KEY POINTS:
This thing we call the credit crunch is wreaking havoc with investor confidence.
AMP Capital's move yesterday to freeze the $420 million NZ Property Fund is worrying more for what it tells us about investor sentiment than because there's any real threat to that particular fund's assets.
What
is going on when one of the nation's strongest financial brands has to take extreme action to shore up a fund that in normal circumstances would be rock solid?
At least, that action - suspending redemptions and new investment applications - would have been extreme a few months ago. Lately it seems like an everyday occurrence.
This one does look like a prudent move by AMP Capital to protect a good fund from panicked investor reaction to the troubles faced by mortgage trusts.
But it will no doubt add to the growing concerns ordinary New Zealanders have about their investments.
According to its website AMP has 400,000 New Zealand customers. That will include family trusts and companies as well as individuals - but still there must have been thousands of people across the country who had their hearts in their mouths yesterday as news of the freeze broke.
How many of them could say off the top of their heads what their relationship with AMP actually is? In other words, how many know exactly what's written on those bits of paper tucked down the back of the desk in their spare room - which funds they are in and where their money is now?
In fact only 2900 retail investors have direct exposure to this fund. Others may have some exposure through diversified funds but that the risk is spread so thin that there should be no cause for panic.
AMP Capital New Zealand managing director Murray Gribben argues yesterday's suspension is not the same as a freeze. That's splitting hairs, but his point is that it's very different from the freezes that have gone before in relation to some of the finance companies.
We have to give organisations like AMP - and the big banks - the benefit of the doubt. If we don't then we really are giving in to fear and panic. And that threatens to make this thing a whole lot worse than it needs to be. It is already bad enough.
If you throw in every investment product that's run into trouble in the past 18 months you get a figure well in excess of $4 billion.
That is $4 billion that should be out there in the economy helping people to create more wealth. It is a massive sum to take out of action in an economy the size of New Zealand's. Lets hope most of that cash will be eventually be defrosted.
* Liam Dann is the Herald's business editor