Zealand farmers as a strong economic benefit, alongside Lactalis' $100 million capital expenditure commitment and ongoing supply arrangements.² Finance Minister Nicola Willis confirmed the transaction met the "benefit to New Zealand test."²

For farmers who haven't yet engaged in comprehensive financial planning, the time to act is now—not after the money arrives. Once capital is in the bank account, the psychological pressure to "do something" with it can lead to reactive decisions, not strategic ones.

Execute on robust financial planning that diversifies wealth beyond agricultural assets into uncorrelated investments, creates multiple income streams independent of commodity cycles and inflation erosion, structures tax-efficient wealth transfer to the next generation, provides financial resilience and liquidity against future market downturns, and builds genuine intergenerational wealth that can support family objectives for decades.

Work with advisers now to develop comprehensive plans, have thorough family discussions about objectives and succession, and ensure structures are ready for when the capital arrives. The planning should happen now; the deployment happens when the money is in your account.

The Bottom Line

The dairy sector has proven its resilience, discipline, and strategic thinking through multiple crisis periods. But dependence on commodity prices alone creates unnecessary risk for farming families seeking to build multi-generational wealth.

Now, thanks to the Fonterra sale, farmers can take the next strategic step—building financial structures that weather all cycles and generate real wealth across generations. Beyond the next season, or even the next decade, this is about creating financial security that supports your family's farming legacy for the next century.

The question becomes whether you'll deploy the capital strategically, with proper advice, appropriate diversification, with explicit attention to generating real returns above inflation.

With capital arriving imminently and markets demonstrating their unpredictability daily, the time for planning is now. The most successful farmers will approach this thoughtfully, strategically… and with professional, fiduciary guidance that puts their interests unequivocally first.

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe,
Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

• Article no. 446

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References

1. BusinessDesk (19 February 2026). "Fonterra farmers set to rubber stamp $3.2b Mainland Group capital return". ASB estimated average return at $392,000, with 60% receiving at least $200,000.

2. BusinessDesk (19 February 2026). Settlement expected between now and end of March 2026.

3. NZ Herald (26 September 2025). Final farmgate milk payout reached $10.16 per kilogram of milk solids.

4. NZ Herald (18 March 2025). In 2013/14 season, Fonterra paid $8.40/kg.

5. Rabobank (18 February 2025). Between 2019 and 2024, average total cost increased 14%, with over 70% since 2021.

6. NZ Herald (22 August 2022). On-farm inflation 10.2% for year to March 2022.

7. Farmers Weekly (4 June 2024). Interest costs rose 86.5% from $187,182 (2018-19) to $246,416 (2024-25).

8. USDA (2025). In 2024, insurance premiums succeeded fertiliser and interest rates as major cost pressure.

9. Infometrics (August 2023). Operating expenses at $8.16 per kgMS in 2022/23.

10. DairyNZ (2024). Break-even at $7.76 kg/MS for 2024/25.

11. NZ Herald (22 August 2022). One fertiliser increased to $1,800/tonne from $799/tonne.

12. Beef + Lamb NZ (June 2024). Fertiliser declined 4.2% in 2023-24.

13. DairyNZ. Feed costs rose 28.2% between 2020-21 and 2022-23.

14. RNZ (9 February 2026) and Opes Partners (25 February 2026). ASB: 2-year at 4.95%, 3-year at 5.19%; Westpac: 4-year at 5.19%, 5-year at 5.29%. Wholesale rates up over half a percentage point. Note: BNZ reversed recent rate hikes on 27 February 2026, cutting 3-year to 4.99%, 4-year to 5.19%, 5-year to 5.29%.

15. Fonterra (August 2025). Season opened at $10/kg midpoint with range $8-$11/kg.

16. Farmers Weekly (18 December 2025). Fonterra cut forecast to $9/kg midpoint, range $8.50-$9.50, following nine consecutive GDT declines.

17. BusinessDesk (19 February 2026). WMP rose 2.5% to US$3,706/MT, SMP 3%, butter 10.7% following four consecutive positive auctions.

18. Reuters/Fonterra (20 February 2026). "NZ's Fonterra lifts annual milk price forecast, teases special dividend". New midpoint $9.50/kg, range $9.20-$9.80. Special dividend 14-18 cents per share from Mainland Group FY26 earnings. CEO noted volatility risk remains.

