Quote Originally Posted by GTM 3442 View Post
"You should know the more you diversify, the less return you get as you get closer the level of averages. . . "- I'm inclined to think that how and what you diversify is also important. Conversely, the more you concentrate, the further away from the level of averages you can get. Out of idle curiosity, what do you benchmark yourself against?

"I recall some years ago the NZ Superannuation fund was trying to sue some bank in Spain because they took a bad stake in a poison pill venture. Like who was the goon that OK this kind of deal? - and you can be sure no one was held accountable." - Context can be quite important - should it turn out that your goon made 5 good calls for each one bad one, what then?

But in general, I suspect the broad thrust of your comments about the New Zealand retail financial services industry is sure to strike a chord with many.
How and what, and concentrate? You can pick narrow base fund that concentrate in a certain segment but then they should be measuring their performance their relative index. ie. relevant commodity index, relevant emerging market index etc. The same rules apply, the more you diversify, the more you become average to that index. Personally i'm only interested in a broad market index so I look at the S&P500 or the DOW index. That is the same benchmark that Buffet refers too and so should most managed funds when they are choosing a broad base diversification for their clients.

As for the NZ Superannuation Fund, the link in question is here:
https://www.stuff.co.nz/business/ind...over-200m-loss
That goon needs to measure his performance to OTHER superannuation funds around the world just like you would with an index fund. So if he's picked 1 bad one (re: the Portugal bank loss), then his other 5 good calls need to be compared to the good calls by other gov't pension funds in other countries. Perhaps there is no benchmark if the NZ Superfund holds most of it's assets in NZ. But I can assure you no pension fund would limit their investment in a narrow base investment if they choose to hold investment mostly in their native country. But going back to the bank investment in Portugal. You have to question how was this goon sucked into this investment by GS? Why couldn't GS suck in some other managed fund in another country? My guess.... the NZ Superfund didn't know better because they never had better information outlining the risks they were getting into. Because it certainly sounds very fishy to lose that $ in 1 or 2 months time frame. Certainly, it's an issue of lack of information for all investors and if you don't have a strong form of market efficiency, then there's little point of pushing the diversification button.

But in general, I suspect the broad thrust of your comments about the New Zealand retail financial services industry is sure to strike a chord with many.
Why would it? Is it not because the truth hurts too much? Just like the NZ building industry we're timber prices are 3 times the price in NZ than what the American can buy at Home Depot? HUGE barriers of trade and HUGE levels of regulations. How about that FMA the NZ gov't dished out last year? You know how stupid NZ looks when they impose a NZ regulation abroad saying for eg. to US brokerage firm, if you're providing services to a NZ resident, that you must comply to our NZ regulation by banning the client access to derivatives and futures / options and forex? What are the repercussions over this? I tell you, the foreign markets will just exclude the NZ market and then you wonder... why is it the NZX experience dwindling liquidity? Here's what I see, the NZ equity market is gonna dry up like a deep fried potato chip and the only people holding the bag are the poor NZ investors.. stuck in schemes like Kiwi Saver all while you have FIF that distorts the tax issue when you want to invest abroad. Other developed nations like Sweden, I know for fact opens the door wide open. Their residents and their pension funds allow full access to foreign markets with no regulation or restriction and certainly not such tax disparity like FIF.