Chris Lee & Partners Ltd

Taking Stock 15 October 2026

Any regular reader of Taking Stock may recall my strident condemnation of the people who devised the Provincia Property fund, doomed to investor disappointment because of its structure.

The fund paid its manager generously but also paid on growth that was funded by debt, as well as rewarding the management company for finding acquisitions and also for arranging debt facilities. Size, not quality, could be rewarded. The combined fees were absurdly high.

It was as poor a structure as RJI was when it was listed in 1982, grossly over-rewarding the founder, with very little ability to fire the managers or direct them to prioritise the interests of the investors. Provincia and Jones were effectively judge and jury, with minimal investor input, and very poor governance.

Various stranded Provincia investors contacted me, some of whom fought valiantly and seem to have gained the upper hand. I admire their tenacity.

The good news is that change may be afoot.

Craig Priscott, who has successfully intervened with other dreadful unlisted property syndicates like Superstore, has become a significant shareholder and has engineered a change in chairman. Clearly, he has financial grunt and the energy to fight.

Contemporaneously, a company valuer, Northington, has analysed Provincia and found that over a decade or so the management fees exceeded investor returns!

Tellingly, one of the founders, Carl Burling, is alleged to have sold out of his units at a 40% discount to par while the fund continues to claim its assets are worth more than par, and that its prospects are bright. There is virtually no liquidity in the stock, meaning investors rarely can escape. Dividends have been nil or pathetically low.

So, it is great news for investors that a new chairman and a well-heeled investor may either arrange to replace the turgid management, or initiate a staged liquidation, bringing an end to an awfully structured unlisted property syndicate.

I compare that with The Wellington Company's three syndicates that 11 years ago bought commercial properties and adapted them to student accommodation during the education boom in Wellington, when foreign students scrambled to get into Victoria University.

Of course, many such students left NZ after the Kaikoura 2016 earthquake. Some have not enjoyed the focus on left wing ideology of the university, showcased by people like Rashbrooke, who in that time became a Stuff commentator preaching far-left ideas.

When the students left, the property concept became flawed. Valuations slumped. The dividend pool was threatened.

The owner of The Wellington Company, Ian Cassels, at one stage sacrificed his management fees to honour the dividend promises.

In recent months he has orchestrated sales or repurchases by his company. This will enable all investors to recover their capital, two with a marginal gain, and has maintained credible returns for investors during the very difficult recent years.

In effect he has taken responsibility for transforming the properties to suit the market that exists today.

I give him great credit for honouring his investors.

The three syndicates were sensibly structured, with good rules, and transparency, but it certainly helped that the principal displayed principles.

Provincia, in my view, should be managed by those with the mindset that the investors are due an outcome very different from what has been assumed, in recent years. My current view is that unlisted property syndicates are useful for vendors but awful for investors. Those advertising gross returns of 7.25% are grossly under-rewarding risk. Run, rabbit, run.

Many, other than me, have for years sought new legislation to prevent fund managers being locked into their role, removable only by the most difficult processes, making the contract worth millions, often tens of millions. (Jones sold his contract for $75 million, thirty years ago, or more.)

The latest protest comes from the new chairwoman of the three Fisher listed share trusts, Kingfish, Barramundi, and Marlin.

Fiona Oliver was appointed to her new role in July, after the former UBS executive, Andy Coupe, retired from chairing the poor structures.

Oliver was confronted by statistics showing years of quite dreadful performance by the three Fisher funds, in contrast to market indexes, resulting in share price devastation, Kingfish having fallen from $2.20 to $1.10 in four years, while the sharemarket index has grown.

Oliver would also have noticed that Fisher Funds have a high management fee structure and a quite absurd bonus fee structure, claiming out-performance bonus fees based not on equity indexes but on the cash rate. The fund is an equity fund, not a cash fund. How did financial advisers allow this structure to be implemented?

I once asked Fishers why they continued with this anomaly. The answer I received was that at annual meetings the issue never arose. (Partly this would be because the Kingfish fund would be bought only by retail investors, never inquisitive fund managers).

