KiwiSaver

Investors offered opportunity for global investment spread and sustainability through NZ’s first Global Sustainability Investment FundKiwiSavers who want to invest long term with companies committed to sustainable activities and practices can now do so through a fund being made available in New Zealand by ASB Group Investments Limited (“ASB”).

The new Global Sustainability Fund will be offered to investors under the FirstChoice KiwiSaver Scheme.

The investment manager for this new fund is Generation Investment Management, established in 2004 by former US Vice President, Al Gore and former global CEO of Goldman Sachs Asset Management, David Blood. Generation Investment Management currently has more than US$1.2 billion of funds under management.

The Global Sustainability Fund provides investors with access to a growth fund comprising 100% global shares, all of which have an absolute focus on sustainability. Existing FirstChoice KiwiSavers will have the option to transfer all or part of their current savings into the new fund.

FirstChoice KiwiSaver comprises 10 funds of which 5 are active funds, which means the investment managers endeavour to exceed market returns. These types of funds are subject to market volatility. FirstChoice funds will continue to be offered to the public directly by ASB Group Investments and through financial advisers and brokers. Index linked funds (sometimes called passive funds) will be available to KiwiSaver investors through ASB Bank branches.

“Our Global Sustainability Fund is currently the only true sustainability fund available to KiwiSavers,” said Greg McAllister, Head of Wholesale Distribution, ASB Group Investments.

“Other funds may include some elements of sustainability, but are more accurately described as ethical or socially responsible funds.

“Our research has highlighted that there is growing interest in investing in sustainability funds and that this demand is not being met.

“The aim of the Global Sustainability Fund will be to seek to achieve superior returns while focusing on investing in global companies that are committed in their business decision making and operations to minimising the social, economic, environmental, ethical and governance impacts of their businesses on society.

“Sustainability investing is recognised as a ‘third generation’ approach to investing in corporations that are responsive to global social challenges. It is more than just ethical and socially responsible investing,” said McAllister.

Companies included in the fund portfolio are analysed against criteria such as their response to future regulation change, potential pandemics, climate change, engagement with stakeholders, human resource practices and their corporate governance standards; as well as their long-term potential to perform financially.

“Until now, to invest in a true sustainability fund, New Zealanders have had to invest directly offshore,” said McAllister.

“Our research has also identified Generation Investment Management as the international market leader.”

The Global Sustainability Fund at any one time tracks the performance of up to 100 global companies, while investing in between 25 and 60 different equities.

“Simply meeting sustainability criteria is not enough,” said McAllister. “To be included in the portfolio, companies must also perform financially.”

The Global Sustainability Fund is now available through FirstChoice KiwiSaver. Investors wanting to join the new fund should contact ASB Group Investments on 0800 1STCHOICE or 0800 178 246 or their adviser.

Women are erring on the side of caution when investing in KiwiSaver while men appear to be more comfortable with higher levels of risk, according to Fiona Oliver, Chief Operating Officer of BT Funds Management, the developer and manager of the Westpac KiwiSaver Scheme.
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Oliver’s comments are based on membership data from the highly popular Westpac KiwiSaver Scheme, which offers five investment funds to suit a wide range of “investment appetites”, including a unique Capital Protection Plan Fund (CPP) that protects contributions to maturity.

Membership of the Westpac KiwiSaver Scheme is currently more than 55,000 and is skewed towards females (56%).

To date, females have been attracted towards more conservative Westpac KiwiSaver investment options with 59% of investors in the CPP being female. Oliver said take up numbers in the other Westpac KiwiSaver investment funds also indicated that women were exercising more caution when making their investment selection, with 60% of the investors in the Cash Fund and 58% of the investors in the Conservative Fund being female. These investment funds are aimed at those seeking lower levels of risk and more stable returns. Oliver says that with the current market volatility, she anticipates conservative investment options like the CPP will continue to attract more investors, including a higher percentage of women.

“The CPP is a unique KiwiSaver investment option which we developed specifically for people seeking peace of mind,” she said. “We designed it for those who would be anxious if their investment funds went down or fluctuated as it protects the contributions to the maturity of the fund.”

