"Trustee investment" : "a discussion on extension of investment powers in New Zealand"

Abstract

At present in New Zealand investment of funds in estates or trusts is subject to the terms of the instruments governing the estate or trust but in the absence of any such terms is subject to the provisions of the Trustee Act 1956 and Amendments. The pattern of investment in "trustee securities" as investments under the Act are generally called has been established from early times in favour of maximum protection of capital and moderate but assured income. The missing factor in this pattern has been of course the ability to keep pace with depreciation in the value of money. This factor has been recognised and especially in more recent time when inflationary trends appear to be more marked. There has been increasing concern for the "frozen" nature of capital funds under existing trustee investment powers and a rising tempo of thought is favouring protection of trustee securities as much from inflation as from speculative or hazardous enterprises. The simple fact is that inflation has been with us for centuries and appears likely to remain far into the forseeable future. In New Zealand we even have a political party pledged to halt inflation, stabilize currency and enable a worthy citizen to buy the same amount of goods with £10 in one years time as he can now, but present reality indicates that this is likely to be impossible. In July 1964 Mr. Lake, present Minister of Finance in the National Government advised the House of Representatives that in the previous five years the value of the £1 had shrunk from 20/- to 17/111/4. One is inclined to feel that for the sake of his position and politics this figure is on the conservative side as other economic indicators Consumer Price Index, New Zealand Abstract of Statistics and confirming advice from the Government Statistician; and see below point to a higher inflation rate than the slightly over two per cent per annum indicated by Mr. Lake. It is however a recognition of the position and the problem is bought forward further up to date by almost daily reports of the Government's concern about accelerating "inflationary trends" and apparently only limitedly successful efforts to "put a brake on the economy". The problem is with us and judging from the results of present efforts to meet it is likely to remain See also Chapter 2, and in the only known N.Z. decision on an investment extension; Re Murray Trust - (judgement 28th October, 1966,) Mr. Justice Woodhouse said:- "There can be no doubt that since the conclusion of the last war the continuing erosion of capital brought about by inflation has presented a very serious problem for all those concerned with the investment of trust funds." This case is considered in more detail in Chapter 5 below.