Speaker 1: Hyoda.
Speaker 2: I'm Chelsea Daniels and this is the Front Page, a
Speaker 2: daily podcast presented by the New Zealand Herald. New figures
Speaker 2: have revealed the assets of our ten biggest EWI stands
Speaker 2: at eight point two billion dollars. A recent report from
Speaker 2: consultancy firm TDB Advisory shows the assets only rose by
Speaker 2: one hundred million dollars in the last three years as
Speaker 2: the economic turmoil over the last five years continues to
Speaker 2: have an impact on their investments, covering everything from property
Speaker 2: to farming, to managed funds and offshore opportunities. Many of
Speaker 2: these EWE owned assets have an impact on our day
Speaker 2: to day lives. So how do they compare to some
Speaker 2: of our biggest investment firms. To explain where ewei's have
Speaker 2: their money today on the Front Page, TDB Advisory director
Speaker 2: Phil Barriers with us to dive into this report. So
Speaker 2: I think a lot of people remain uncertain how all
Speaker 2: these ewis have made so much money. I suppose obviously
Speaker 2: there have been treaty settlements over the last few decades,
Speaker 2: but how has that led to them owning so much
Speaker 2: land and making so much money.
Speaker 1: Well, the entities we look at are called the post
Speaker 1: settlement EWI entities, and so some of the big ones
Speaker 1: like Nati Fatu Iraqi, Nightitahu, why can I Taynoi? They
Speaker 1: settled with the crown, And in fact, in total there's
Speaker 1: been about one hundred EWI settled with the crown since
Speaker 1: the mid nineteen nineties. The settlements, if you had them
Speaker 1: all up, are added to about three point five billion
Speaker 1: dollars just in the dollars of the day when the
Speaker 1: settlements were made. And our best instrument is those assets
Speaker 1: now are worth around twelve billion dollar. So in a way,
Speaker 1: it's the magic of compound interests. If you like, you know,
Speaker 1: you just reinvest the profits. They've paid out some dividends,
Speaker 1: but have tended to take a long term view, and
Speaker 1: just over time those assets have grown as property values
Speaker 1: have increased, as share prices have increased, just as I say,
Speaker 1: the magic of compounding.
Speaker 2: So what are these investment reports and why are they done?
Speaker 1: We will have been lucky enough to work with several
Speaker 1: of the larger ews over time and working with them
Speaker 1: on their investment strategies and financial strategies. And so we've
Speaker 1: been TDB Advisory, where independent strategic advisors, financial economic advisors.
Speaker 1: We just saw a demand out there for a bit
Speaker 1: of an independent review of the ewe's. Three things we
Speaker 1: look at. We look at their organizational structure, we look
Speaker 1: at their investment strategies, and we look at their financial performance.
Speaker 1: We've been doing this pro bono for I think close
Speaker 1: to ten years now.
Speaker 2: Which ewe's are a part of it.
Speaker 1: Typically the largest one, so we think we focus on
Speaker 1: the top ten if you like. Those ten probably account
Speaker 1: for about eight billion of assets of the twelve billion
Speaker 1: in total, so around two thirds.
Speaker 2: What are some of the assets owned by our biggest eweys.
Speaker 2: What are the industries where you can see the most investment.
Speaker 1: Well, not surprisingly a lot of it is the land,
Speaker 1: the fenoa, okay, and so it's the commercial property. Like
Speaker 1: we take an few examples y Katto Taiinui, a lot
Speaker 1: of investment in downtown Hamilton, the new ACC building for example,
Speaker 1: some of the hotels, the Ibis, the no Hotels, half
Speaker 1: share on the Auckland Pullman at the airport, other Nati
Speaker 1: Fatuiraki of course Auckland centric downtown Auckland, some very important
Speaker 1: ground leases there. Normally, we though have also diversified more
Speaker 1: and have quite a lot of their holdings now in
Speaker 1: what we call financial assets, so typically shares or bonds
Speaker 1: and managed funds so and some of those could be
Speaker 1: offshore or they are offshore. Yeah, if we look at
Speaker 1: for example, Touhoi in the two are Awra, you're a Weerra,
Speaker 1: they have just over half of their assets in these
Speaker 1: financial assets currently. Nati Pero also some of the sort
Speaker 1: of shares so different e wee, different strategies and yeah,
Speaker 1: just interesting to see how it's going over time.
Speaker 3: People on this house talking about mary Len. No, Mary Len.
