Friday 14th of December 2007

PIEs are the greatest things in the investment market since sliced bread (if you’ll excuse the poor pun). This has been clearly demonstrated with the enthusiasm fund managers have had in baking PIE-compliant funds across their product range, and excitement by managers to introduce new funds to the market which are tax efficient. There has been one notable exception though, which in my view is significant. That exception is in the area of cash PIEs and in particular alternatives to bank term deposits. Currently there is a flood of money finding its way to bank coffers on the back of troubles in the finance company sector. No doubt much of that money is invested by people on tax rates other than 33%. The simple conclusion here is that banks aren’t necessarily doing their customers a great service. What is also fascinating is that we have attempted to find out what banks are doing in this space, yet all the ones we have talked to have been pretty tight-lipped. It makes one wonder whether there are problems, not so much with the product manufacturer, but maybe more with technology issues? Since the PIE rules came into effect on October 1 there have been plenty of PIE funds available. The only cash PIE we are aware of is one made by AMP Capital and marketed through RaboPlus. It’s a pretty appealing product for advisers and investors. While its blackboard rate is 8.00%, for a 39% tax payer, we are told, that the effective rate is 8.79%. While it is being pushed by Rabo to retail customers, we understand AMP Capital has put it on the major platforms (Aegis and FNZ) for advisers to use.