All of these defects explained why many, me included, would rate the Fisher Fund group as more credible than the now defunct fund managers Vestar, Money Managers, Broadbase and Reeves Moses, but only by a short head, not by a neck, let alone the length of the strait.

Its track record with its three listed trusts, Kingfish, Barramundi and Marlin is abysmal. There have been times when its heavy buying of Ryman and Michael Hill has had the air of desperation, not logic. Neither company features today in its top twenty, but undoubtedly both contributed to Kingfish's awful results.

Oliver must see all of this.

She is commissioning a review to consider sacking Fisher Funds and finding another fund manager. I politely suggest that Milford would be warmly regarded by most.

Carmel Fisher herself, the saleswoman who founded Fishers, has retired having quit with a nine-figure lump sum, an extreme reward for her energy, media skills, ambition and brand selling dedication.

Oliver is to be applauded for her initiative.

Will the day come when at regular prescribed times, investors get to vote on changing the fund manager?

The Provincia investors would welcome such a change.

So would I. We should not need regulators to legislate.

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When in the decades from 1990 to 2010 several NZ trust companies were trawling for retail investors, looking to manage their estates and trusts, the sector was barely inspected by anyone, least of all the media. Nobody seemed to care, not even the regulators.

The trust companies serviced investors who were not visible, either poorly advised when they enquired about the service, or unwilling to make enquiries, guided only by the Yellow Pages or newspaper and television advertisements, protected by nobody.

What brought the trust companies into the headlines around 2005 was their singularly incompetent work when they chased fees by offering to represent those who had invested in mortgage trusts or finance companies.

Perpetual, NZ Guardian Trust, Trustees Executors and Covenant were all so incompetent and negligent that the trust sector was naturally scorned for their obvious incompetence. (The Public Trust wisely sidestepped the non-bank sector.)

Few will forget how often blind eyes were paid to examine useless covenants in poorly structured trust deeds, expected to apply the handbrake on non-bank deposit takers, when lending focussed on margins, rather than loan recovery, with no respect for rules.

NZ Guardian "supervised" Hanover's rotten group. Covenant looked after Dominion, Bridgecorp and others. Trustees Executors was negligent in managing South Canterbury Finance, but Perpetual was the worst, pretending to be the guard dogs for those who invested in canines like Lombard.

The 2008 second-tier money-lending collapse was well traversed in my book The Billion Dollar Bonfire, which traced the lending nonsense that seemed to scuttle off to holes in the floorboards whenever the trustees called in for a cup of tea and to deliver their invoices.

I guess the good news is the quite appalling abandonment of the trust companies' sense of responsibility to investors, led eventually to inspection of trust company behaviour in the area where they collected their richest gravy, managed funds, family trusts and estates.

Typically, a fund manager would appoint a trust company to attest to the manager's abiding with its deed on such funds as bond funds, or cash funds. The trust company confirmed compliance with the deed.

As no fund manager of any value would benefit by cheating on such funds, the trustee fee, of say 0.1% on a $100m fund would be $100,000, requiring someone with the skill level of a primate, to tick the boxes and collect the fee. This was a task that took hours a year, not weeks. As Darwin had suggested, primates and humans can be closely aligned.

It was money, not so much for jam, but for an old recipe describing how to make jam. Value? Coins, not bank notes.

But the real gravy was, and is, in managing estates and family trusts. The charges are revolting and the skill level confirms that Darwin was right.

Incredibly, the unadvised, or poorly advised public allowed trust companies to set their fees not on the value or time requirements of their role, but as a percentage of the value of the estate or trust. Do I hear 1%? No, 2%? No, 2% plus various ancillary fees such as "admin fees".

People with no or little value to add were paid like valuable fund managers. They were rarely, if ever, accountable for the outcomes. Readers can develop their own thoughts on the value added, compared to the fees charged.

Because the fees were collected in advance, and set per annum at a fixed rate, there was (and is) no incentive to clean up estates efficiently, and because the fees applying to managing a family trust are collected annually, there often was no alignment with the interests of the family trust beneficiaries (to wind up the structure and pay the beneficiaries).