19. FMA New Zealand. Advisers must put client's interests first.

The DIY Investment Trap: Why New Zealanders Need to Play the Net Game

Article # 444

The democratisation of investing has transformed the financial landscape. Where once only institutional investors had access to sophisticated investment vehicles, today's retail investors can build diversified portfolios with a few clicks on their smartphones. Exchange-traded funds (ETFs) have been at the forefront of this revolution: in the United States, they now represent half of all listed funds[1], a remarkable shift that reflects their popularity and accessibility. 

The investment supermarket has expanded exponentially, offering strategies across listed and unlisted assets, domestic and international markets, and countless sectors and themes. From tech giants like Apple and Nvidia to broad market indices, bond funds to commodity trackers, the barriers to entry have never been lower.  

A generation ago, building a globally diversified portfolio required significant wealth and professional intermediaries. Today, it requires a brokerage account and an internet connection. 

But more choice doesn't automatically mean better outcomes. In New Zealand, there's a growing cohort of DIY investors who are playing the gross game when they should be playing the net game. They're watching their portfolio balances grow, celebrating double-digit returns, and comparing performance with friends… all whilst ignoring the substantial tax implications that will ultimately determine their real wealth accumulation. 

The Bracket Creep Reality 

New Zealand's tax landscape has shifted dramatically, yet many investors haven't adjusted their thinking accordingly. A significant number of Kiwis now find themselves in the 33% tax bracket (income between $70,000 and $180,000) or even the 39% bracket for those earning over $180,000, often without realising it until after 31 March when their tax returns are typically filed.[2] 

This isn't always due to massive salary increases or career progression. Bracket creep, driven by wage inflation without corresponding tax threshold adjustments, is quietly pushing more New Zealanders into higher tax brackets each year[3]. As wages rise to keep pace with the cost of living, the tax system captures an increasingly large slice of that income. What once seemed like a tax bracket reserved for high earners has become surprisingly accessible to middle-income professionals. 

But there's another factor many overlook when calculating their tax position: total earnings extend far beyond salary. Consider the full picture of your financial life. That cash sitting in the bank, even at relatively low interest rates, generates taxable income[4]. It might not seem like much on an individual transaction basis, but across multiple accounts and a full tax year, it adds up. 

Trust distributions, company dividends, rental income from investment properties, and profits from share trading; these all contribute to your taxable income.  

Many investors are genuinely surprised when they discover their effective tax rate is higher than anticipated, simply because they've been thinking about salary in isolation rather than total taxable income.  

The Hidden Consequence 

When you buy shares in Nvidia, Apple, or any other direct shareholding, or when you invest in ETFs tracking international markets, you're creating taxable events. Under New Zealand's tax rules, particularly the Foreign Investment Fund (FIF) regime, these investments generate tax obligations that must be included in your annual return[5]. 

The FIF rules are complex and often misunderstood. Many investors assume they only pay tax when they sell. In reality, they may be liable for tax on deemed income each year, regardless of whether they've sold anything. Yet a startling number of investors either don't realise this or don't adequately account for it in their investment strategy. 

They're focused on gross returns (the headline numbers showing how much their portfolio has grown) without applying a tax overlay to understand their true, net position. They celebrate when their tech stock portfolio rises 25%, but forget to calculate what that means after tax obligations are met. 

How We Got Here 

For roughly 25 years, New Zealand maintained a relatively flat tax structure with a top rate of 33%[6]. The tax environment was stable and predictable. Investors could make reasonably informed decisions knowing that their tax position would remain relatively constant. 

But the introduction of the 39% top tax rate in 2021[7], combined with the absence of inflation indexing for tax brackets, has fundamentally changed the game. Each year, more New Zealanders cross into higher tax brackets not because they're genuinely wealthier in real terms, but simply because thresholds haven't kept pace with inflation. 

The compounding effect is significant. A professional who was comfortably in the 30% bracket (or lower) a decade ago might now find themselves in the 33% or even 39% bracket, despite their real purchasing power having barely changed. The tax burden has increased substantially, yet investment strategies have often remained unchanged. 

Gross Returns vs Net Reality 

An investment delivering a 10% gross return might sound attractive, but if you're in the 39% tax bracket and a significant portion of that return is taxable under the FIF rules, your net return tells a very different story. Suddenly that 10% might be closer to 6% or 7% after tax. It’s still positive, but materially different from the headline figure. 

This distinction becomes even more critical when comparing investment options. A lower-gross-return investment with tax advantages might deliver superior after-tax returns compared to a higher-gross-return investment that's tax-inefficient for your circumstances. 

