Aussie hedge fund manager raves about Xero's potential

An Australian hedge fund manager has raved about the potential for accountancy software company Xero and accused New Zealand fund managers of being "precious petals" for wanting the stock removed from the sharemarket's NZX 50 index.

Writing in his popular blog on Monday, Bronte Capital's John Hempton said he first heard about Xero from a top US technology executive and bought a small parcel of shares.

He next heard of it from a woman linked with theGovernment's Superannuation Fund who was lamenting the performance of its Kiwi fund managers for not investing in Xero.

Hempton said he was then approached by several Kiwi fund managers who wanted him to short sell the stock - an typical tool used by hedge fund managers who bet on a stock going down.

But he said none of the fund managers had used the product or talked to anyone who had. Hempton, whose firm does use Xero, said he felt the product was "life-changing good".

The stock, which was the best performer on the NZX last year, rising by more than 300 per cent during the year, has caused some angst for local fund managers as very few hold it. Hempton said Xero's continued performance had put local managers on the spot. "Their underperformance has gone from notable to embarrassing."

There has been talk in the industry that some have lobbied to get Xero taken out of the NZX 50 index - a benchmark used by many fund managers to gauge their performance.

Hempton said he understood the problem but disagreed. "I am not going to cede this argument to the [underperforming] petals of New Zealand funds management. Indeed I want to argue the opposite."