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.

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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.

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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.

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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

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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.

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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

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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 Red Baron's Dicta: Timeless Lessons in Discipline and Risk

Article #453

April 21st marks the anniversary of Manfred von Richthofen's death: the legendary Red Baron who claimed 80 aerial victories before falling at just 25 years old.

Since childhood, I've been captivated by his story. Here was an aerial combat pioneer and crack shot hunter since his youth, who transformed the chaos of dogfighting into a disciplined science. What makes his story relevant for investors isn't his success, but how he achieved it through disciplined adherence to proven principles – and ultimately, how he lost everything by abandoning them in a single moment of exuberance.

From Hunter to Ace

Von Richthofen's foundation as a hunter shaped everything that followed. Before he ever climbed into a cockpit, he'd spent years stalking game on his family's Silesian estate, learning patience, precision, and the critical importance of positioning. A hunter doesn't charge blindly at prey; he studies wind direction, uses terrain for cover, and waits for the perfect shot. Honed since boyhood, these instincts would prove invaluable in the skies above the Western Front.

He brought this hunter’s mentality with him when he transferred to the Imperial German Air Service in 1915. He learnt his craft from Oswald Boelcke, the era's preeminent fighter tactician, whose maxims established fundamental rules for air combat. But von Richthofen didn't simply follow his mentor's teachings; he refined them through his own experience into his own dicta – an effective combat manual that became the foundation for his legendary Flying Circus.

The Dicta: A Hunter's Discipline Applied to Combat

The Baron's rules were precise and probabilistic, each designed to stack advantages systematically.

• Secure advantages before attacking: altitude, sun position, numerical superiority. Like a hunter choosing his ground, never engage until the odds favour you.

• Attack from behind where opponents can't see you, just as a hunter approaches game from downwind.

• Fire only at close range when your target is properly in your sights – ammunition is limited, and wild shots achieve nothing.

• Always carry through an attack once started. Half-measures waste the advantage you've worked to secure.

• Keep your eye on your opponent; never let them trick you into looking away. A hunter who loses focus on his quarry finds himself suddenly the hunted.

• When threatened, don't evade—turn and face the attack. Running reveals your vulnerability; confronting the threat keeps you in control.

• Over enemy lines, always remember your line of retreat. Know where safety lies, just as a hunter always knows the path back to camp.

He drilled his pilots in these tactics as they flew, pairing them as leader and wingman, spaced 60 metres abreast to allow room for manoeuvre without collision. They flew in tight formation, massing their power for coordinated strikes. This ensured every engagement began with probability tilted in their favour.

The Flying Circus became legendary for systematic execution. Von Richthofen applied that hunter's patience to aerial warfare, refusing to engage unless conditions favoured him. His bright red Fokker Dr.I triplane was essentially psychological warfare, announcing his presence and unnerving opponents before the first shot was fired.

Manfred von Richthofen (centred) with his mentor Hauptmann Oswald Boelcke (left) and Reserve Lieutenant Max Immelmann (right)

From Nick Stewart’s personal collection

Stacking Structural Advantages in Investing

Just as von Richthofen never attacked without multiple advantages working simultaneously, successful investing requires layering structural advantages that compound over time:

Numerical superiority: Broad diversification reduces unsystematic risk. Rather than betting everything on a single stock or sector, spread exposure across asset classes, geographies, and market capitalisations. You're not dependent on any single position succeeding, giving you better odds overall.

Securing altitude advantage: Tilts towards factors like value and small-cap, which decades of academic research show provide systematic return premiums over time. This means you begin each engagement from a position of structural strength backed by empirical evidence.

Additionally, low costs prevent silent erosion of returns. Every percentage point in fees is altitude surrendered before the engagement begins. Index and enhanced index funds that minimise expenses ensure more of your capital remains invested and compounding rather than being siphoned off.

Remembering your retreat: Liquidity enables repositioning when needed. Like von Richthofen’s strategy, portfolios need the ability to adapt without being trapped in unfavourable positions. Illiquid investments might offer higher returns, but they remove flexibility precisely when you might need it most.