The trust company sector was, and is, divorced from the desired marriage between settlor wishes and beneficiary entitlements. Settlors need to be precise in documenting their wishes if the trustee fee grab is to be minimised. The current practices are offensive, in my opinion.

I recall helping a wheelchair bound beneficiary sack the trustee who had persuaded a senile mother in her 90s to sign up a document giving the trust company, Perpetual, tens of years of annual fees. (The beneficiary won only when the threat of a media campaign scared the company). Such a long-term income stream comes from a "testamentary" trust. Never ever!

Well all this may seem like history, but it is relevant today.

In recent days I have fielded calls from furious beneficiaries encountering deliberate, inexcusable delays, and in one case denying beneficiaries the right to seek a transfer of assets equally to the beneficiaries, rather than the selling of the assets (with all the vendor fees) and distributing cash.

My advice has always been never to use a trust company without first discussing the alternatives with a lawyer. Be specific about what the wind-up should involve, or what grants are to be made. Never be advised by the trust company.

I have long advocated that most trusts and estates can efficiently and at low cost be managed or executed by family & friends, perhaps with access to paid legal or accounting advice when there was uncertainty about legal processes.

In general, this advocacy has succeeded. Far fewer of those I meet sign up with a Trust Company if they have any credible alternatives.

Simple, honest, competent lawyers are generally immeasurably better, and cheaper, than trust companies. 

Caring, alert, competent family and friends are an even better choice, nearly always producing better outcomes, more cheaply and quickly.

Trust companies themselves surely know they are in a sunset industry. Artificial Intelligence can, and will, be the catalyst that should turn dusk into darkness, the sooner, the better.

Gaining advice on how to arrange management of a trust or an estate is not financial advice and therefore should be available from any seasoned financial adviser.

Such an adviser surely would have witnessed many times the trust company fees that far, far exceed value-add.

Do we need court law to put an end to ridiculous fees?

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One client would argue stridently that not all law firms will add value when preparing wills or administering estates.

She recently petitioned Parliament to consider new law requiring much more transparency, when lawyers prepare a will and arrange to administer the estate.

She had encountered greed, inefficiency and intransigence from a law firm. She did not have the power to expel the law firm and move to a more appropriate source of help, though she was a principal beneficiary.

Parliament has rejected her petition.

This may look like a parliamentary group of people protecting what others may see as "the club".

Administering (executing) a will is generally done quickly and well by law firms, with transparency available throughout the process.

When there are exceptions the Law Society should be judgemental and come down heavily on greedy or poor performers. Such operators do not deserve to be protected. Greed should be a justification for exclusion from “the club”.

The worst performers draft the will, appoint themselves as executor, and do not explain adequately their fees and their processes. They then help themselves for as long as they can drag out the process.

It is for that reason that I prefer all draft wills to be independently inspected before any agreements are signed.

A lawyer's certificate should never be a free ticket for any passing gravy train.

Who remembers the days when conveyancing charges were a standard 2.5% of the value of the property?

In the 1980s a $100,000 house scored twice the revenue of a $50,000 house despite there being no difference in time, effort or expertise needed, no incidental costs, and virtually no liability for the lawyer.

To repeat, a lawyer's university certificate, just like an appointment as a trustee, should never be a free ticket to a passing gravy train.

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New Issues

Contact Energy is expected to issue a new subordinated capital bond in October. We expect the bond to have a term of around 6 years, with a possible interest rate of around 6.00% per annum. 

Kiwi Property Group has announced it is considering an offer of 7-year, fixed rate, senior, secured green bonds. We expect it will offer an interest rate of around 6.00% per annum. The offer opens on Monday 19 October. 

Investors who are interested in either of these potential bonds are welcome to contact us with their CSN and an indication of the amount they may wish to invest. We will then contact them once further details are available.