Speaker 3: It was all mary Land confiscated, confiscated under the New
Speaker 3: Zealand Settlements Act in eighteen sixty three, and then they're
Speaker 3: talking about the settlements process where mary only get one
Speaker 3: percent of its total due Mary still only have the
Speaker 3: resources that they'regain because the government continues to make its
Speaker 3: money and it's profit of stolen Mali resources and assets.
Speaker 3: And then they wonder why body don't want to lose
Speaker 3: the four percent that it's still hes.
Speaker 2: So what was the movement in twenty twenty four The
Speaker 2: headline figure is only a one hundred million dollar rise
Speaker 2: since twenty twenty two, but that still sounds pretty impressive
Speaker 2: to a club like me, How does that compare to
Speaker 2: previous performances.
Speaker 1: Yeah, Look, it's been a tough couple of years for
Speaker 1: EE and for investors generally in the New Zealand economy.
Speaker 1: So I think those twenty two and twenty three twenty
Speaker 1: four years probably three of the worse than the last
Speaker 1: ten years. On average, over the last ten years, the
Speaker 1: year we've achieved a five percent return twenty four in
Speaker 1: twenty twenty four it fell to about three percent. Actually,
Speaker 1: that's not bad compared to the returns that were available
Speaker 1: to most investors in the New Zealand economy. We calculated
Speaker 1: what we call a benchmark index, that's weights according to
Speaker 1: the sectors the EE investor, and that benchmark in twenty
Speaker 1: twenty four was a negative five percent return, primarily because
Speaker 1: property prices fell. That nz X Real Estate Institute fell
Speaker 1: by about seven percent, and the other big sector where
Speaker 1: the e WE invest in is primary sector and that
Speaker 1: index fell by around four percent. So you know, it's
Speaker 1: been tough. Fortunately, as I mentioned, many of the ere
Speaker 1: we are now more diversified. Typically they have around five
Speaker 1: or six asset classes, and that diversification can help shield
Speaker 1: you from those cyclical downturns. In any one sector. So
Speaker 1: for example, twenty twenty four was a great year for
Speaker 1: global securities. Not so good at the moment given all
Speaker 1: the term oil, of course, but in twenty twenty four
Speaker 1: the S and P five hundred New York rose by
Speaker 1: about twenty percent in US dollar terms, even more in
Speaker 1: New Zealand dollar terms because of the depreciation of the
Speaker 1: New Zealand dollar, and EWE who were in those investments
Speaker 1: like Knight Tahoo, like out A, Taiinui Tuhoi managed to
Speaker 1: achieve actually pretty good returns into for overall seven percent
Speaker 1: returns typically for those.
Speaker 2: Three which EWE is the richest or has the most assets.
Speaker 1: In terms of total assets, actually waking At Taui have
Speaker 1: sort of risen to the top and in the most
Speaker 1: last most recent couple of years, if you measured in
Speaker 1: terms of net assets per member, which if you know
Speaker 1: we're a key we saver investor, that's probably the measure
Speaker 1: you'd use. You look at the number of members of
Speaker 1: each EWI. You know, at one extreme you have Puui
Speaker 1: with about one hundred and twenty thousand members, hasn't settled
Speaker 1: yet with the crown, so it doesn't have a very
Speaker 1: much in the way of asset, it's still one hundred million,
Speaker 1: but not a lot per member. On the other hand,
Speaker 1: you've got nty five two Iraqi, which is a very
Speaker 1: small EWI and very wealthy, so their assets per member
Speaker 1: are around twenty thousand dollars At the moment.
Speaker 2: I think, what are some of the factors that are
Speaker 2: limiting the growth of their assets and the return that
Speaker 2: they're getting.
Speaker 1: Well, like any investors, it's not easy to consistently year
Speaker 1: in a year out make positive returns. If you look
Speaker 1: at Naho for example, had done very well in over
Speaker 1: the decade, but last couple of years it's it struggled.
Speaker 1: It's net worth has gone down by about twelve percent.
Speaker 1: Total assets fallen by about eight percent. So debt is
Speaker 1: at the same time as assets have been falling, debt
Speaker 1: has risen somewhat, not not to overstate it, but there
Speaker 1: has been an increase. Why. They obviously hit by COVID,
Speaker 1: like most investors more recently, the property downturn, high interest
Speaker 1: rates ocr last year, you know, at around five percent
Speaker 1: the official cash rate. They're also quite heavily in the
Speaker 1: tourism market. Yeah, I don't know.
