KiwiSaver, investing, providers

Crypto creeping into KiwiSaver

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It’s been a while now that Cryptocurrency has become the talk of the town. 

Since it’s become so popular, it is important to talk about it and address the client's needs. When I say client needs, I mean people asking me what I think of Crypto and if there are any providers out there that invest in the commodity? 

What I think of Crypto is outside of the scope of this article but the answer to the second part of that question is yes. There are providers that are not investing in Crypto. 

It started with NZ Funds last year when they dipped their toes in the cryptocurrency market and added some Bitcoin to their KiwiSaver portfolios and now Kōura has also joined the ranks. 

The small KiwiSaver provider has gone beyond what NZ Funds did last year and has instead created a whole new fund category that has only Bitcoin as an asset. 

The way it works is that investors choosing Kōura as their KiwiSaver provider can allocate a maximum of 10% to a KiwiSaver Fund containing Bitcoin and its derivatives as assets. The reason that there is a maximum allowance of 10% is because cryptocurrency remains a highly volatile commodity and it is not advised to have a whole portfolio composed of only this particular class of asset. You need to have that diversification in there and spread your metaphorical eggs into more than one metaphorical basket. It’s just good practice. It is particularly important as you are nearing retirement or close to that first home deposit goal as you don’t want to encounter a big drop in your balance all of a sudden and have to wait for it to come back up while your goal gets pushed back further into the horizon. 

There is also the issue of ‘mining’ Bitcoin and its derivatives. It takes a lot of energy to run the processing plants that keep Bitcoin going, i.e. the computers with a large processing power that need to be continuously running in order to keep cryptocurrency available. This creates a lot of carbon emissions. 

So what Kōura has done is decide to purchase carbon offsets in order to balance out the situation and remain relatively neutral in their overall position. Part of the fees this fund charges will go to that. The rest will go towards the high costs associated with the expensive infrastructure needed to make investing in cryptocurrency available, according to Kōura representatives. 

The fee for the fund is expected to be 1.1%, considerably higher than the flat fee of 0.63% that Kōura charges across its other types of funds. Carlyon, CEO of Kōura, says that it’s still “pretty good value” considering similar funds in the US charge anywhere between 0.95% and 2.5%. 

Kōura has a few different funds and allows its members to create their own portfolio. While this option might be useful to the DIY investor who has researched the funds in depth, it is highly recommended that you speak with a financial adviser about what strategy is best for you. 

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