_ _ _ _ _ _ _ _ _ _

Travel

Our advisors have an extensive travel schedule coming up over the next quarter, including the following dates:

21 October – Auckland (Albany) – Edward Lee (FULL)

22 October – Auckland (Ellerslie) – Edward Lee

29 October – Christchurch – Johnny Lee (FULL)

17 November – Christchurch - Chris Lee

18 November (am) – Christchurch – Chris Lee

18 November (pm) – Ashburton – Chris Lee

19 November – Timaru – Chris Lee

Chris Lee

Taking Stock 8 October 2026

James Lee writes:

Where Have All the Leaders Gone?

Donald Trump recently said: “The only control or guardrails that AI needs is a STRONG AND SMART (High IQ!) PRESIDENT.”

Um, yes.

But it did get me thinking about leadership and, more specifically, where all the leaders have gone.

As I think about who I would vote for at the next election, I find myself surprisingly uninterested in most of the individual policies being announced. I want someone to tell me where we are going.

What does New Zealand look like in 20 years? What are we going to be great at? How are we going to create better jobs, higher wages and more wealth, and what difficult decisions do we need to make today to get there?

Instead, politics increasingly seems to be about finding something people are angry about and promising to fix it.

Maybe that is what polling tells politicians to do. But it isn’t leadership.

And I wonder if the same thing is happening in business.

Leadership matters

I have had the privilege during my time in markets of meeting most of New Zealand’s leading CEOs and quite a few internationally.

The genuinely good ones are surprisingly easy to recognise. Marko Bogoievski, Scott Pritchard, Cecilia Robinson and many others I could name are all very different people, with different personalities, industries and management styles. But the good leaders I have met tend to have some things in common. They have a clear idea of where they are going. They speak frankly. They act fairly. They surround themselves with capable people and they make decisions.

Importantly, they don’t get everything right. Nobody does. I would wager every successful leader I have ever met could go back in time and change something they did. I certainly could.

Perhaps that is the distinction. A good leader gets something wrong, learns, adapts and tries to make the next decision better.

A poor one blames somebody else, learns nothing and then occasionally explains why, despite everything apparently being someone else’s fault, they deserve to be paid more.

Funny old world.

Research involving 1,200 Australian and New Zealand organisations found leadership, people management and customer focus were among the strongest predictors of operational performance.

Leadership isn’t simply a nice thing to have. It has economic value.

I have thought this for a while

Back in 2022, I criticised DGL chief executive Simon Henry after his comments about Nadia Lim. I thought his comments were unacceptable. But my concern as an investor wasn’t simply whether they were offensive. I thought they told you something about judgement, leadership and potentially culture. I questioned whether that made the stock effectively uninvestable.

I wasn’t alone. The New Zealand Shareholders’ Association publicly criticised the comments and Kiwi Wealth went further and put DGL on its exclusion list.

If you don’t trust the judgement of the people running a company, at some point you have to ask why you would trust them with your capital.

Leadership is an investment issue.

Nearly half

Which brings me to one of the most extraordinary investment statistics I have come across recently.

J.P. Morgan looked at companies that have been constituents of the Russell 3000 (an index tracking the largest 3,000 US listed companies) since 1980. Nearly 45% suffered what it defines as a catastrophic loss, losing at least 70% of their peak value and never recovering. Even more interestingly, the top-performing 10% of stocks generated almost all the Russell 3000’s total return.

That is an extraordinary combination. A relatively small group of companies created enormous wealth while nearly half eventually suffered catastrophic destruction of shareholder value. They all had boards, auditors, strategies, budgets and management teams. At some point the market thought they were worth considerably more than they ultimately proved to be.

Some were destroyed by technology, competition, debt or bad capital allocation. But I suspect many simply continued making perfectly sensible decisions for a world that no longer existed.

That matters because the world is changing faster, not slower.

What are we trying to become?

Which brings me back to New Zealand.

We spend enormous amounts of time debating individual problems. I am more interested in the bigger question.

What are we trying to become?

We have a temperate climate, relative safety, abundant water, renewable electricity, space, functioning institutions and one of the most beautiful countries on earth.

Mostly, we’re even quite nice.

AI requires enormous amounts of electricity. Climate change increases the value of water. Geopolitical instability increases the value of safe, stable jurisdictions. Some of New Zealand’s historical disadvantages may increasingly become advantages.