Always see things through: Tax efficiency keeps more capital compounding. In New Zealand's relatively benign capital gains environment, this means strategic timing of realisations, thoughtful use of portfolio investment entities, and attention to income versus capital return characteristics.

Like securing altitude and sun position before attacking, proper asset allocation and positioning come first. Like firing only at close range with targets in your sights, investment decisions require clear conviction based on evidence, not speculation. Like the Flying Circus's coordinated attacks, diversification across asset classes works more effectively than concentrated bets.

Oil painting by Max Ordinall, from Nick’s personal collection

Constant Awareness: The Discipline of Waiting and Watching

Von Richthofen's rule about keeping your eye on your opponent and never being tricked into looking away speaks directly to behavioural finance. The greatest threat to individual investment success isn't market volatility. It's our own behavioural biases, causing us to look away at critical moments.

In investing, maintaining awareness means monitoring what you can control whilst ignoring what you can’t - AKA the noise designed to distract:

• Portfolio drift from target allocations matters. Daily market movements don't.

• Rebalancing opportunities when asset classes diverge significantly from targets matter. Quarterly earnings reports for individual companies within diversified index funds don't.

• Changes in personal circumstances requiring plan adjustments matter. Predictions about where markets are headed next month don't.

Discipline is harder in practice than in abstract. The retail investment industry generates an overwhelming torrent of information, most of it designed to make you feel you're missing something critical if you're not constantly trading. But as von Richthofen ignored enemy aircraft that didn't present advantageous engagement opportunities, investors must ignore much of market commentary and focus solely on what affects their systematic advantages.

Systematic Execution: Rebalancing as Tactical Discipline

Disciplined rebalancing is your “always carry through an attack once started” parallel. When equity markets surge beyond target allocations, trim them back to target. When they fall and fear is highest, rebalance back into them. Half-measures, like trimming only slightly or delaying rebalancing in case of a better opportunity later, waste the systematic advantage you’ve built.

This is extraordinarily difficult psychologically. Trimming equities after they've surged feels like selling winners. Adding to equities after they've fallen feels like catching a falling knife. But this mechanical adherence removes emotion from decision-making and ensures you're systematically buying low and selling high without attempting to time markets.

Von Richthofen's pilots didn't abort attacks halfway through if conditions looked momentarily unfavourable. They committed fully, trusting their systematic advantages would prevail. The same discipline applies to rebalancing: execute completely. Trust the process.

When Threatened, Face the Attack

When markets plunge, and portfolios decline, every instinct screams to sell, to "preserve what's left”, or to flee to cash.

This is precisely when systematic discipline matters most. Loss aversion—the behavioural bias where losses feel roughly twice as painful as equivalent gains—drives panic selling at market bottoms. Recency bias makes recent volatility feel like the new permanent reality. These biases trick investors into looking away from their long-term objectives and focusing on short-term pain.

Facing the attack means maintaining perspective. Your goals—retirement security, educational funding, legacy objectives—haven't changed because markets had a volatile quarter or year. Your systematic advantages—diversification, factor tilts, low costs—still function. The evidence supporting long-term equity returns hasn't evaporated.

Avoiding Fatal Deviation

The Baron's final flight on April 21, 1918, illustrates what happens when principles are abandoned. Engaging Canadian pilot Wilfrid May in a prolonged dogfight, von Richthofen broke multiple cardinal rules. The wind that day blew from an unusual direction—not the prevailing westerlies favouring German pilots. The extended engagement pushed him progressively deeper over Allied lines near the ridgeline at Corby.

He forgot his line of retreat. Flying low in pursuit of a relatively inexperienced opponent, he'd surrendered altitude advantage for the thrill of another victory. No wingman accompanied him. No formation support protected him. Every systematic advantage that had kept him alive through 80 victories had evaporated in the heat of pursuit.

