AMP’s New Zealand Wealth Management (NZWM) announced on Tuesday that their KiwiSaver scheme will be switching from active to passive fund management. Rather than having active managers making investment decisions, it will be driven by computer algorithms to track indexes instead. Their 200,000+ members should be expecting a major fee reduction from this move.
The AMP KiwiSaver scheme has around $6.2 billion of Kiwi’s savings that will now be managed by BlackRock Investment Management, by mid-2021. BlackRock will also be taking over and managing the AMP New Zealand Retirement Trust with around $3.42 billion of savings in it.
This change in management is part of their plan to boost returns for their members. Jeff Ruscoe, acting chief executive in AMP Wealth Management says that the “change to a predominantly index tracking investment management approach is the right decision to ensure we are best placed to deliver long run returns, further value for money, and continue to support the financial wellbeing of our clients.”
There was a fee reduction when BNZ moved to a passive management on some of their portfolio holdings as it is a much cheaper way of investing. Principal at MyFiduciary, Chris Douglas expects AMP’s scheme’s ”fees to drop down to 0.5%” as part of the next stage of the investment transformation. AMP however, did not give a timeframe on when the fee reduction would be made.
AMP Capital has a process where it takes ESG (Environmental, Social, and Governance) considerations to better manage risk and is planning to continue doing so. Ruscoe said that the change of management “also enables us to have more flexibility to support key environmental and social areas to create positive change.”
He said that as with their current investment management approach, AMP Scheme “will not invest in companies that are involved in the manufacture of cluster munitions, anti-personnel mines, chemical weapons, nuclear explosive devices, civilian firearm stocks, or tobacco.”
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