NBR gave Booster a good old-fashioned rogering this morning in an expose article about how Booster have been loose with the truth, hidden by obfuscation.
Our Tuesday article “Investment Fund Fees Smackdown: Provincia vs Booster” compared the fees of Booster’s new Private Land and Property Fund with the fees of our own Provincia Property Fund.
Apart from the factual comparison of fees, I alluded to structural problems with Booster’s fund but went no further, not wanting to engage in unseemly criticism of another fund.
Turns out I didn’t need to. NBR gave Booster a good old-fashioned rogering this morning.
Tim Hunter authored the wonderful article, titled “New listing, same old problem”. It contains a really good analysis of Booster’s new fund.
Article link: https://www.nbr.co.nz/story/new-listing-same-old-problem. It’s behind a paywall but if you don’t have an NBR subscription you can register for a premium account to read the article.
The main thrust of Hunter’s article is the obfuscatory language used by many in the financial sector, of which Booster is a stand-out example.
To quote Hunter…
Such is the taboo associated with calling a monetary spade a spade, the lexicon of loot is often deployed as much to obscure as to enlighten.
It is deeply ironic – and disappointing – to see this behaviour displayed by the first fund to list under new NZX rules designed to make fund investments more accessible.
That it should occur little more than a week after NZX published a report on how to develop our capital markets suggests the financial sector is still struggling with the concept of customer focus.
We’re talking here about the Private Land & Property Fund, a unit trust offered by Wellington-based fund manager Booster.
Hunter lists three claims made by Booster that appear to be untrue. The first is one I alluded to in Tuesday’s article. To quote from Booster’s product disclosure statement…
“The fund provides investors with an opportunity to obtain an investment exposure primarily in a specialised portfolio of directly held, unlisted, agricultural and horticultural land and other property investments in New Zealand, which may be supplemented with investments in industrial, commercial and retail properties (including land, buildings, bearer plants1, and plant and equipment, which are together referred to as ‘Property’).”
Hunter points out that “most readers might take ‘directly held’ to mean the fund held land assets itself, but no. The Private Land fund does not hold land itself. Instead, as was explained in the following sentence, it owns units in another fund (whose land is held on trust via a custodian).”
His second revelation relates to Booster’s claim that the Private Land & Property Fund is a $50 million fund. Hunter says, “Is the Private Land fund a $50m fund? No. It’s a $30m fund.”
How can they say it’s $50 million when it’s actually $30 million?
Apparently, Booster justify the obfuscation by explaining that the fund that the fund invests into [no, that’s not a mistake!] has net assets of $30 million, but if you ignore the debt of nearly $20 million then the gross asset value is $50 million.
Booster’s product disclosure statement says the underlying fund “may borrow to invest” but not that it has already done so. And not once does the word ‘debt’ appear.
A troubling revelation
The most troubling revelation for me, though, was something related to Booster’s fees that I hadn’t picked up on. Hunter discovered that Booster has an obscure 1.1% fee fee for arranging loans from its income and fixed interest funds to its Geared Growth Fund.
In other words, Booster charges a 1.1% fee for arranging a loan from one part of itself to another part of itself. Some might politely say this is not in investors’ best interest. Others might call it unbridled greed. The truth is usually somewhere in the middle, but I’ll let you draw your own conclusions.
I encourage you to read the article: https://www.nbr.co.nz/story/new-listing-same-old-problem. If you don’t have an NBR subscription you can register for a premium account to read it.