There's a lot more to selecting a KiwiSaver fund than just checking past returns and fees. If your hard-earned money is invested in KiwiSaver, you need to ask the important questions to understand where and how that money is invested.
Note: The following information is taken from Lifestages Kiwisaver Scheme's own website, fund updates, and the product disclosure statement published in March 2020.
Facts & History of the KiwiSaver provider
Lifestages is an operating division of Funds Administration New Zealand Limited, a subsidiary of SBS Bank (SBS Bank has been working with New Zealanders since 1869 and is a registered bank).
As at the 31st March 2020 FANZ managed over $1.2 billion for more than 20,000 New Zealanders through providing private wealth services, the Lifestages KiwiSaver Scheme and the Lifestages Investment Funds.
✅ New Zealand Based Provider
Below you will find a link for more information on their history:
The Lifestages KiwiSaver Scheme manages eight funds and has total KiwiSaver Assets Under Management (AUM) of over $366 million and 19,152 KiwiSaver clients.
The investment team, structure and their alignment with clients
Mike Skilling - Chairman
Michael joined the board in May 2016 and has been a member of the board of SBS Bank since 2014. He is also a director of Staples Rodway Asset Management Limited, a subsidiary company of Funds Administration New Zealand Limited.
He has in-depth experience in retail, private, rural and business banking together with insurance, managed funds and finance companies. In previous roles, he has led both the Agribusiness and Business Banking arms of BNZ including Small Business, Medium/Large Business, International Trade, Property, Plant and Machinery Finance and Private Banking.
Michael is a director of several other Boards - including farming enterprises, a pre-school business, a mortgage broker and a finance company. He was a founding director of The ICEHOUSE and a Trustee for eight years. He has been a judge of the Auckland Business Awards and the Indian Business Awards.
He is a Senior Fellow of Financial Services Institute of Australasia (FINSIA) and a Chartered Member of the New Zealand Institute of Directors.
Greg Mulvey - Director
Greg joined the board in May 2004 and has been a member of the board of SBS Bank since 2004.
Greg is a qualified accountant with over 40 years’ experience in the corporate sector including 30 years as general manager of the Invercargill Licensing Trust and a former director of DB South Island Brewery Limited. Greg is currently a Trustee of the Southland Indoor Leisure Centre Charitable Trust.
Greg is a fellow of both the New Zealand Institute of Chartered Accountants and the New Zealand Institute of Management.
Derek Young - Executive Director
Derek joined the board in May 2004.
Derek has over 20 years’ experience in the financial services industry and has extensive investment management experience.
Prior to joining Funds Administration New Zealand Limited, Derek was a General Manager for ING as well as being responsible for the operations of ANZ Life New Zealand.
Derek has worked for leading funds management organisations such as TOWER, ANZ, and Armstrong Jones/ING in senior management roles.
Derek is a member of INFINZ.
Graham Duston - Executive Director
Graham joined the board in September 2001. He is also a director of Staples Rodway Asset Management Limited, a subsidiary company of Funds Administration New Zealand Limited.
Graham has over 30 years’ experience in the financial services industry and has extensive investment management experience.
Prior to joining Funds Administration New Zealand Limited, Graham was the General Manager of ANZ Funds Management and New Zealand Manager of ANZ Life New Zealand. He has also held senior management roles with TOWER and Armstrong Jones/ING.
Graham is a member of INFINZ.every year and conducts a detailed financial analysis to uncover high-quality investment ideas.
Responsible investment is used in the construction of the investments and selection of the underlying managers. Lifestages do this by integrating an assessment of sustainable practices with the use of exclusionary screens as a way to filter investments, funds and fund managers. An exclusionary screen enables them to exclude investment exposure to such things as controversial weapons, nuclear weapons, tobacco and gambling. External research is accessed to help identify sustainable funds and fund managers, as well as site reviews.
They outsource most of the investment management to external fund managers. They follow a due diligence process for selecting the underlying managers within each Fund, applying a combination of four primary filters. These are:
Lifestages consider investment style and philosophy, representation, fund size, and liquidity.
