New Zealand’s boutique funds managers are set to benefit from the growth of KiwiSaver, even if they do not operate funds themselves.
Many big providers are outsourcing parts of their KiwiSaver products, such as stock selection, to smaller operators.
AMP announced this month that it was to outsource its New Zealand equity management to a third party. Big banks, such as ASB, also have aspects of their KiwiSaver investments managed externally.
Stephen Bennie, of Castle Point Funds, said it meant the country’s boutique managers were not shut out from the KiwiSaver flow of investment.
“They’re not in-house managing the money, that’s going to funds managers in some cases like ourselves. You saw the example of AMP recently – that’s the way a lot are going. That’s the favoured approach to getting the best decision made at a stock selection level.”
John Berry, of Pathfinder Asset Management, said: “That’s something I think will happen with time. The large managers may reach capacity with the assets they’re managing and others are outsourcing more and more functions.”
He called for KiwiSaver providers separate their platforms and funds management so investors could get access to a wider range of products.
But he said that might require a regulatory push.
“KiwiSaver investors want what is the best solution for any particular asset class. They want their KiwiSaver provider to say ‘I’m giving you the best solution in the market’. If the KiwiSaver manager has the platform and manages the product they’re likely to just choose their own.”
He said if providers were going to stand by their claim that their product was giving clients the best options in the market they should have to consider third-party options. “They don’t have to choose the third-party options if theirs it the best but they should test the market and make the call.”
The Financial Markets Conduct Act has introduced a licensing regime for funds managers, imposing a level of regulation not previously seen.
Berry said it would not drive smaller operators out. “If you look at where we’ve come from it was a situation where anyone could set up as a fund manager regardless of their qualifications and infrastructure. That was unacceptable from an investor perspective. We need minimum standards and to make sure that people offering products have robust systems.”