Speaker 2: Much about the subject, but I think Nightaho I think tourism.
Speaker 1: Yeah, it's not a big part of the portfolio actually,
Speaker 1: but it's a high profile shot over jet everybody knows
Speaker 1: that whale watch Kaikura tourism numbers, you know, have not
Speaker 1: rebounded in the way they have been many countries around
Speaker 1: the world. They've rebounded, but not back to pre COVID
Speaker 1: levels yet. So just you know, those operational things do matter.
Speaker 1: Keep in control of operational expenses. Administration expenses are important,
Speaker 1: and you know some of the EWI facing challenges there.
Speaker 2: How do the EWIS fare as asset managers? How would
Speaker 2: you rate their performance compared to some of our banks
Speaker 2: or publicly listed companies.
Speaker 1: Well, as I say, if you look at the long
Speaker 1: term picture, and I think that's the shouldn't be influenced
Speaker 1: by short term sixicality. But over the last ten years,
Speaker 1: benchmark return has been about five point seven percent per annum,
Speaker 1: the EWI on average about five percent, so close almost
Speaker 1: almost fully match it. Now break it down a bit.
Speaker 1: Four of the EWI that we have the data for
Speaker 1: for the eight we have data, four have exceeded that benchmark,
Speaker 1: achieving bridge returns of around seven to eight percent. So
Speaker 1: that's the ro Kawas, the ninety five two Iraqis and
Speaker 1: the two big ones Tainui and Naitahu. Four of them
Speaker 1: have done worse than the benchmark over that long term,
Speaker 1: achieving returns of around three to four and a half percent.
Speaker 1: So still positive, but yeah, it should be you'd like
Speaker 1: to see some better returns.
Speaker 2: There are there any disparities between the ewi's in terms
Speaker 2: of how much they make. It seems like the ones
Speaker 2: with more of an urban property portfolio tend to fare better.
Speaker 2: Is that fair?
Speaker 1: It depends, is the answer, And it depends in particular
Speaker 1: which years you're looking at. So ninety five two Iraqi,
Speaker 1: you know, ninety seven percent of its assets in aucan property,
Speaker 1: so sort of high risk strategy, but also has been
Speaker 1: high return as they rode the organ property bone last
Speaker 1: two years. Though a bit of a come back come
Speaker 1: back to earth, a bit of a reality check. The
Speaker 1: interesting ones also, as I said, the two Eastern North
Speaker 1: Island EWI two Hoy and Nadi Pero, who've chosen to
Speaker 1: invest more and manage funds about half of their assets. Again,
Speaker 1: there's been some psyclicality, but last year too Hoy did
Speaker 1: very well. It's even a seven percent return overall bounce
Speaker 1: back from its previous year, which was pretty poor. Nadi
Speaker 1: Perot's been to me a bit surprisingly week. It's financial
Speaker 1: returns only around three percent per annum over the ten
Speaker 1: years on average, and even last year when global share
Speaker 1: markets boomed, as I said that twenty percent increase, they
Speaker 1: haven't reported strong returns even in that year. It's a
Speaker 1: bit of a puzzle to me how to ewe's.
Speaker 2: I mean, I suppose that it would be different for
Speaker 2: each EWI, but how do they generally decide what to
Speaker 2: invest in? Is it a vote amongst members or do
Speaker 2: they have a board?
Speaker 1: Yeah? Yeah, no, good, good question. It's they normally do
Speaker 1: have a and this is the structural question that we
Speaker 1: look at. Typically, the EUI set up two separate entities,
Speaker 1: often is multiple, but keep it simple. They have one
Speaker 1: enderity that focuses on the commercial management generating the money
Speaker 1: if you like. And then on the other side there
Speaker 1: are the ones that spend the money that have the
Speaker 1: social and educational goals. So those commercial ones the ones
Speaker 1: who decide where where the money is invested commercially. They
Speaker 1: typically have a board of some tribal appointed members and
Speaker 1: some independent members with hopefully with good strong investment expertise. Yeah,
Speaker 1: and that separation of roles actually, I think is very important.
Speaker 1: It ensures better accountability, better ability to measure performance. It's
Speaker 1: a little bit like what the government Central Government does
Speaker 1: with its stayed on enterprises, where you have the soees
Speaker 1: set up with the primary objective of making the money
Speaker 1: and then you have the msds and the education who
Speaker 1: spend the money.