A single, well-timed shot from Australian ground troops ended the legend—despite the aerial victory subsequently claimed by Canadian RAF pilot Roy Brown. One bullet. One moment of losing sight of position, probability, and principles.

Investors make remarkably similar mistakes constantly. Prolonged bull markets create overconfidence, and carefully constructed asset allocations drift unchecked because "equities always go up" or "bricks and mortar never lose value." A colleague's cryptocurrency windfall makes disciplined portfolios feel inadequate, tempting abandonment of evidence-based strategies for speculation. Market corrections trigger panic selling despite decades until retirement, abandoning the systematic discipline that would mean buying at depressed prices.

These are precisely the moments when abandoning proven principles feels most justified—and when probability turns decisively against us. We're pursuing that one more gain, chasing performance, abandoning our line of retreat.

Von Richthofen's legacy is defined by the systematic, probabilistic approach that made him exceptional – and his demise shows the value in sticking with what works.

His manual endures because it improves probability in combat. Markets require a similarly disciplined approach: following proven principles not just when conditions are favourable, but especially when every instinct says otherwise. 

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

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REFERENCES

1. Franks, N. & Bennett, A. (1995). The Red Baron's Last Flight. Grub Street Publishing.

2. Kilduff, P. (2007). Red Baron: The Life and Death of an Ace. David & Charles.

3. Fama, E.F. & French, K.R. (1992). "The Cross-Section of Expected Stock Returns." Journal of Finance, 47(2), 427-465.

4. Kahneman, D. & Tversky, A. (1979). "Prospect Theory: An Analysis of Decision under Risk." Econometrica, 47(2), 263-291.

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 

28 Investment Principles That Actually Work When Markets Don't Cooperate

Article # 442

I've watched families navigate decades of volatility: crashes, recoveries, euphoria, panic. The ones who preserve wealth across generations don't have secret information or perfect timing. They follow simple rules, consistently.

February has 28 days. To ring it in, here are 28 guiding principles that have stood the test of time regardless of market activity.

1.       The market rewards patience, not prediction.

Most noise isn't information. The constant stream of commentary, analysis, and breaking news creates the illusion that staying informed means staying ahead. It doesn't. The market moves on fundamentals that reveal themselves slowly, not on headlines that change hourly.

2.       Focus on what you can control: Costs, discipline, diversification, behaviour.

You cannot control returns. You cannot control when recessions arrive or when bull markets end. But you can control how much you pay in fees, how consistently you invest, how broadly you spread your risk, and how you respond when fear or greed takes hold.

3.       You don't need to beat the market. You just need to capture it.

The obsession with outperformance drives investors towards complexity, higher costs, and ultimately, disappointment. Capturing market returns through low-cost, diversified portfolios has built more wealth over time than the pursuit of alpha ever has.

4.       The simplest portfolio is often the smartest.

Complexity rarely adds value. It adds cost, confusion, and opportunity for error. A straightforward allocation across global equities and bonds, rebalanced systematically, has outperformed the vast majority of elaborate strategies.

5.       Volatility is the price of admission.

Don't demand returns without accepting the ride. Equities deliver premium returns over time, because of fluctuations in the short term. If you cannot stomach the volatility, you don't deserve the returns.

6.       Time in the market matters more than timing the market. Always.

Missing just the 10 best days over a 20-year period can cut your returns nearly in half. Funnily enough, the best days often follow the worst ones – so it’s hard to capture them after getting cold feet on the downswing. Staying invested through the chaos is what separates wealth-builders from market-timers.

7.       Diversification is a dark horse.

Its power is revealed over decades, not days. When one asset class stumbles, another steadies the ship. The benefit isn't dramatic in any one year, but over a lifetime of investing, it's the difference between weathering storms and being swept away by them.

8.       Your plan should be built on evidence, not emotion.

Especially when emotions run high. When markets crash, fear whispers that this time is different and worse than any before. When markets soar, greed tells you that you're missing out. Evidence and decades of market history tell a different story – a much more trustworthy one.