They consider fees and expenses, quality of execution, diversification, consistency of risk exposure, tax efficiency, track record and performance since inception vs benchmark.
This filter focuses on socially responsible investing. A combination of an exclusionary screen and investing sustainably may be used. The exclusionary screen is to ensure none of the Funds’ investments have exposure, at a minimum, to entities;
For more information on the Investment Team Structure, please see the link below:
The SIPO will be reviewed at least annually by Lifestages and the Supervisor. An ad hoc review of the overall SIPO and/or underlying fund managers/issuers may be triggered by any of the below events occurring. They review all investments on a quarterly basis. Performance is measured against appropriate benchmark indices. Where an underlying fund’s performance is consistent with its mandate and in line with broad style and/or asset class returns, and their investment filters have been observed, no further action will generally be taken. However, an investment/underlying fund may be flagged for ‘enhanced due diligence’, and subjected to a higher degree of scrutiny for any one or more of the following reasons:
Governance & Compliance processes
All KiwiSaver Scheme Providers must ensure they meet regulatory standards and act with customer interests in mind.
KiwiSaver Scheme Managers must exercise care, diligence, and skill in the investment of scheme assets, and act in accordance with the stated investment policy and objectives. The FMA monitors that KiwiSaver Schemes are compliant with their obligations. Additionally, KiwiSaver Scheme Trustees also have a responsibility as front-line supervisors for monitoring the management and administration of these schemes.
A custodian plays a key role in protecting your investments. They hold your money and investments (i.e. keep custody of them) on your behalf. So they are the legal holder of your assets while you are the beneficial and ultimate owner.
Lifestages’ custodian is Trustees Executors Limited. Before Trustees Executors was established in New Zealand in 1881, it was the practice for people to appoint a friend or acquaintance as their trustee when they drew up a will or trust deed. Naturally, the most able business people were called upon to be trustees.
Due to the rapid development of the Otago province at that time, prospective trustees often found that they had little time to attend to such affairs. During this time the practice of appointing a specialist trustee instead of a friend was already successfully established in Australia. Adopting the same practice, Trustees Executors were proud to establish the first of its kind in Dunedin.
A supervisor is a licensed entity independent of a KiwiSaver scheme provider that supervises the provider’s management of the scheme. KiwiSaver schemes are trusts, and (except for restricted KiwiSaver schemes) the terms of the trust deed states that the supervisor (or another custodian) must hold all contributions and investments in trust for the investors.
Lifestages’ supervisor is also Trustees Executors Limited.
Follow the link below for more information on Trustees Executors Limited:
Sufficient liquidity will be held to cover reasonably anticipated redemptions. If necessary, Lifestages have agreed with the Supervisor to borrow up to 5% of the market value of a Fund to cover settlement requirements relating to that Fund. Such borrowing is to be used solely to meet redemption requests and will be for a maximum period of 15 business days and in each instance the Supervisor will be advised of drawdowns occurring and when the amounts have been repaid. To date the funds have not borrowed, nor have any intention to.
The purchase price of securities entering a Fund will include purchase brokerage and sale values will be after brokerage has been deducted.
For assets under outside management, periodic valuation will be based on latest market prices (for equities the last sale and for bonds the mid-price). Deposits with banks and building societies will be valued using current financial standards. In the case of securities whose latest market price or yield is more than 5 business days old at least two broker opinions will be sought and the average of these will be the price for valuation purposes.
The valuation formula will include a provision for tax, supervisor fees, management fees, an estimate of other ongoing fees, costs and expenses, any exceptional fees and estimated disposal costs to establish the true ‘cash’ value of the relevant Fund. For exiting and new members in a Fund this will be the basis of their exit and issue unit price respectively.
