New Zealand Tribe’s Bet Transforms Its Fortunes

Posted by on Mar 12, 2014 in Uncategorized | No Comments

The Ngāi Tahu See Their Investments Pay Off

By Lucy Craymer

The Wall Street JournalMarch 12, 2014

CHRISTCHURCH, New Zealand  —  For generations, the Ngāi Tahu of New Zealand resembled many other indigenous peoples around the world: impoverished, virtually landless and experiencing a steady erosion of its language and culture.

Then, in 1998, the tribe made a bold bet.  Rather than distribute a historic 170 million New Zealand dollars (US$144 million currently) settlement with the New Zealand government among its people, it invested the money in everything from real estate and stocks to tourist attractions.

All Blacks WSJ

PUMPED UP: Piri Weepu, standing, of Ngāi Tahu tribe descent, leads the haka for the New Zealand All Blacks rugby team in a match in 2012.

A series of astute investments have since transformed Ngāi Tahu’s fortunes, enabling leaders to pump funds into restoring its meeting houses and supporting health and education programs.  In doing so, the 50,000-strong Ngāi Tahu has become one of New Zealand’s wealthiest tribes even as it eschews opportunities such as gambling that run counter to its values.  A number of New Zealanders of Ngāi Tahu descent have gone on to international success, including rugby player Piri Weepu.

“It is a hand up, not a handout,” said Mark Solomon, chairman of Ngāi Tahu’s tribal council.

Tribal Assembly 1

 

The tribe compares its investment approach to college-endowment funds such as those operated by U.S. Ivy League schools, which typically hold assets for years and favor those that generate steady returns.

Ngāi Tahu now has total group assets in excess of NZ$1.03 billion, has paid out more than NZ$200 million in dividends to its people, and in the year through June 2013 had a 25.3% return on its portfolio.

 

Last year, Yale and Harvard reported returns of 12.5% and 11.3%, respectively.

Most of the increase in Ngāi Tahu’s assets is from investment gains, although the tribe in recent years received an extra NZ$68.5 million from the government as part of its settlement.

New Zealand’s government has pursued a process of restitution for the injustices faced by Māori, the country’s first people.  The Treaty of Waitangi, first signed in 1840 and considered to have importance on par with the U.S. Declaration of Independence, set basic principles for relations between the nation’s European settlers and Māori tribes that have helped New Zealand largely avoid the independence struggles elsewhere in the British Empire.

Mark Solomon 1

Mark Solomon, chairman of Ngai Tahu’s tribal council Te Rūnanga o Ngāi Tahu.

While it guaranteed Māori ownership and control of “taonga,” or treasure and precious things, it was often ignored, leaving the Māori poor and landless.  Ngāi Tahu was the second Māori tribe to settle with the government since it began negotiating compensation in the 1980s.

The largest portion, some 61%, of Ngāi Tahu’s investment assets are in commercial real estate, residential property and rural land.  About 9% of its holdings are in tourism-related assets, with 22% invested in capital markets such as stocks and a private-equity firm and including a 6% stake in retirement-village operator Ryman Healthcare Ltd.

The Ryman stake nearly doubled in value in 2012 and is now valued at about NZ$252 million.  The tribe’s property-holdings business has benefited from rising land values in Christchurch as rebuilding intensifies after a 2011 earthquake killed 185 people.

However, not all investments have been a success: An early foray into selling fish caught off the South Island failed due to a lack of retail expertise

“If you look at 15 years since settlement, this entity has done really well,” said Trevor Burt, a former executive board member of German chemicals giant Linde Group who the tribe tapped four years ago to run its investment arm.  Over the past four years, the fund’s average total annual return, based on comprehensive income, was 14%, beating the average 12.9% annual return by the benchmark NZX-50 share index.  While Mr. Burt, his board and a staff of nine make some decisions, any major investments must also be approved by the tribal council

To be sure, Ngāi Tahu has an advantage over other funds: It has a right of first refusal to buy government-owned assets or real estate on its ancestral lands that the government decides to sell.  Recently, it used those rights to buy 22 hectares (54 acres) of forest.

Still, Ngāi Tahu’s latest bet is proving contentious — pitting family members against each other in a clash of beliefs that has already seen gambling ruled out as an investment.  The tribe is converting former forestry land into at least eight mainly dairy farms on plains outside Christchurch, New Zealand’s second-largest city.  But the project could expand to around 15 farms, valued at more than NZ$1 billion.

While the deal seeks to profit from rising dairy prices, to some it runs counter to tribal values because intensive dairy farming can cause pollution.  Several tribal members have argued that investment should support traditional Ngāi Tahu farming methods, but Mr. Solomon argues that is no longer possible: His grandparents’ cow Daisy “spent most her life on the riverbed, and that wouldn’t be allowed now.”

“I constantly hear at my table that ‘we want to do farming the Ngāi Tahu way’ and I’m like ‘yes, my grandparents had a Jersey cow called Daisy and she spent most of her life on the riverbed and that wouldn’t be allowed now,'” he said.

When an investment in a local casino was on offer more than a decade ago, the tribe unanimously opposed it.  Diverging from American Indian tribes, which have built casinos on reservation land to raise revenue, Ngāi Tahu turned down the opportunity because “gambling isn’t good — even some of the gamblers said that,” said Mr. Solomon.

The former welder with ancestral ties to a village of 68 houses on a tribal reservation said keeping the fund accessible to tribal members can be as challenging as increasing returns and dividends used to fund schools and community projects.  Visitors to Mr. Solomon’s office, adorned by indigenous art, are welcomed by pressing noses in a traditional greeting of New Zealand tribes.

He recalled an inquiry from an 80-year-old Ngāi Tahu woman who had read the annual report and was flummoxed by references to a mysterious woman named Eva.  “It was economic value added,” Mr. Solomon said, referring to a common financial measure.  “But it [clicked] for me…what’s the point of Ngāi Tahu putting an annual report that talks about economic value added into 14,500 homes when a good number of people don’t understand it?”