You don't want to win the battle only to lose the war. Chasing gross returns without understanding the net outcome is a pyrrhic victory – it looks impressive on portfolio statements but delivers disappointing real-world results when tax time arrives. 

The Silo Trap 

Even when investors recognise the need for professional advice, they can fall into another trap: the silo regime. Perhaps influenced by barbecue conversation about diversifying across advisers – “don't put all your eggs in one basket, mate” – some investors split their portfolio. They might allocate $750,000 here with one adviser, another substantial chunk there with a second, and perhaps a third portion elsewhere for good measure. 

The logic seems sound on the surface. After all, diversification is a fundamental investment principle, so why not diversify your advisers too? It provides a sense of security, multiple perspectives, and perhaps even keeps each adviser "honest" through implicit competition. 

You’re essentially asking each adviser to play with one hand tied behind their back. 

No single adviser in this fragmented arrangement understands your complete tax position. They can't see the full picture of your income sources, your various investment vehicles, or how different components of your portfolio interact from a tax perspective. They're optimising for their slice of your wealth without any visibility into the whole. 

One might be selecting investments that generate substantial taxable income, unaware that another adviser is doing the same thing, pushing you into a higher tax bracket than necessary. Or they might be duplicating strategies, eliminating the diversification benefits you sought by splitting your portfolio in the first place. 

Each adviser might be doing an excellent job with their portion, yet your overall outcome remains suboptimal because no one is orchestrating the tax efficiency of the complete picture[9].  

It's the financial equivalent of having multiple chefs each cooking one course of a meal without coordinating the menu. You might end up with three excellent dishes that don't work together at all. 

Why You Need a Financial Adviser 

Professional guidance matters. And not just any adviser, but one who can see your complete financial picture and implement a coordinated, tax-efficient strategy across all your assets. 

Investment success isn't measured by individual account performance. It's measured by your actual, after-tax wealth accumulation. An adviser with a holistic view can structure investments in ways that are tax-efficient for your specific circumstances, recognising that different investment vehicles have different tax treatments and that your personal tax situation is unique. 

They can help you understand whether PIE funds, direct shares, or other investment structures make the most sense for your position. They can coordinate the timing of income recognition, manage your exposure to FIF rules, and ensure your overall portfolio is working towards your net wealth goals rather than simply chasing gross returns. 

When seeking advice, look for a fee-only, unconflicted fiduciary adviser[10]. This ensures their recommendations are driven by your best interests, not commission structures or product sales targets. A fiduciary is legally obligated to put your interests first—a distinction that matters profoundly when navigating the complex intersection of investment strategy and tax planning. 

Fee-only advisers are compensated for their advice and service, not for selling particular products. This alignment of interests is crucial when you need objective guidance on tax-efficient structuring rather than a sales pitch for the highest-commission product. 

The Path Forward 

The DIY investment revolution isn't going away, nor should it. Access to investment opportunities is fundamentally democratising and positive. But as the New Zealand tax environment becomes increasingly complex, investors need to evolve their approach. 

Understanding your total tax position, applying a tax overlay to investment decisions, and focusing relentlessly on net returns rather than gross figures—these aren't optional luxuries. They're necessities for anyone serious about building wealth in today's environment. 

The supermarket aisle may be longer than ever, offering more choice than any previous generation of investors could have imagined. But choosing wisely requires understanding the true price you're paying; not just the label on the shelf, but the price after tax.  

The game has changed. Make sure you're playing it properly. 

Nick Stewart

(Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha)

Financial Adviser and CEO at Stewart Group

• Stewart Group is a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm providing personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

• Article no. 444

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References

[1] Investment Company Institute, 2024 data on US ETF market share  

[2] Inland Revenue Department, "Individual income tax rates" (current as of 2024-25 tax year)  

[3] New Zealand Treasury, "Fiscal drag and bracket creep analysis," 2024  

[4] Inland Revenue Department, "Resident withholding tax on interest"  

[5] Inland Revenue Department, "Foreign investment fund rules and portfolio investment entities"  

[6] New Zealand Tax History, "Top personal tax rates 1988-2021"  

[7] Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021  

[8] Financial Advice New Zealand, "The importance of holistic financial planning," professional standards guidance  

[9] Chartered Accountants Australia and New Zealand, "Tax-effective wealth management strategies," 2024

[10] Financial Markets Authority, "Financial adviser disclosure requirements and fiduciary standards," Financial Markets Conduct Act 2013