9.       Chasing performance is a tax on impatience.

Last year's winners become this year's laggards with predictable regularity. By the time a fund or strategy appears on a "best performer" list, the opportunity has usually passed. Avoid getting swept up in the furore.

10.  The market has already priced in what everyone knows.

You don't need to outguess it. If information is public, it's already reflected in prices. Your edge as an investor isn't superior information, it's superior behaviour.

11.  A disciplined strategy beats a brilliant prediction. Every time.

Predictions fail. Discipline endures. The investor who follows a consistent plan through all market conditions will outperform the ‘strategist’ who tries to predict turning points.

12.  Your behaviour matters more than your products.

Panic is more expensive than fees: selling in a downturn locks in losses, while buying at market peaks locks in mediocre returns. Managing your behaviour by staying calm, and staying invested, matters far more than optimising your expense ratio by a few measley basis points.

13.  You don't need the perfect moment.

The moment you start is perfect enough. Markets climb over time. Waiting for a correction before investing often means waiting forever. Start now. Adjust as you go.

14.  Rebalancing is the quiet hero of long-term returns.

It forces buy-low, sell-high. When equities surge, rebalancing trims them back. When they crash, rebalancing buys more. It's counter-intuitive, uncomfortable… and extraordinarily effective over time.

15.  The best portfolios feel boring.

Boredom is not a bug, it's a feature. If your portfolio keeps you up at night with excitement, you’re probably taking on unnecessary risk. Wealth is built slowly, quietly, and without drama.

16.  Markets recover more often than they collapse.

History is your friend. Every bear market in history has eventually given way to a new bull market. Crashes feel permanent in the moment. They never are – as the adage goes, “this too shall pass.”

17.  Ignore headlines.

They're written to sell attention, not build wealth. Financial media thrives on urgency and alarm. Your portfolio should thrive on patience and perspective.

18.  Compounding works best when you don't interrupt it.

Let time do the heavy lifting. Albert Einstein allegedly called compound interest the eighth wonder of the world. But, it only works if you leave it alone – every time you exit the market, you reset the clock.

19.  Costs compound too.

Costs compound just like returns. Pay for advice that adds value, not for products that don't. The difference between value and waste always reveals itself in the fullness of time.

20.  Bad days don't destroy portfolios. Bad decisions do.

Markets fall. That's normal, and things will swing back the other way. Selling during the fall, abandoning your plan, or fleeing to cash – those are the decisions that inflict permanent damage.

21.  Not every risk deserves a reward.

Factor premiums do. Stocks are riskier than bonds, so they should deliver higher returns. Small-cap and value stocks have historically outperformed over long periods. These are risks worth taking. Concentrated bets on individual stocks or sectors? Not so much.

22.  Your portfolio should be built around you, not around the news cycle.

Your goals, your time horizon, and your risk tolerance should dictate your allocation. Not the latest economic forecast or geopolitical crisis.

23.  You don't need to predict the future.

…But you do need a strategy that survives it. Robust portfolios aren't built on forecasts. They're built on diversification, discipline, and the recognition that uncertainty is permanent.

24.  Stay invested, stay diversified, stay disciplined.

The rest is commentary. If you do these three things consistently, you will be fine. Better than fine, in fact. You'll be wealthier than the vast majority of investors who spend their lives chasing the next opportunity.

25.  Wealth isn't created in moments of excitement.

It's created in years of consistency. The investors who succeed aren't the ones who make brilliant trades or perfectly time the market. They're the ones who show up, year after year, regardless of conditions. Consistency compounds.

26.  Your worst investing day feels catastrophic. Your best investing decade feels inevitable.

Perspective matters. In the moment, a 20% drawdown feels like the end. Twenty years later, it's a footnote. Keep the long view. Stay the course.

27.  Successful investors are more patient than ‘smart’.

Intelligence helps, but temperament wins out every time. The ability to sit still, to do nothing when everyone else is panicking or euphoric, is worth more than any financial qualification.

