KiwiSaver Investment Selection Process

How do we select the funds that we recommend to our clients?

National Capital aims to help 1 million Kiwis become financially secure, so selecting the most appropriate providers and funds to ensure that your hard-earned money is invested wisely is very important to us. To achieve that, we have a robust and well-defined KiwiSaver Investment Selection Process explained on this page. 

We rely on our parent company Saturn Group and its Investment Committee to research said KiwiSaver funds.  The process starts with a universe of widely available KiwiSaver Scheme providers managing more than 300 KiwiSaver funds between them. We then rate and rank each Scheme provider’s diversified funds and select the top-ranked funds for our client needs.

Our investment selection process is based on six pillars that intend to help you build trust and confidence in your investments.

These six pillars are Performance, Organisation Capability, Fees, Organisation Stability, Processes & Portfolio Composition and Ethical Investing Considerations

A. Performance

A fund's past performance may not necessarily indicate future success. However, history does give us valuable information. Suppose a fund manager has been consistently achieving a high rate of return over a long time frame. It is likely this is based on a robust investment process, having a quality investment team with great investment insights, and not charging excessive fees. We would rather invest with such a manager than one with consistently sub-standard results. 

National Capital screens its funds' coverage by measuring each individual fund's performance against its peers, which is part of our Investment Selection Policy. We want to ensure that your savings are growing, and ensuring that your money is invested in funds with a great historical performance relative to its peers is a great place to start.

B. Organisation Capability

This pillar is perhaps the most overlooked by individual investors when selecting a fund. While the performance and fees of a fund are important, evaluating the capability of the organisation to manage your money well is an important box that needs to be ticked. This pillar looks at the people managing your money, their experience and expertise,  how long they have been with the organisation, and the resources available to do their jobs well. The success of the organisation in growing its business will, in turn, impact its ability to attract the right people.

C. Fees

The third pillar is fees. However, rather than just take an extreme view that fees are the only aspect you should consider when choosing KiwiSaver providers, we base our selection on value for money. This allows our clients to be invested in funds that charge a reasonable fee while still delivering good returns. 

We also understand that the fees charged by KiwiSaver providers can vary according to the service they provide, such as active funds management, responsible investment funds, and, importantly, access to Financial Advice. 

A study by Vanguard concluded that access to financial advice could add up to three percentage points per annum or more in net returns.  Currently, schemes vary significantly in access they provide to a financial adviser for their members. 

Ultimately, we look to achieve a balance in fees charged and services provided to ensure that Kiwis end up better off in the long run. 

D. Organisation Stability

In order to make informed decisions, we believe it is essential to assess the stability of the organisation responsible for managing the funds. The Saturn Investment Committee evaluates things such as any key investment team departures or arrivals. 

E. Processes & Portfolio Composition

Our advice is based on what type of fund is appropriate for a client. The determination of the type of fund is based on the asset allocation of the funds, so it’s very important to ensure that we check that funds are true to label. For example, a fund labelled a Growth Fund should have an asset allocation consistent with a typical growth fund and not morph into an asset allocation more typical of a conservative fund. 

To ensure that we are comparing apples to apples, we check the asset allocations for each fund we research.  If a fund’s asset allocation is inconsistent with its fund type, this will negatively impact its rating.


F. Ethical Investing Considerations

Ethical investment, also known as sustainable or responsible investment, is an approach that takes into account Environment, Social and Governance factors in the investment selection process.

Our Investment Committee uses third-party research to evaluate KiwiSaver funds' screening processes and sustainability scores. This ensures we are “looking under the hood” rather than simply relying on claims made in marketing material.


Investment Selection Process Steps

We run through the following process on a quarterly basis.

Step 1 - KiwiSaver Fund Universe

We review the universe of widely available KiwiSaver providers and their diversified funds. We use the FMA disclose register as our starting point for all fund data. The categorisation of funds is broadly done as follows.

  1. Cash Funds : 0% Growth Assets, 100% Cash or equivalent assets (Note)
  2. Conservative funds: Funds that have up to 20% of growth assets
  3. Moderate funds: Funds have between 21% and 40%  of growth assets
  4. Balanced funds: Funds have between 41% and 60% of growth assets
  5. Growth funds: Funds have between 61% and 80% of growth assets
  6. Aggressive funds: Funds have above 80% of growth assets 

Qualitative adjustments for certain funds are performed if the asset allocation does not truly represent the type of fund. 

Step 2 - Exclusion of certain providers 

We exclude any providers for whom insufficient public access or data is available. This may be either because the provider is too small, is a restricted provider not available to the general public or has chosen not to provide data to research houses. The providers that are currently excluded are as follows.

  1. AE KiwiSaver Limited
  2. Civic Financial Services (SuperEasy)
  3. Consilium NZ Limited (KiwiWrap)
  4. Craigs Investment Partners Superannuation Management Limited
  5. Implemented Investment Solutions Limited (InvestNow and Aurora)
  6. Kernel Wealth Limited
  7. New Zealand Anglican Church Pension Board (Christian)
  8. New Zealand Funds Management Limited

Step 3 -  Exclusions of certain funds

Next, we apply exclusions to the list per the criteria noted below. This is done to ensure we are not considering non-diversified funds, geared funds, duplicate funds or funds which do not have a fixed asset allocation.

We will not take lifecycle funds into consideration since they have a variable asset allocation that changes with time. As our clients are advised regularly, we believe they should make asset allocation decisions depending on their personal circumstances rather than on a single factor such as age. 