Derivatives may not be used to leverage any Fund, or if the effect is to increase the portfolio risk beyond what it would have been had the relevant Fund comprised only directly held securities. That is, there will be no gearing effect and any derivative positions will be backed by physically held positions at the time that the risk on any derivative arrangement commences. It is accepted that during the term of a derivative arrangement some mismatch may occur between the value of the derivative and the value of its underlying security or portfolio position. Derivatives may be used as a risk management tool where underlying investments create an overall portfolio exposure that they determine to be undesirable e.g. to hedge currency risk. It is envisaged that derivatives will not be used in the normal course of business. While derivatives may be used at our sole discretion, they will advise the Supervisor of any decision to do so, explaining the investment rationale and anticipated duration of the holding period of derivative contracts entered into.
For more information on Lifestages’ Investment Policies, follow the link below:
The investment processes followed by the manager
Lifestages employ a three-prong investment philosophy:
The Funds may undertake the following other activities in carrying out their investment strategy:
Securities lending with ‘A’ rated counterparties. Currently the Scheme has not done this and does not intend to in the future.
Underwriting new issues of authorised debt and share issues (as applicable).
Asset Allocation Policy
Another characteristic in building funds is diversification across asset classes in optimized portfolios. They achieve this by setting a Strategic Asset Allocation (“SAA”) for the Funds and the Lifestages Auto options. They do not employ Tactical Asset Allocation (“TAA”).
See Definitions for further explanation of SAA and TAA. Traditionally the asset classes are cash, fixed interest and equities. They separate this allocation further as they believe there are unique characteristics within these asset classes. Lifestages separate New Zealand from Global within both fixed interest and equities. Within equities, they separate New Zealand to New Zealand and Australian equities, and Global to Developed and Emerging Markets. They also allocate separately to property and infrastructure. Currency hedging is also given a separate allocation, achieved via currency hedging within the underlying funds.
This policy is reviewed every three years and accounts for future long-run asset class returns and peer comparisons.
They review the performance of the Funds and the underlying investment managers quarterly. This review will compare the return of each Fund and each component of its portfolio against the relevant index over the quarter. There will also be a Fund review, at least annually, against its peers as determined by the FANZ Investment Committee, with input from the Supervisor where appropriate.
For more information, follow the below link to download the Statement of Investment Policy and Objectives:
Social and Ethical Considerations
Socially responsible investing (SRI) or Environmental, Social and Governance investing (ESG), also known as sustainable, socially conscious, “green” or ethical investing, is any investment strategy which seeks to consider both financial return and social/environmental good to bring about social change regarded as positive by society.
Basically, SRI investing is investing in companies that have a positive impact on society, based on a number of factors.
As at the date of the SIPO linked below, the Fund (through its underlying managers) will only invest in the following security types:
a) Deposits, transferable obligations or other debt obligations of or guaranteed by a ‘registered bank’ under the Reserve Bank of New Zealand Act 1989 whose short-term rating is at least A1 with a maturity of no more than 365 days at time of purchase. Floating rate notes with a final maturity of more than 365 days are not authorised (irrespective of the frequency of rate setting).
b) Shares issued in any jurisdiction of companies listed and traded on a recognised stock exchange or other trading system.
Derivative contracts, where the underlying risk relates to the shares referred to in (b). Eligible derivative contracts include interest rate futures, options, interest rate swaps, and credit default swaps. Options, swaps and credit default swaps must be entered with a counterparty with a minimum long-term credit rating of AA- and a current industry standard (International Swaps and Derivatives Agency) agreement must be in place between the counterparty and us or the underlying manager. The market value of the exposure must be fully covered by cash or backed by liquid physical assets. Derivatives are to be measured on a notional face value basis and may not exceed 100% of the net market value of the relevant Fund’s investment portfolio. Investment in collateralised debt obligations and collateralised loan obligations are not permitted.
Where an entity or an issuer is rated, that rating shall be by an internationally approved rating agency such as Standard & Poor’s (or other rating agency acceptable to the Supervisor).
Follow the link below for more information:
We have looked at the best performing KiwiSaver funds based on their 5-year returns, however, looking at past performance of a fund is just one aspect when choosing a KiwiSaver fund. Other questions you should be asking include:
Our research team at National Capital looks at over 100+ funds and can recommend the right KiwiSaver investment for you.
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Lifestages KiwiSaver Plan has the following KiwiSaver Funds. More details on each of these funds can be found in the links below.