KiwiSaver

Research house Morningstar has given faint praise to the KiwiSaver schemes operated by Grosvenor, now rebranded as Booster.

The balanced fund, balanced growth, conservative fund, high-growth fund and default saver fund have all been given a neutral rating in the latest update. They were previously rated negative.

Morningstar hands out gold, silver, bronze, neutral and negative ratings based on analyst research.

Analyst Elliot Lucas said Booster was an “acceptable option” in the KiwiSaver space.

“Firm founder Allen Yeo and CIO David Beattie launched this KiwiSaver strategy in 2007 with a very conservative approach, focused relentlessly on downside protection. This approach paid off very well in the 2008 financial crisis but subsequently proved a drag. After years of underperformance and after the firm’s acquisition of Fidelity Life KiwiSaver substantially expanded the number of advisers using the scheme, Booster implemented a big process change in late 2013. It moved the strategy’s asset allocation in line with the relevant peer group average and imposed tight risk budgets,” he said.

He said the new strategy was a major change in approach. Instead of focusing on absolute risk, the Booster team were looking at risk relative to peers.

“Booster still implements some tactical tilts when it believes the relative prices of asset classes have deviated significantly from long-run averages. The team plans to increase the risk budget allocated to these tilts over time. Exposures at the asset class level are still mostly passive, though Booster does pick securities for Australasian equities, domestic fixed income, and part of the global equities allocation.”

Lucas said the changes should mean less drastic under-performance but would also lose some of the extremely defensive nature of the previous strategy.

He raised a note of caution about the team managing the fund, calling it “of reasonable size in theory but under-resourced in practice”.

“Neither Beattie nor Yeo are fully focused on the portfolios and some of the analysts responsible for security selection – albeit within tight risk controls – are rather inexperienced.”

He said fees were also above average. Booster has been approached for comment.

Meanwhile his colleague Matthew Wilkinson gave Mercer’s KiwiSaver schemes a better result, awarding them a bronze rating.

“The portfolios boast the widest investment opportunity set in the market, and diversification across managers is high. For instance, no other KiwiSaver providers we cover invest into unlisted infrastructure or natural resources. The unlisted exposure was tempered in 2014 to bolster liquidity but still forms a significant part of the portfolios.”

He said that level of diversification meant relative performance was strong when traditional assets were performing poorly but lagged when markets were strong.

Work is under way to require superannuation savings scheme providers to report on their annual fees in dollar terms – but some providers say that might be harder than some expect.

The Financial Markets Authority, Commission for Financial Capability and Ministry of Business, Innovation and Employment are working on a project that could lead to some fund managers being required to change the way they disclose fees.

MBIE financial markets manager James Hartley said the Commerce Minister had commissioned work on annual statement reporting of KiwiSaver, superannuation and workplace savings schemes earlier in the year.

“The annual statement work focuses on making KiwiSaver statements easier to read and gives us an opportunity to consider ways we can ensure banks and fund managers make clear and easy to interpret disclosure information available to consumers.”

The work is being led by MBIE. It proposes that annual statements should include a projected retirement balance and income figures, and the total fees the investor has paid in dollars.

At the moment, most report on fees as a percentage.

MBIE is finalising a document for consultation about implementing the changes.

But there are concerns that it could be hard to implement, particularly for big providers with a range of diversified and outsourced products.

Grant Hodder, head of product, funds and private bank, at ANZ, said he was supportive of transparency. But the transition might not be straightforward.

“Providers will need to build an engine to calculate the fees in dollar terms for members and then feed that into the annual statement information so this will take some time,” he said.

“Any calculations will also need to account for members who have sums of money spread across different funds within a KiwiSaver scheme.  And before anyone can start we need to agree on details – for example whether to calculate on an average balance for the year or end-of-year balance.    It is all achievable but there is a bit in it so will take some time to build.”

One fund manager who did not want to be named said each provider would have to calculate the fees at a client level, across thousands of people.  “Doing it at an individual client level would add a lot of cost that the client might end up paying for possibly for little additional benefit.”

George Carter, of Nikko, agreed there was more to think about. “Often for retail investors the fund management fee is just one aspect of the total fee.  For this to be effective, it would be necessary to get a total fee picture which would require inclusion of platform fees, advice fees as well.  Otherwise, if the focus is on just one area things have a habit of migrating to other less well-disclosed areas.”

Craigs Investment Partners is renaming both its KiwiSaver schemes in a bid to improve clarity for consumers.

Craigs has announced it is to repackage its kiwiSTART Defined KiwiSaver scheme as QuayStreet KiwiSaver.

Quay Street will take over as the named manager of the fund from Craigs Investment Partners Superannuation Management, but the underlying product, and the funds it invest in remain unchanged.

The scheme already only invested in QuayStreet funds – the fund manager is a wholly-owned subsidiary of Craigs Investment Partners.

Craigs’ KiwiStart Select product is also being rebranded, as Craigs Investment Partners KiwiSaver.

It allows investors to pick and choose the securities their funds invest in. 

Craigs head of client services Stephen Jonas said: “There’s fundamentally no change in the style and nature of the product offered but it should be much clearer in the marketplace what it is and who is offering it.”

He said the new names should be in place in the market by December 1.

Jonas said his firm was also working to launch a new superannuation scheme and hoped to have the new QROPS offering in the market by December 1, too.

It will offer self-selected portfolio construction and the firm is developing a new platform to make it easier for investors to access a broader range of securities.

But he said more clarity was still needed on what could be done about people who had transferred money to a  KiwiSaver scheme before they all lost their QROPS status. That money is now effectively locked into the schemes it was transferred to, because it cannot be moved without incurring a tax bill.

“If you transfer that money you breach the HMRC rules [in Britain] but if you don’t, you breach the KiwiSaver Act. We are asking for clarification on that.”

A financial adviser is re-launching a KiwiSaver scheme in partnership with Forsyth Barr.

Martin Hawes is chairman of the investment committee for Summer KiwiSaver.

He said he wanted to grow the investment culture in New Zealand.

He said New Zealanders could miss out on tens of thousands of dollars in retirement unless they became more actively involved in driving their investment choices.

“New Zealanders are notoriously disengaged with their KiwiSaver. One quarter of KiwiSaver members don’t even know what kind of fund they’re invested in*. That’s dangerous. If you’re still 10 or 20 years from retirement you risk missing out on thousands in retirement,” he said.

Hawes, an AFA, d will lead communications with the scheme’s members. Forsyth Barr’s funds management team will handle day-to- day investment management.

Hawes said his move into KiwiSaver was a natural extension of his mission to reach as many New Zealanders as possible with the message that the small decisions you make today can have a massive impact on your lifestyle in retirement. The scheme was named Summer in reference to Hawes’ 2006 retirement planning bestseller 20 Good Summers – and to acknowledge that retirement can be the best years of your life if your finances are well organised.

He said a danger to many New Zealanders achieving the retirement they aspire to is to is being disengaged from their KiwiSaver account.

“For many New Zealanders KiwiSaver will be their most significant financial asset outside the family home. That’s why it’s critical to get involved with your KiwiSaver investment now and take charge of it to create the future you want,” he said.

Summer KiwiSaver members will have the opportunity to learn about investing from Hawes’ regular communication with them. They’ll also have the chance to put that into action by deciding the weighting of their investment allocated to different investment classes.

“With Summer, you can get involved as much or as little as you choose. We offer the Investment Selection option for members who would rather let us make the decisions for them and keep them informed along the way. Those who like to be more involved can allocate their investment across different funds that invest in cash and domestic and global fixed interest and shares, depending on how they read the market at any given time.”