Speaker 2: Last year, as part of the heralds Fanua project, we
Speaker 2: heard a lot about how the EWI assets today still
Speaker 2: pale in comparison to what the ewe's owned presettlement. We
Speaker 2: spoke on this podcast with Nati Fatua Araki Trust's deputy
Speaker 2: chair Narimo Blair.
Speaker 4: Today we called the Nati pat but that's really a
Speaker 4: reflection of we lost all of the control of all
Speaker 4: of that area, the fishing circuits and the hunting circuits
Speaker 4: for birds, and it was we were whittled away down
Speaker 4: to one called of an Acre, which was all we
Speaker 4: had left at ak which is our name today. But
Speaker 4: I don't really like that name because it really highlights
Speaker 4: that we were actually the masters of the holess miss
Speaker 4: and not just the Ford of an Acre land that
Speaker 4: we had left at Ki.
Speaker 2: Do you think that it will ever be possible looking
Speaker 2: at your reports, for those assets to ever come close
Speaker 2: to what they once were.
Speaker 1: Look, that's not something we've locked at. We're looking at
Speaker 1: the strategy, structures, performance post settlement. Those settlements obviously politically
Speaker 1: negotiated process. We just take that as a as a
Speaker 1: given and sort of focus on what we're good at,
Speaker 1: which is the financial strategy side of things.
Speaker 2: Phil, if you had to take a glimpse into your
Speaker 2: crystal ball, what do you think the future holds for
Speaker 2: EWE assets.
Speaker 1: Well, I'm an optimist. I guess you sort of have
Speaker 1: to be. And you know there'll be volatility this year,
Speaker 1: huge uncertainties around the global political economy that will impact
Speaker 1: all investors and it will impact you know, some of
Speaker 1: the EE directly with if they're involved in our exports
Speaker 1: to the US, which are mainly beef and wine, some
Speaker 1: of the EE you're involved in that. But much more
Speaker 1: important is the whole global trading environment. And you know
Speaker 1: you've got to ride these hackups and hopefully come out
Speaker 1: the other side. I think the E we are have length,
Speaker 1: which is they do tend to take a longer term view,
Speaker 1: so you know, by nature they understand and will appreciate
Speaker 1: that cyclicality. They're also in strong position because they're gearing.
Speaker 1: Their debt levels are relatively low, about fifteen percent on average,
Speaker 1: So you know that means you have more financial flexibility
Speaker 1: too to ride the waves.
Speaker 2: And when these ewe's get a positive return, what do
Speaker 2: they generally do with that money? I suppose every EWE
Speaker 2: is different as well, but they've got that that decides
Speaker 2: how to spend it. Do they put that back into
Speaker 2: the community.
Speaker 1: Look, that's a good question too, And you know there's
Speaker 1: always that trade off between long term aspirations which mean
Speaker 1: you sort of reinvest in it in the business, and
Speaker 1: the short term demands, you know, for meeting sort of
Speaker 1: social and educational needs. As you said, each ee wee
Speaker 1: is different. My view is that fortunately most of the
Speaker 1: ewe have taken a longer term view. And then now,
Speaker 1: you know, if you look at my Tahoo for example,
Speaker 1: you know they started out with the settlement of one
Speaker 1: hundred and eighty million. They multiplied that by ten to
Speaker 1: having you around one point eight billion in assets. Their
Speaker 1: dividends when they started out, you know, we're about ten
Speaker 1: million per annum. Last year they pay dividends of around
Speaker 1: sixty nine million. So you know that longer term, medium
Speaker 1: to longer term view in a way means you can
Speaker 1: have your cake and eat it. You know, you can
Speaker 1: have your assets and pay a higher dividend compared to
Speaker 1: if at the start they'd paid out everything in dibdends,
Speaker 1: they'd still be at one hundred eighty million assets. Perhaps.
Speaker 2: Thanks for joining us, Phil.
Speaker 1: Thank you very much, Chelsea.
Speaker 2: That's it for this episode of the Front Page. You
Speaker 2: can read more about today's stories and extensive news coverage
Speaker 2: at enzadherld dot co dot nz. The Front Page is
Speaker 2: produced by Ethan Sills and Richard Martin, who is also
Speaker 2: our sound engineer. I'm Chelsea Daniels. Subscribe to The Front
Speaker 2: Page on iHeart Radio or where you get your podcasts,
Speaker 2: and tune in tomorrow for another look behind the headlines.