Rangatira Annual Report 2025 - Flipbook - Page 7
Annual Report 2025
Nevertheless, we still believe there will be opportunity
for a prudent long-term investor in the right industries.
Like investors, there will be countries that take a longterm view of the problem in front of us and solutions
available, they realise this is a moment in time and
a modest quake rather than a seismic shift but the
direction of travel is clear. These moments have been
experienced in the past and will be experienced in the
future. It is all about finding a balance for the moment
that we are in.
The NZ economy, to some degree given our size,
proximity and key exports, is protected against some
of these macro trends, but not forever. For certain
products like lobster, kiwifruit, tourism and technology
we will be able to continue to extract premiums from
international markets. The increasing attractiveness
to live in New Zealand and a growing economy will
support well run and leading domestic businesses
in sectors like health, building products including
scaffolding and waste management.
The other obvious change will come about through
the adoption of AI technologies. How this new
advancement will play out is yet to be seen, but there
are many pundits predicting various scenarios. In the
short term one could expect improved productivity
at the expense of employment. Previous significant
human advancements such as mass production, the
introduction of steam engines, motor vehicles and air
travel, telecommunications, personal computing and
the Internet have all increased the total demand for
labour. It is unclear whether AI will deliver this, quite
the contrary, it could lead to a significant reduction
in the demand for labour.
Regardless, it will see those that adopt AI first,
becoming leaders in their industries, so we need
to be aware of what that means for our investments
and adapt quickly with it.
At a macro level there is a space race going on, our
observation is the need to be first outweighs the need
for regulation or a view on what we want from AI in the
future, so its advancement lacks any restraint. As a
result, we may well end up in a place that is
not desirable.
We will continue to stay on top of AI advancements
where it impacts our business and have a sensible
view on the likely direction it may take in the future.
At the same time, we observe the ever-increasing
appetite for private businesses to stay private rather
than becoming publicly listed on stock exchanges.
This is most evident in NZ where we are seeing less
and less interest in companies listing on the public
exchange with a preference to stay private for longer.
The alternative of finding capital from private sources
through either traditional private equity or firms like
Rangatira is now more attractive.
Staying private reduces compliance costs, scrutiny
from external and sometimes ill-informed investors
and allows businesses to take long-term investment
decisions rather than actions that are driven to improve
near term results at the expense of the long term. In our
view it also improves the governance and management
of the business, as more streamlined and risk-based
governance practices allow management to be more
agile and have the confidence to make long-term
decisions. Over time this is attracting better quality
management and directors to private businesses at the
expense of listed companies.
This trend is unlikely to change, as sovereign funds,
private equity funds and large family offices continue
to increase investments in private firms. This only
serves to increase the pool of opportunity available to
Rangatira.
Direct investor access to investment vehicles that
access private investment is not available to all, so in
time, I would expect that KiwiSaver, and other managed
funds will look to invest more actively in private
investment assets on behalf of their investors. We are
seeing this with Fisher Funds, Milford and others now
making more sizable allocations to private assets. While
presenting us with more competition it will also present
us with opportunities given the capacity and capability,
we have in Rangatira, including potentially increasing
investor interest in Rangatira.
You can see from the table on the next page how
poorly the returns from the NZX50 index compare to
our returns over the last five years. While these markets
offer more liquidity, the low return is an expensive price
to pay for this liquidity when compared to owning wellrun private assets.
With the current volatility in the markets, a fragile bond
market, heightened due to weak government balance
sheets and more isolationist domestic policies, it is
prudent to maintain liquidity and not hold too much in
the listed equity markets.
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