Oliver said that subject to certain circumstances, CPP protects members’ contributions, plus whatever the government and their employers have contributed. However, she said CPP also offers the potential for higher returns through its exposure to shares. Oliver added that while she had expected the CPP to appeal to women, she had been pleasantly surprised at how attractive it had been to this group.

“Currently, women appear to be the more cautious of KiwiSaver investors,” said Oliver. “However, they also have strong representation across all funds, and the fact that they are choosing the CPP that protects their capital but also gives them the potential upside of shares shows they are thinking long term.”

BT manages and administers around $2.0 billion of funds under management. BT provides a wide range of investment options, including funds managed by its own teams as well as alliances with global investment managers. Westpac purchased BT in 2002.

Two thirds of owners of mid-sized New Zealand businesses surveyed for the Grant Thornton International Business Report say that fewer than 10% of their employees have signed up for KiwiSaver.In nearly 20% of cases, no staff at all have signed up. And only 6.7% have more than half of their staff on the KiwiSaver scheme.

The Grant Thornton survey also found that 54% of business owners felt the KiwiSaver scheme would have a negative impact on them, while 56% considered it would have either no impact or a negative impact for staff.

“These results are interesting because they would seem to point to either a general sense of dis-favour or indifference to the scheme among many employers who are the owners of medium-sized businesses,” said Grant Thornton New Zealand spokesman Peter Sherwin.

“This is possibly an extension of their overall discontent with having to deal with so much Government-generated paperwork, red tape and the cost of compliance. The compulsory 1% employer contribution from April 1 will most likely create further irritation.

“On the other hand, the figures most likely also contain an element of lack of interest in KiwiSaver from employees.

“But whatever way you look at it, the initial response to KiwiSaver is not exactly stellar. And part of that could be that business owners see it as yet another burden for medium-sized businesses to shoulder.

“There is clearly the need for some work to be done yet to make KiwiSaver more appealing all round.”

Sherwin said if there was some encouragement for the scheme, it lay in the fact that 42.7% of the business owners felt it would have a positive impact for their staff and 20.7% felt it would have a positive impact for them as employers.

The results were obtained from questions specifically for New Zealand businesses, contained within the wider international survey.

KiwiSaver is all about the long-term prospects. That’s the message being shouted from the rooftops in the face of recent short-term uncertainty.AMP Capital Investors’ Head of Investment Strategy, Dr Leo Krippner, believes rationality is key.

“Over the 2007 December quarter, risk was realised rather than rewarded”, said Krippner.

“Growth assets generally had a poor performance, reflecting fears that a US recession might impact negatively on global markets. That left returns flat for the conservative diversified fund and negative for the balanced and growth diversified funds.

“But returns were reasonable for the year as a whole. AMP Capital’s conservative diversified fund returned 7.1%, our balanced diversified fund returned 6.9%, and the growth diversified fund returned 6.8%. These were more modest than 2006, but diversification and active management helped to hold returns up.

“For example, New Zealand commercial property was a good performer over the December quarter returning 1.9% and an outstanding 30.8% for the year. Conversely, the worst performer for the quarter and year was global property at -10.1% and -9.7% respectively. Holding more New Zealand property and less global property certainly made a positive contribution.

“Our central view remains for reasonable returns. We think global growth should continue at an even pace – although lower in the US and developed countries – and inflation should remain at moderate levels. Long-term horizon returns suggest that growth assets are reasonably valued. However, downside risks have become more tangible even over the past month. So, as an active manager of our clients’ portfolios, we think it prudent to be cautious at this stage.

“The key thing for New Zealanders who have started their KiwiSaver accounts to remember is to focus on the next three decades rather than the last three months. While market volatility has forced returns down, KiwiSaver has easily beaten the under the mattress alternative when the Government’s contributions are taken into account. And compulsory employers’ contributions which come into play on 1 April this year will also significantly enhance the KiwiSaver investment outlook,” said Krippner.