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All Blacks turned waterboys
The Registrar of Companies probably isn't in the business of collecting sports stars signatures, but last year bagged three of the biggest in New Zealand. Former All Blacks Ali Williams, Dan Carter and Ritchie McCaw put pen to paper to formally dissolve their bottled water startup Premium New Zealand Trading Company (PNZTC).
The company, founded in 2009, had traded as Water For Everyone and pledged 5c from every bottled sold to be donated to charity. The company played heavily on the image of its three All Blacks shareholders - but ran into trouble in its early years after business partners complained of being cut-out of the business, members of the public complained about its advertising and poor sales led its charitable contributions to wither.
Records filed with the Intellectual Property Office show the trademarks for Water for Everyone were sold by PNZTC in 2014 - then sold again in mid-2019 to today rest with Kauri Springs. (Unrelated to the All Blacks, Kauri Springs ran into immediate trouble after acquiring the brand when its 40 per cent shareholder Oceania Natural opted to liquidate after the FMA filed civil action alleging its directors breached disclosure requirements and engaged in market manipulation.)
After Water for Everyone, Carter and McCaw went on to win the 2015 Rugby World Cup. Williams, after a troubled stint closing out his playing career in France, shacked up with Zuru toys mogul Anna Mowbray.
The For Everyone charitable trust designated as the beneficiary of NZPTC has ironically only picked up steam after losing its bottled-water tie-in. In 2015 it rebranded as the iSport Foundation, lost Carter and Williams, and while it had previously never generated six figures of income it has over the past five years raised $400,000 annually on average.
McCaw remains a trustee, and its most recent annual report says it last year assisted 158 organisations to get children active, and its Kids With Character programme mentored 676.
Keeping up with the Jones'
Lost in a flurry of public health honours awarded over the New Year was one to an, at first glance, unlikely recipient: An economist. Rodney Jones of Wigram Capital was made a member of the New Zealand Order of Merit ostensibly for "services to economics and public health research" but more accurately for likely being the most significant early contributor to New Zealand's Covid response from the business sector.
Until 2018 Jones had been based in Beijing, and his experience covering the SARS outbreak in 2002-2004 saw him retcon his firms' economic modelling into epidemiology.
His honours citation says "Mr Jones' modelling helped to inform the New Zealand government's response to the pandemic, leading to the implementation of the lockdown in March 2020."
Grant Robertson told the Herald Jones had called him on February 5 about deep concerns over Covid, and the finance minister credited him with providing his first education about the R0 concept quantifying infectivity rates.
"At that moment Covid really went right up to the top of my list," Robertson said of this call from Jones.
Hedge funds: got the memo
The modern hedge fund guru faces two separate but distinct problems. First, asset prices continue to rise, irrespective of economic or business fundamentals. If everything is going up, why pay high hedge fund fees? Second, markets have become increasingly "efficient".
The explosion of information and analytics, along with a massive, global asset management industry, has made abnormal returns difficult to sustain. The first phenomenon will presumably reach its natural conclusion, though the timing is uncertain. The second is even more uncertain.
Billionaires Howard Marks and Seth Klarman have written lengthy memos sharing their thoughts on the apparent collapse of value-investing.
Mr Klarman laments the way in which central bank policies of low interest rates perversely inflate the values of speculative companies. Distant cash flows have become more valuable in present terms. The slow deterioration of the premium that shareholders typically demand to own stocks over risk-free securities was comparable, he wrote, to a frog being slowly boiled while blissfully unaware of its fate.
Mr Marks points to changes in the investing subculture over the past half century. Financial and corporate data was not easily accessible and an understanding of concepts such as return on capital and free cash flow "were not widely appreciated" when he began his career. Not only has there been an explosion in data and analytical techniques, but investors like Warren Buffett and Mr Marks himself are now celebrities.
Mr Klarman explicitly rejects the idea that markets have become "fully efficient", believing mass investor sentiment will one day become his friend. "The fluctuating emotions and irrational behaviours governing human activity ensure that markets will always be inefficient and mispricings will always exist".
But for value buyers, that environment simply has not materialised. Those who have bet short or stayed out of the market have looked foolish. In his memo, Mr Marks went as far as to say that "value investing doesn't have to be about low valuation metrics".
The best hope for these humbled titans is that financial markets reassert their habit of ebb and flow. This can happen quickly. In the brief window of tumult last March and April, several investors were able to strike quickly. The key question is whether any particular set of firms will be able to consistently profit when financial markets are as deep, well-capitalised and efficient as ever. - Lex, Financial Times