Cullen's Reverse Midas Touch hits again

Cullen fund takes a hit over credit crunch fallout – 12 Jan 2008 – NZ Herald: New Zealand Business and Personal Finance News

Michael Cullen has suddenly developed a Reverse Midas Touch.

He has been saying for months that the US sub-prime mortgage crisis won’t affect Kiwi’s at all, then in the space of two days we get confirmation of the exact opposite. Mortgage rates are rising in NZ as the credit crunch squeezes all Banks.

Today we hear that the Cullen Fund has also taken a hit. How much of hit? Well The Cullen Fund had invested in Countrywide Financial in the US. On June 29 last year the shares were worth US$36.35 making the Cullen Fund stake worth $11.43 million. On Thursday upon news of the impending crash of Countrywide Financial that stake had shed over $7 million to be worth just $2.4 million with the likelihood of it tanking completely. The news gets worse though.

As at the end of November, the fund had an overall value of $13.68 billion, down from $14.01 billion in October, despite fortnightly Government injections which total about $2 billion a year. For those not that good at math that means that the Cullen Fund has burned up almost $400 million dollars.

The funds guardians are supposed to ensure a return of at least 2.5%p.a., released November performance figures yesterday showing a negative 3.52 per cent return for the month and a negative 0.8 per cent return over the financial year to date.

This simply unacceptable.

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