We have been GMI customers for several years but became disillusioned with them after several years of poor performance.GMI Performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair enough we joined right at the start of the Global Financial Crisis which was pretty poor timing on our part and forunatly GMI held losses to less than they might otherwise have been.

Since then however the performance has been pretty much along the same lines as the market benchmark (see the second graph where the lines have been overlaid).

GMI

So what have GMI achieved for their money? Well two things stand out, they preserved the investment value during the first part of the Global Financial Crisis and secondly their reporting is excellent.

On the downside though we have felt unhappy with several aspects:

  • There's a complete lack of transparency on brokerage and hedging costs which are not reported on.
  • GMI have been continuously under allocated in shares, thereby missing out the worst of market falls but also on such rallies there have been
  • Currency hedging. After several abortive attempts to predict currency movements they went for 50% hedged/unhedged, always half right half wrong.
  • Some investments are aggregated (or pooled) to allow small investors access to "wholesale" bonds. This means that if you leave GMI you can't take them with you unless you have a minimum holding and must sell them
  • The sale to Kiwibank may not affect them in the short term but it seems inevitable that GMI will become a profit centre for Kiwibank. One thing you can be sure of is that you don't want your investments to be someone else's profit centre.

I read the book Unconventional Success: A Fundamental Approach to Personal Investment is by David Swensen, chief investment officer of Yale University's Endowment Fund some years ago and we've been summoning up the courage to follow his directives. One major thrust was to ensure that your objectives are the same as the investment manager and he advises readers to avoid all products from fund managers who are required to make profits for shareholders. We had thought that GMI was such an organization. Naive.

You can read a review of the book in the NZ Herald here