28.  Markets don't care about your timeline. Build a plan that doesn't care about the markets.

You might need money in five years for a house deposit or in thirty years for retirement. The market will do what it does regardless. Structure your portfolio around your needs, not market predictions, and you'll sleep better through every cycle.

Remember: Markets will always be chaotic. Your response doesn't have to be.

Follow the rules (and seek professional advice)

These principles work. But they work best when you have someone in your corner who isn't conflicted by commissions, product sales, or institutional agendas.

Seek independent, impartial advice that puts you first and foremost. You are the sun, not the moon: your financial plan should orbit around you, your goals, your circumstances. Not around what someone else needs to sell.

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. 442

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Should I Invest in What I Love? Product Affection vs Investment Logic

Personal product preferences are often the worst possible guide to investment decisions.

I remember when my family first got a GoPro. Revolutionary technology, stunning footage – everyone wanted one. Naturally, I thought: "This company is going places. Maybe I should buy shares." It's a seductive logic: if I love the product, surely others will too. A decade later, I'm thankful I didn't act on that impulse.

This instinct to invest in what we know and love feels intuitive. We use the products, we understand them, we see their value. But this emotional connection – what behavioural economists call "familiarity bias" – is precisely what makes it dangerous.

Back in 2014, GoPro went public and quickly hit a market capitalization of $10 billion with virtually no competition. Today? The stock trades around $1.87 per share – down 98% from its peak, with over $9.7 billion in market value lost.

What went wrong?

Smartphones killed the action camera star. Modern phones became waterproof, gained multiple lenses, and developed image stabilisation that rivals dedicated cameras. GoPro thought they were competing against other action cameras when they were actually competing against the most successful consumer device in history.

But here's the deeper lesson: loving a product tells you nothing about the company's competitive position or long-term viability. A great product is necessary but far from sufficient for investment success. In GoPro's case, every smartphone manufacturer became their competitor, each with deeper pockets and products consumers were already buying.

The Pattern Repeats Closer to Home

This isn't just an overseas story. Take My Food Bag – during COVID lockdowns, it seemed genius. The company went public in March 2021 at $1.85 per share, raising $342 million. Customers loved the service and bought shares. Many retail investors had enjoyed watching co-founder Nadia Lim cook on TV for years – hardly grounds for a wise investment decision. The result? Shares now trade around 25 cents – an 86% decline. As one fund manager noted, "It was a classic private equity exit, which has seen a lot of retail investors lose out."[1]

The timing seemed perfect. Lockdowns had created new habits. People were cooking at home more. The convenience model made sense. But investors failed to ask: what happens when lockdowns end? Is this a permanent behaviour shift or a temporary adaptation? How defensible is the business model? These are the uncomfortable questions that emotional attachment prevents us from asking.

As one fund manager noted, "It was a classic private equity exit, which has seen a lot of retail investors lose out."

Then there's Ryman Healthcare, beloved by many Kiwi families for good reason. My own family experienced the amazing care and kindness shown towards my late father during his time in the dementia care unit at Ryman in Havelock North. The quality of their villages is genuinely impressive. Yet despite these strengths, the stock hit $10.87 in December 2019 and now trades around $2.87 – down 74%. The investment thesis crumbled under construction delays and regulatory challenges, demonstrating that exceptional service doesn't automatically translate into strong investment returns.

This one hits close to home because the service was excellent. But gratitude and investment logic operate in different domains. A company can deliver outstanding customer experiences while simultaneously facing operational headwinds that undermine shareholder returns.

These three examples share a common thread: product or service quality created an emotional connection that clouded rational investment analysis.

The Evidence Against Emotional Investing

Behavioural finance research identifies "familiarity bias" as a major driver of poor investment decisions, where investors favour what they know rather than what performs best.[2] This bias is particularly pronounced amongst long-term investors who believe they're securing against volatility when they're actually concentrating risk.

