ACC Influence on Stockmarket Liquidity a Concern to Private Investors

I am a little worried about the Accident Compensation Corporation having such an influence, in terms of sharemarket liquidity, on the local NZX.

It has been buying up significant stakes in several NZX listed companies and now owns over 4% of the free-float of the market:

The Accident Compensation Corp now has significant stakes in 28 NZX-listed stocks, cementing is position as the biggest player in the market.

ACC manages some $13 billion of assets and had about 10 per cent of its reserves in New Zealand equities in 2010. So far this month it has declared holdings of at least 5 per cent in Argosy Property Trust, Abano Healthcare and Pumpkin Patch, while adding to its stake in Nuplex Industries. In February it emerged as a holder of DNZ Property Fund, Goodman Property Trust, Mainfreight, Tourism Holdings, Kermadec Property Fund and Restaurant Brands.

"New Zealand equities are cheaper than they once were but you can say the same thing about global equities," said Nicholas Bagnall, the state-owned accident insurer's investment manager.

He wouldn't be drawn on whether the disclosures point to a bet on a revival in New Zealand's economy, which the International Monetary Fund sees growing just 1 per cent in calendar 2011 before accelerating to 4 per cent in 2012, helped by the rebuild after the Christchurch earthquake. Figures this week showed the economy narrowly avoided a double-dip recession last year.

ACC now owns more than 4 per cent of the free float of the New Zealand stock market, giving it influence over liquidity in some of the nation's biggest listed companies as well as smaller-cap firms.

"We're effectively enhanced our returns by being a seller of liquidity to the market," Bagnall says. "It works for us and it works for the market as well."

The corporation's investment mandate is to ensure it can cover the long duration of claims liabilities. Its allocations between asset classes tend to be "riskier than the minimum possible risk position," according to ACC's 2010 financial condition report.

It may not seem like a problem to the uninitiated but the New Zealand Stockmarket already suffers from a lack of liquidity and while this obviously will have positive effects as the ACC is buying, it will have very negative effects when they sell.

The ACC has a short term relationship to our market and its main pursuit is to extract the best returns for its investments as possible - as we all do - but that goes against the sort of long-term investment that the NZX has been pushing for the last 10 years.

In short the size of ACCs stake in the NZX is bad for the average investor in the long term because they are able to manipulate the market because of that size.

What we need from this taxpayer funded Government Department is a upper cap - I suggest 5% - on what they are allowed to invest in terms of overall investment in the stockmarket.

It is our money after all and using it to compete against local investors to their detriment is clearly unwise at best and reckless at worst.

It keeps other private investors from using their own money and building up stakes in companies because the ACC are artificially competing with them.

Real competition still remains in the private realm not the bureaucratic one.

Disc I own, PPL & MFT shares in the Share Investor Portfolio.


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c Share Investor 2011

Evidence mounting for a restructuring of ACC

With The National Party promising a long needed restructuring and the element of competition with the Accident Compensation Corporation, the highly inefficient government department continues to provide evidence that it should be privatised completely.

Over the last two weeks, ACC staff were exposed using taxpayer money to get pet grooming for spot and fluffy and day spas and manicures for themselves, a woman who lost all her limbs in a work accident is only allowed a maximum NZ$117,000.00 payout for loss of income, even though she would have made that sum in just one year, and the latest story to hit the media, again, cements ACC as the dinosaur that most know it as.

Mike Gibson, the man caught on video lifting boulders, mowing lawns and doing all sorts of work but officially unable to because of a bad back and getting ACC compensation for it, has not yet been prosecuted by the department and doesn't look likely to anytime soon.

According to reports this individual has been collecting ACC fraudulently for 20 years or more but ACC seem uninterested even with the mounting evidence against him.

These are only three stories that have hit the media, there are thousands more like them that havent. The Mike Gibsons of this world are ripping off the taxpayer and ACC are allowing them to, and the limbless woman not getting what they deserve are the just tip of a well manicured finger.

All this and ACC staff have the best looking pets and finger nails in the land, all courtesy of you and me.

All good reasons to privatise and ACC agrees with that too. The insurance scheme that covered ACC staff for pet grooming etc was provided by Southern Cross.

An efficient, well run private insurance company.


Related Political Animal reading

Labour backs ACC rorts
ACC staff spending on day spas and pet grooming

c Political Animal 2008

ACC staff spending on day spas and petcare

In the wake of the Accident Compensation Corporation failing to look after the British Scientist who lost all her limbs at a work place accident in New Zealand last year and the Labour Government that passed legislation earlier on this decade to limit maximum payouts under ACC to NZ$100,000.00, come revelations today of extreme wasteful spending by the beleaguered, inefficient and expensive public "insurance" government department.

In Parliament today Pansy Wong asked a series of questions and they were answered by the Minister for ACC, well known for condoning overspending by government departments:

Pansy Wong: How does giving staff $250 each per year to spend through the activa card on activities like manicures and day spas promote a more active lifestyle and keep staff fit and well for work?

Hon MARYAN STREET: I presume it is a case of the Accident Compensation Corporation (ACC) practising what it preaches, in that it is trying to prevent injury. I commend it for that. It is in fact an operational matter that is under the jurisdiction of the chief executive officer. But I suppose it is good to hear the National Party spokeswoman on accident compensation actually saying something about the portfolio at least once every 6 months, given that she was not able to—or not allowed to—say anything about National’s policy when it was released.

Manicures and day spas part of "preventing injury"? I think not.

Pansy Wong: Does the Minister believe that the active and healthy lifestyle of ACC staff is promoted by spending $250 for each person per year on animal care, including pet grooming?

Hon MARYAN STREET: I have no idea what that has to do with the health and safety of ACC staff, but I am happy to look into that for the member.

What part of an employers responsibility is it to look after employees pets?

Pansy Wong: Can the Minister assure the House that ACC staff are not spending $750,000 worth of taxpayers’ money on Botox, facelifts, and other cosmetic treatments that are services provided for through the activa cards, or does she think that this is an acceptable use of ACC funds?

Hon MARYAN STREET: In respect of the first part of the question, I think I can assure the House of that. But I will check that with the chair of the board, given the member’s obvious concern about the expenditure of ACC money.

If this is a fact then it is a scandal.

Nothing on TV news this evening or in the newspapers.

This sort of corrupt practice, the spending of taxpayer money on things that individuals should be paying for themselves, in the face of a recession and high taxes, is a very good reason why this government department should be subject to competition at the very least.

Personally I think it should be sold.

The bleating from the left about the ACC being fair, efficient and a wonderful State apparatus is clearly quite wrong in the face of the above and more the public dont know about.

The Minister clearly has little trouble with wasteful spending machinations at ACC because it is a State department and it is taxpayer money they are wasting and that clearly doesn't matter when it comes to this Minister and the Labour Party.

Related Links

Full transcript of Pansy Wong's question

c Political Animal 2008