In addition, some 'duplicate' funds have the exact same portfolio composition but are distributed by different schemes. We exclude these duplicate funds from consideration, keeping only the fund with the lowest fees in our selection process. 

The final sample list is still comprehensive and covers around 90% of the total funds under management (FUM) in the KiwiSaver universe. Please contact us for the latest fund list. 

Step 4 - Data Gathering

Our Investment Committee then gathers data for our six pillars from various sources, including research partners.

  1. Performance: FMA Disclose Register, Inhouse Research
  2. Organisational Capability: MyFiduciary Research, Inhouse Research
  3. Fees: FMA Disclose Register, Inhouse Research
  4. Organisational Stability: MyFiduciary Research, Inhouse Research
  5. Process & Portfolio Composition: MyFiduciary Research, Inhouse Research
  6. Ethical Investing Considerations: MyFiduciary Research, Inhouse Research

Step 5 - Data Analysis & Scoring

The data collected is then analysed and scored by our proprietary process. The scoring process calculates each fund's overall rating (A-D) based on the following weightings.

Criteria Weighting

Max points, midpoints or no points are awarded based on
  • Beating the relevant benchmark over 1, 3 & 5 years.
  • Returns vs peer group over 1, 3 & 5 years
  • Risk-adjusted return (Sharpe ratio) over 1, 3 & 5 years

These subpoints are calculated into a percentage out of 25 points on offer for this criteria.

Ongoing annual charges plus performance fees are used in historical calculations.

Membership fees are not factored in.

The most expensive 25% of funds are only penalised in this category if their 5-year performance is below the peer median


Organizational Capability

An assessment of people who are responsible for running the portfolio, including their relative experience and time working together as a team, the business structure and systems & software used. This factor seeks to uncover managers with specific issues due to being a new business or lacking resources that we want our clients to be clearly informed of.


Organizational Stability

Good organisations reward staff and have stable and well-resourced teams. This factor scores fund managers on the investment team's stability and penalises those with a high staff turnover.


Process & Portfolio Composition

Good investment results come from a well-defined investment process that includes diversified portfolios which are aligned with the fund's stated objectives. Here we assess the underlying investment strategy to ensure it aligns with our expectations.


Responsible Investing Considerations

This is a combination of MyFiduciary specialist research notes plus Sustainability points based on the actual fund holdings within each fund.

Total 100%


Top 25% 26-50% 51-75% Bottom 25%

Each fund’s A, B, C or D rating from the last four quarters is then weighted and summed to give a rolling weighted average which helps avoid frequent changes based on performance or fees. For example, at the end of the March 2022 quarter:

Fund June 2021 Rating
Sep 2021 Rating Dec 2021 Rating Mar 2022 Rating Rolling Weighted Average Rating
Weighting 10% 20% 30% 40% 100%
Provider X Balanced Fund A A A B A
Provider Y Balanced Fund C C C D C
Provider Z Balanced Fund B B A A A

Note: Our selection criteria for Cash Funds differs slightly from other types of funds. The most important considerations for a Cash fund should be low fees and minimal volatility.

Step 6 - Investment Committee Review and Authorisation

The final ranking data and notes are then presented to the Investment Committee (IC) for review and discussion. The IC currently consists of:

  1. Chair: Craig Stobo
  2. Committee Member: Peter Dine
  3. Committee Member: Jean Strock (Financial Adviser)
  4. Committee Member: Ravi Chandola
  5. Committee Member: Shahrukh Abdali (CFA, Financial Adviser)
  6. External Adviser: Chris Douglas (AIFA)

This expert scrutiny provides an opportunity to challenge the outcomes of the scoring process. 
For example, if, despite high ratings, there are concerns regarding a KiwiSaver provider’s ability to generate future returns because of factors such as organisation instability, or structural changes taking place in the business, the IC can make decisions that may override the score-based ratings. This can lead to a specific provider not being recommended until the IC is satisfied with the outcomes of changes at the provider.

Step 7 - Personalised algorithmic selection of funds for your situation and preferences

  1. You can choose your top priority from Returns, Responsible Investing or Fees when you complete our KiwiSaver HealthCheck. 
  2. You can also choose if receiving ongoing advice and monitoring is important to you and if investing with an NZ-owned provider is important to you.
  3. We define “New Zealand Owned” providers as being more than 50% owned by NZ entities.
  4. If you select ‘Yes’ to wanting ongoing ‘Financial Advice’, then KiwiSaver providers who don’t pay National Capital to provide ongoing annual reviews will be removed from the selection pool.
  5. If you select ‘Yes’ to wanting an ‘NZ-owned’ provider, then KiwiSaver providers who are not NZ-owned will be removed from the selection pool.
  6. The algorithm automatically selects the best fund combination for you that suits your preferences.
  7. In rare circumstances, a combination of funds that suit all your conditions may not be available. In those circumstances, the algorithm will select two different options, and the explanation of the compromise made will be explained to you so that you can make an educated choice from the options available to them. 

Exceptions to the Investment Selection Process

1. Specific Client Circumstances or Preference 

We pride ourselves on providing personalised advice to our clients. In certain cases, we might recommend funds that fall out of the above Investment Selection Process. This would only be in the case of a specific client circumstance or preference. In such cases, we will inform the client of the deviation from our standard Investment selection process and explain the reasons why.

Are we independent?

Our investment selection process is not biased towards any provider we have a commercial arrangement with. We are legislated to follow a code of professional conduct in which we must treat clients fairly, act with integrity and give financial advice that is suitable. We intend to do that anyway since it's just good practice and the right thing to do. Our ethics policy and values can be found below.

Ethics Policy

Why I based my company on these three Māori principles