The evidence against stock picking is overwhelming:

An Arizona State University study by Professor Hendrik Bessembinder examining over 28,000 stocks from 1926 to 2024 found that just 4% of firms created all net wealth in the U.S. stock market. The remaining 96% collectively matched Treasury bills over their lifetimes, and the majority of individual stocks actually reduced shareholder wealth compared to holding cash.[3]

Think about that. If you picked a stock at random, you'd have better than even odds of underperforming cash. The market's impressive returns come from a tiny fraction of companies – and identifying them in advance is nearly impossible.

Professional fund managers fare no better. S&P Dow Jones Indices' SPIVA Scorecard shows that after 10 years, approximately 85% of large-cap funds underperform the S&P 500, and after 15 years, around 90% trail the index.[4] Even Warren Buffett admits: "In 58 years of Berkshire management, most of my capital-allocation decisions have been no better than so-so."[5]

These aren't amateur investors. These are professionals with research teams, Bloomberg terminals, insider access, and decades of experience. If they can't beat a simple index fund, what makes individual investors think they can, especially when driven by product affection rather than analysis?

The Smart Money Questions

Instead of asking "Do I love this product?", evidence-based investors ask: How big is the addressable market? What prevents competitors from copying this? How strong are the financials? Is the company innovating fast enough? What could make this product obsolete?

These questions are deliberately uncomfortable because they force you to look beyond your emotional attachment. They require research, analysis, and a willingness to acknowledge uncertainty. Most importantly, they shift the focus from "I like this" to "can this company maintain a durable competitive advantage?"

The answers usually point to the same solution: diversification. Diversified index funds consistently outperform stock picking over the long term, providing market-matching returns while reducing the risk of catastrophic losses from individual stock failures.[6]

Diversification isn't glamorous. There's no story to tell at dinner parties about your clever stock pick. But it's precisely this lack of excitement that makes it effective. By owning the entire market, you guarantee you'll own the 4% of companies that generate all the wealth creation, without needing to predict which ones they'll be.

As a fee-only adviser working with evidence-based strategies, the real value isn't in chasing hot stocks or validating product obsessions. It's in building a robust financial plan grounded in decades of research, then maintaining discipline through market noise and emotional temptation.

This discipline is harder than it sounds. When GoPro was soaring, when My Food Bag was listing during lockdowns, when you're genuinely grateful for care received – the emotional pull to invest is powerful. It feels like you have special insight. You don't. You have an emotional connection clouding your judgment.

The most valuable thing a good adviser provides isn't stock tips or market predictions. It's the voice of reason when your emotions are screaming at you to invest in what you love. It's the person who asks the uncomfortable questions: "Have you analyzed the competitive landscape? What's your exit strategy? How does this fit your overall plan?" These questions aren't exciting, but they're essential.

Seek wise counsel, commit to a plan that aligns with your goals, and redirect that energy from stock-picking to living your life. Enjoy the products you love. Be grateful for excellent service. Just don't confuse these feelings with investment insight.

Your future self will thank you for choosing evidence over emotion.

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. 437

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References

1. My Food Bag Group Limited. (2024-2025). Financial Results and Market Updates. NZX Announcements. Retrieved from https://investors.myfoodbag.co.nz/

   • Devon Funds Management. (2025). "My Food Bag Investment Analysis." RNZ Business Interview, May 22, 2025.

2. Huberman, G. (2001). Familiarity breeds investment. Review of Financial Studies, 14(3), 659–680. https://doi.org/10.1093/rfs/14.3.659

   • Chew, S.H., Li, K.K., & Sagi, J. (2023). Home bias explained by familiarity, not ambiguity. Social Science Research Network. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3870716

   • De Vries, A., Erasmus, P.D., & Gerber, C. (2017). The familiar versus the unfamiliar: Familiarity bias amongst individual investors. Investment Analysts Journal, 46(1), 24-39.