We have the ingredients. What we need is ambition, a view of where New Zealand could be in 20 years and a willingness to make decisions today that may take 10 years to pay off.

We need a direction. Where is the plan?

Growth compounds

I was in Christchurch recently and was reminded what an extraordinary job they have done rebuilding the city, and how tastefully much of it has been done.

More importantly, Christchurch feels like a city that expects to grow.

Christchurch lost around 4,000 jobs between 2020 and 2021, then added around 18,000 between 2021 and 2023. By 2025 it had around 48,200 businesses employing approximately 238,000 people.

As a proud ex-Wellingtonian - go the Hurricanes - I can tell you my hometown feels like it is on the other side of that growth curve. And that matters because relatively small differences compound.

Build a convention centre, hotel, factory, office or housing development and people build it, operate it and supply it. Visitors arrive. Restaurants gain customers. People move there and need houses.

Investment creates jobs. Jobs create demand. Demand creates confidence and confidence encourages more investment.

Contraction works in reverse. Lose confidence and investment slows. Projects get deferred. Businesses hire fewer workers. People spend less and eventually the cycle begins reinforcing itself.

That is why new projects matter beyond their immediate economics.

Sometimes you don’t wait for growth and then build. You build and create the conditions for growth to follow.

The same is true inside companies.

We tend to think leadership is about the big acquisition, strategy or restructuring. Most of the time it is far less dramatic.

Hire someone slightly better. Fix a customer problem. Remove some waste. Promote someone talented. Make a decision faster. Have a difficult conversation earlier. Stop something that isn’t working and invest more in something that is.

None transforms a business.

Do them hundreds of times and five years later you have a very different company.

The reverse compounds too. Tolerate mediocre performance, add bureaucracy, delay difficult decisions and lose good people. Nothing looks catastrophic on any particular Tuesday. Then one day it does.

Leadership sets the direction. Culture determines what happens every day when the leader isn’t in the room.

Culture isn’t being nice

I learned this relatively early in my career.

I once rang my chairman because I was struggling with what should have been a simple decision. We had been asked to sponsor CatWalk, a charity doing work I thought was genuinely worthwhile.

It was within my delegation, the events would give the firm reasonable exposure, and I could construct a commercial justification.

Yet something didn’t feel right.

My chairman asked me a simple question: “Are you doing it because you think it is the right thing for the firm, or because you think it is the right thing to do?”

I knew immediately.

Supporting CatWalk was the right thing to do. That didn’t necessarily make it the right thing for shareholders to pay for. So, we both made the donation personally instead.

I have remembered that conversation ever since because I think we increasingly confuse good culture with being nice.

They aren’t the same thing.

Being human, empathetic and fair matters enormously. But none of those things excuse poor performance, avoid difficult conversations or justify blatant waste.

Good culture is paying for the staff function but perhaps sending everyone home at eight rather than opening another case of top-shelf wine. It is having honest conversations about performance along the way rather than saying nothing for a year and then isolating somebody when you finally decide you have had enough. It is rewarding extraordinary contribution rather than overpaying someone because their title sounds important.

You can be kind and demanding, generous and disciplined, and treat people like human beings while still expecting them to perform.

Mainfreight is an interesting example. Culture is one of its core pillars, but that sits alongside extraordinary transparency and accountability. Branch results are reported weekly for team members to see and responsibility for quality is reinforced through regular internal audits.

Care and accountability aren’t opposites.

Good cultures understand you need both.

The asset you can’t see

We spend enormous amounts of time valuing companies based on things we can measure. Revenue, EBITDA, margins, market share, cash flow, debt and return on capital all fit nicely into spreadsheets.

Leadership and culture don’t.

Yet if nearly half of the companies in that J.P. Morgan study ultimately suffered a catastrophic decline, surely one of the most important questions an investor can ask is who is making the decisions?

And I deliberately say leadership team rather than CEO.

The heroic CEO is mostly a myth. Great companies are built by groups of people who challenge one another, attract talented people, allocate capital intelligently, admit mistakes and recognise when the world has changed.

The best leaders aren’t necessarily the smartest people in every room. They create an environment where the organisation can learn and adapt.

