The editorial below reflects the views of the editorial contributor only and content may be out of date. This article is sourced from a previous JUNO issue. JUNO’s content comes from sources that it considers accurate, but we do not guarantee that the content is accurate. Charts are visually indicative only. JUNO does not contain financial advice as defined by the Financial Advisers Act 2008. Consult a suitably qualified financial adviser before making investment decisions.
By Brenda Ward
GMI was started in 2000 by the well-known entrepreneur, economist, intrepid motorcyclist, and outspoken commentator Dr Gareth Morgan.
In 2007, Gareth Morgan Investments (GMI) introduced a KiwiSaver scheme to the product stable. Kiwi Group was looking for a solution to provide wealth management products, and acquired GMI in 2012.
Gareth Morgan still plays a part in GMI as an external member of its Investment Governance Committee, which oversees the investment strategy, setting and agreeing investment guidelines, and holding the Investment Management Team to account.
The scheme now has more than 150,000 members, with more than NZ$2 billion of funds under management. There are six funds in the Kiwi Wealth KiwiSaver Scheme, each catering to a different investor profile and level of risk. They are:
Spotlight on growth
In this fund review, we will be looking at its Growth Fund. There are 187 KiwiSaver offerings in New Zealand, says website sorted.org.
So Kiwi Wealth is one of a number of providers from which investors can select. Within that 187, the fund types include Defensive (cash), Conservative, Balanced, Growth and Aggressive.
In the Growth category, which is defined as medium-to-high risk, there are 37 funds to choose from. KiwiSaver growth funds generally have a high proportion of funds invested in shares and property, with a lower proportion in bank deposits and fixed interest.
Kiwi Wealth says its mission is to help Kiwis create wealth by giving them information and control over their investments.
Kiwi Wealth keeps things very simple, in plain English.
The company says: “We keep things simple in all contact with our members, from plain English documents and easy-to-understand account management; to online applications that give KiwiSaver members ways to take control of their retirement income from KiwiSaver.”
To 30 June, 2016, according to sorted.org , the five-year returns of the Kiwi Wealth Growth product are 8.38 per cent, which places them eighth out of 37 funds in that category.
On service, Sorted ranks it at 76 per cent, which is in line with the industry average at 77 per cent. Finally, its fees are the fifth lowest at 1.17 per cent.
Kiwi Wealth says: “We don’t charge performance-based fees, or separate withdrawal, contribution or establishment fees. We help our 150,000 KiwiSaver customers make good choices by showing them exactly how and where their money is invested, and what the fees are.”
However, as with all KiwiSaver schemes, fees and charges do apply, so check these out if you’re considering investing.
When you’re selecting an investment manager for the long term, if you do not have much knowledge of the person actually managing the money today, let alone in five to 10 years’ time, then statistically you are better off to simply select someone with the
Low fees aren’t everything and some managers with higher fees have proven they can produce better net returns long term. However, by and large these are the exception rather than the rule.
Generally speaking, for large fund managers and this includes KiwiSaver, many financial advisers will recommend you go with an investment manager you like who has low fees.*
The Kiwi Wealth Growth fund invests the majority of its assets offshore, which are managed locally by Kiwi Wealth’s investment team. It believes this best diversifies opportunity and risk for New Zealand investors.
It uses a wide practical set of investment activities, which are subject to ethical, liquidity, transparency and cost-efficiency tests.
It has four main areas of emphasis:
• Capturing market returns effectively
• Adding value by active security selection
• Risk management to preserve capital
• Cost-efficiency of implementation
Kiwi Wealth is a product provided by a government-owned New Zealand bank, but it’s important to remember that like all the other KiwiSaver products, this fund is not guaranteed by the government.
So, investing in a high-risk product might mean that the value of your investment could go down as well as up.
Overall, the Kiwi Wealth stable of KiwiSaver products look to be a good offering. GMI has been managing investors’ money for 16 years and has a good reputation.
It’s clear to see that while returns might not be the best in the market, you will likely have lower fees, with the service and returns at least in line with competitors, if not better.
Also, you will be supporting a locally-owned bank which reinvests its profits back into New Zealand and not offshore.
* Visit http://fundfinder.sorted.org.nz/funds for more comparisons between funds.
• Product: Kiwi Wealth KiwiSaver Scheme Growth Fund
• How it works: The Kiwi Wealth Growth Fund has up to 100 per cent in shares and other growth assets, but will usually have some invested in fixed interest and cash assets. It is generally suitable for members with a longer investment timeframe (more than 10 years) and who have a greater tolerance for declines in the value of their member account. This fund aims to exceed the returns received from investing 15 per cent in New Zealand cash and New Zealand Fixed Interest assets, and 85 per cent in global shares.
• Offerer: Kiwi Wealth Limited
• Manager: All Kiwi Wealth KiwiSaver Scheme funds are managed by the same investment strategy team, led by Chief Investment Officer Simon O’Grady.
• Minimum investment: Not applicable
• What we like: Its fees are low and you have the opportunity to put your money in global investments. We like its plain English philosophy, sense of corporate responsibility and goal to make Kiwis wealthy.
• What we don’t like: Returns could be higher, but the five-year returns still put them at eighth out of 37 funds in that category.
• Conclusion: It’s a good offering, with a good reputation, and a sound track record. Being New Zealand-owned gives it a feel-good factor.