3. Bessembinder, H. (2024). Shareholder wealth enhancement, 1926 to 2022 (Updated through 2024). Arizona State University, W.P. Carey School of Business. Retrieved from https://wpcarey.asu.edu/department-finance/faculty-research/do-stocks-outperform-treasury-bills

   • Bessembinder, H. (2018). Do stocks outperform Treasury bills? Journal of Financial Economics, 129(3), 440-457.

4. S&P Dow Jones Indices. (2024). SPIVA U.S. Scorecard Year-End 2024. Retrieved from https://www.spglobal.com/spdji/en/documents/spiva/spiva-us-year-end-2024.pdf

5. Berkshire Hathaway Inc. (2022). Letter to Shareholders. Annual Report 2022.

6. Malkiel, B.G. (2019). A random walk down Wall Street: The time-tested strategy for successful investing (12th ed.). W.W. Norton & Company.

   • Bogle, J.C. (2017). The little book of common sense investing: The only way to guarantee your fair share of stock market returns (10th anniversary ed.). John Wiley & Sons.

   • Fama, E.F., & French, K.R. (2010). Luck versus skill in the cross-section of mutual fund returns. The Journal of Finance, 65(5), 1915-1947.

Markets, Science, & the Chicago Legacy: Why Evidence Matters More Than Ever

Standing outside the University of Chicago Booth School of Business recently, I was struck by how this building represents something far more valuable than bricks and mortar.

The building bears the name of David Booth, founder of Dimensional Fund Advisors (DFA), whose $300 million donation in 2008 recognised the profound influence this institution has had on how we understand investing. It was the largest gift to any business school in history at the time—and for good reason. The University of Chicago has produced 97 Nobel Prize laureates, making it one of the world’s great centres of economic thought.

I’ve just returned from the United States, where I attended a conference and met with some of the most innovative wealth management firms operating today. What struck me most wasn’t the technology or the marketing—it was the unwavering commitment to letting science, not emotion, drive investment decisions.

The Chicago Revolution

The University of Chicago fundamentally changed how we understand markets. In the 1960s and 70s, Eugene Fama developed the Efficient Market Hypothesis, which challenged the prevailing wisdom that active stock pickers could consistently beat the market. His research, along with work by Harry Markowitz on portfolio theory and Merton Miller on corporate finance, created a scientific framework for understanding how markets actually work rather than how we wish they would work.

 These weren’t armchair theories. They were rigorously tested hypotheses backed by decades of data. Fama won the Nobel Prize in 2013.[1] More recently, Douglas Diamond, who serves as a director at DFA, won the Nobel Prize in 2022 for his groundbreaking research on banks and financial crises.[2] The message is clear: markets are remarkably efficient at incorporating information into prices, making it extraordinarily difficult for active managers to consistently outperform after fees.

From Theory to Practice

This is where David Booth’s story becomes fascinating. After studying under these pioneers at Chicago, he co-founded DFA in 1981 with a radical idea: academic research should drive investment strategy. Rather than trying to pick winners or time markets, DFA built portfolios that captured the dimensions of return that academic research had identified—company size, relative price, and profitability.

The firm’s commitment to its academic foundation remains extraordinary. Eugene Fama himself serves as a director and consultant to DFA, alongside Nobel laureate Douglas Diamond and numerous other distinguished academics.[3] This isn’t window dressing—these researchers actively shape the firm’s investment approach. Today, DFA manages over $850 billion globally and works exclusively with around 1,800 financial advisers and institutions worldwide who share their evidence-based philosophy.[4]

We’ve been fortunate to be part of that community since 2003. Over more than two decades, I’ve had the privilege of meeting David Booth himself, along with many of DFA’s esteemed researchers and team members. These aren’t just business relationships—they’re ongoing dialogues about how markets work and how we can best serve our clients.

But philosophy alone doesn’t pay the bills. The real work happens in translating these academic insights into portfolios that work for real New Zealanders with real goals. Our investment committee builds portfolios that harness these evidence-based principles while respecting each client’s individual circumstances. For some, that means incorporating ESG considerations—ensuring investments align with values without sacrificing returns. For others, it’s about smart tax planning, understanding how PIE funds, FIF rules, and portfolio location decisions can significantly impact after-tax wealth over time. The science tells us what works in markets; our job is to implement it in a way that works for you.