That is becoming more valuable. AI will make information, analysis, software and expertise cheaper. Judgement won’t necessarily become cheaper.

Knowing when to invest, when to stop, when to change your mind, when to back someone and when to say no remain very human decisions.

An uncomfortable question about passive investing

The J.P. Morgan numbers also raise an interesting question about passive investing.

Passive investing has been extraordinarily successful. It is cheap, diversified and difficult for most active managers to beat consistently.

But if nearly 45% of companies in that historical study suffered catastrophic declines, owning everything inevitably means owning many of tomorrow’s failures as well as its extraordinary winners.

Historically the winners have more than compensated for the losers. But as technological change accelerates, I wonder whether understanding what we own becomes more important rather than less.

AI will create extraordinary winners and destroy business models that today appear perfectly sound.

An index doesn’t know the difference. Eventually the market will.

Which brings me back to leadership. Understanding who is allocating your capital, whether they learn from mistakes and whether they can adapt when the world changes seem increasingly important.

Maybe we should measure it

I have often thought analysts create valuations that do an excellent job of judging a company’s financial model. ESG firms create elaborate scorecards measuring whether companies adhere to policies and frameworks.

Perhaps, as financial advisers, we should develop a scorecard for leadership teams - not a personality contest, but a genuine assessment of whether they have a clear vision, allocate capital well, admit mistakes, retain good people, promote talent, deal with poor performance fairly and early, communicate honestly when things go wrong and link remuneration to genuine value creation.

And perhaps we should ask whether the board actually challenges management or merely admires the quality of the board papers.

Because I am tired of hearing about another toxic bully of a first-time CEO, protected by an incompetent board that appears to believe good papers are what constitutes good governance.

Governance isn’t the paper. Leadership isn’t the presentation. Culture isn’t the staff drinks.

They are what actually happens when the numbers disappoint, when someone disagrees, when a mistake is made, when a talented employee challenges the boss and when nobody outside the room is watching.

Perhaps that is the scorecard that matters.

Nearly 45% of Russell 3000 constituents in J.P. Morgan’s study suffered a catastrophic loss from which they never recovered. Almost all of the index’s wealth creation came from the best-performing 10%.

The difference between those outcomes obviously isn’t leadership alone.

But pretending leadership doesn’t matter because we can’t put it neatly into an Excel model seems increasingly absurd.

Vision matters. Culture matters. Judgement matters. Accountability matters. The accumulation of hundreds of small decisions matters.

And in a world changing this quickly, I suspect all of them are becoming more valuable.

For those of you who get to the end and wonder whether I was talking about you, I probably wasn’t.

But perhaps the fact you wondered if I was is pretty telling.

New Investment Opportunities

Lodestone Energy 

Lodestone Energy has confirmed that the IPO price is $2.25 per share.

Lodestone owns a portfolio of five solar farms across New Zealand, with plans to build another 10 solar farms using the funds raised from this IPO, essentially tripling the size of the business over the next 5-years.

The company is seeking to raise between $75 million and $100 million, with no existing shareholders selling shares as part of the IPO. The new capital will be used to support Lodestone’s continued expansion across New Zealand.

For advised clients, we have prepared a research piece on Lodestone Energy, which is available in the private area of our website. If you would prefer a copy to be emailed to you, please contact us and we would be happy to send it through.

Investors can find the investment statement on our website and if you would like an allocation for these shares, please contact our office with an amount and your CSN and we will send through a contract note.

Contact Energy is expected to issue a new subordinated capital bond in October. We expect the bond to have a term of around 6 years, with a possible interest rate of around 6.00% per annum. 

Investors who are interested in this potential bond are welcome to contact us with their CSN and an indication of the amount they may wish to invest. We will then contact them once the final terms and further details are available.

Travel

Our advisors have an extensive travel schedule coming up over the next quarter, including the following dates:

21 October – Auckland (Albany) – Edward Lee

22 October – Auckland (Ellerslie) – Edward Lee29 October – Christchurch – Johnny Lee (FULL)

Chris Lee and Partners Limited