The Emotional Trap

During my US trip, I sat through presentations from wealth management firms managing billions in client assets. A common theme emerged: the biggest threat to investor success isn’t market crashes or economic recessions—it’s investor behaviour itself.

We’re hardwired for emotional responses that work against us in financial markets. We panic when markets fall and become euphoric when they rise. We chase last year’s winners and abandon sound strategies at precisely the wrong moment. We believe we can spot the next big thing, despite overwhelming evidence that even professionals cannot consistently do so.

The firms I met with have built their practices around protecting clients from themselves. They use science-based portfolio construction, maintain discipline during volatility, and focus on what investors can control: costs, diversification, tax efficiency, and most importantly, behaviour.

The New Zealand Reality

Here’s something I hear often: “But surely New Zealand is different?”

It’s not. Market principles are universal. New Zealand shares trade on the same fundamental dynamics as shares in New York, London, or Tokyo. The temptation to believe “it’s different here” often leads to home bias and concentrated portfolios that increase risk without increasing expected returns.

The evidence is unequivocal, regardless of geography. Studies consistently show that the average investor significantly underperforms the very funds they invest in, purely due to poor timing decisions. Research from Morningstar found that investors typically lag their own investments by 1-2% annually simply by buying high and selling low.[5] This behaviour penalty applies equally to investors in Auckland as it does in Austin.

Think about that: a 1-2% annual drag from poor timing decisions alone. Over a 30-year investment horizon, that’s the difference between retiring comfortably and struggling to make ends meet. And it has nothing to do with market returns or fund performance—it’s entirely self-inflicted through emotional decision-making.

What This Means for You

As your advisers, our role isn’t to predict the future or pick winning stocks. It’s to help you stay invested in sensibly constructed, evidence-based portfolios through all market conditions. The science tells us that markets reward patient investors who remain diversified and resist the urge to react to short-term noise.

This matters now more than ever. With 24/7 news cycles, social media investment “gurus,” and the constant temptation to react to market movements, maintaining discipline has never been harder—or more important.

When markets inevitably experience volatility (and they will), remember this: every market downturn in history has eventually been followed by recovery. The investors who stayed disciplined and remained invested captured those recoveries. Those who sold in panic and tried to time their re-entry typically bought back in after much of the recovery had already occurred.

Standing outside that Chicago building, I felt grateful for the legacy of rigorous thinking that continues to shape how we invest today. But the principles that emerged from those halls decades ago remain as relevant now as ever: markets work, diversification matters, costs compound, and behaviour determines outcomes.

The challenge isn’t knowing what to do—science has answered that. The challenge is doing it consistently, especially when markets test our resolve. That’s where good advice becomes invaluable.

Nick Stewart

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

Financial Adviser and CEO at Stewart Group

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References

 [1] The Nobel Prize, “Eugene F. Fama - Facts,” 2013, [nobelprize.org](http://nobelprize.org)

 [2] University of Chicago Booth School of Business, “Douglas W. Diamond Wins Nobel Prize in Economic Sciences,” October 2022, [chicagobooth.edu](http://chicagobooth.edu)

 [3] Dimensional Fund Advisors, “Leadership and Board of Directors,” [dimensional.com](http://dimensional.com)

 [4] Dimensional Fund Advisors SEC Form ADV, showing $835.7 billion in discretionary assets under management as of March 31, 2025

 [5] Morningstar, “Mind the Gap: The Behavior of the Average Investor,” various years, [morningstar.com](http://morningstar.com)

 [6] University of Chicago News, “Alumnus David Booth gives $300 million; University of Chicago Booth School of Business named in his honor,” November 2008, [news.uchicago.edu](http://news.uchicago.edu)​​​​​​​​​​​​​​​​