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 Simplicity Kiwisaver Scheme's own website, fund updates, and the product disclosure statement published in August 2020.
Facts & History of the KiwiSaver provider
Simplicity is the manager of the Scheme. They are 100% owned by the Simplicity Charitable Trust. Simplicity’s aim is to make members better off by offering the lowest cost KiwiSaver scheme, and operating it in the simplest, most transparent way possible.
They aim to:
They donate 15 percent of the fees charged to the Simplicity Charitable Trust, which donates to New Zealand charities.
Below is a link to their story :
The Simplicity Kiwisaver scheme has total Assets Under Management (AUM) of over $980 million and 34,062 KiwiSaver members.
The investment team, structure and their alignment with clients
Sam Stubbs -Founder and Managing Director
Sam Stubbs was most recently the CEO Of Tower Investments, a KiwiSaver default provider. Before that he was Managing Director of Hanover Group, and spent 10 years working for Goldman Sachs in London and Hong Kong. He previously worked for Natwest Markets, Fay, Richwhite and IBM New Zealand.
He has been a Board Member of the Financial Services Council, and a member of the Government Taskforce on Financial Services.
Sam has an MA (Hons) from the University of Auckland.
Andrew Lance - Chief Operating Officer
After more than 10 years working in the City of London bond market for various investment banks, Andrew emigrated to New Zealand at the end of 1993. More accurately, he was brought here as a souvenir of his wife’s OE. He then fulfilled a variety of roles for New Zealand Funds Management, TOWER Investments, Fisher Funds and finally AMP Financial Services, where he was the investment expert in the project team transitioning AMP products into the new FMC Act regulatory regime. Stimulating stuff!
Amir Bashir - Chief Technology Officer
Amir, Simplicity's CTO, leads the long term technology vision and is responsible for the platform selection and technical design of the Simplicity system. Amir holds an Engineering degree from Massey University majoring in Software.
With close to 10 years of experience working with web technologies, Amir has a great understanding of the web space. Prior to joining Simplicity, Amir worked as senior and lead developer for a number of development agencies and also worked as the Infrastructure Development Manager for interest.co.nz.
Jane Gold - Chief Financial Officer
Jane is the CFO. She qualified as a Chartered Accountant with Price Waterhouse in 1996. Since then she has gained extensive experience in the corporate sector in London, Melbourne and Auckland.
Recently, in 2010, she was CFO at Tower Health and Life. Then she led the Finance Team at ecostore for 4 years and most recently CFO at Kepa Financial Services Ltd. Jane’s particular area of expertise is in financial services in all areas of financial and management accounting, reporting, analysis and financial modelling.
The Funds are trusts and are governed by a trust deed (Trust Deed) between Simplicity and Public Trust, the supervisor of the Scheme (Supervisor). The Scheme’s assets are held by Public Trust, the Supervisor and independent custodian of the Scheme, on behalf of investors. The Scheme is a managed investment scheme. This means that your money is pooled with other members’ money and invested by Public Trust on our instructions. A managed investment scheme can give you access to investments that you may not be able to access as an individual.
The Chief Operating Officer (Andrew Lance) is the principal person responsible for all of the KiwiSaver and Investment Funds. The Head of Operations and Research (Craig Simpson) is the backup and then they also have a Business Analyst (Ryan Lambert) who supports the COO, MD and the Board.
In terms of reporting Andrew Lance reports to the Managing Director (Sam Stubbs) and Craig Simpson reports directly to Andrew Lance. Ryan Lambert currently has a dual reporting line to both Craig Simpson & Andrew Lance.
Read more about the structure by following the link to the Product Disclosure Statement (PDS):
The Scheme Objective & Investment Strategy
The investment objective for each Fund is for its performance to be ranked in the top 25% of its respective KiwiSaver category after tax and fees over the medium to long term.
For the Conservative Fund, its category is funds with an average allocation to income assets such as bonds, of around 80%. For the Growth Fund, its category is funds with an average of around 75% allocated to growth assets such as shares. For the Guaranteed Income Fund and the Balanced Fund, their category is funds with a fairly even split between income and growth assets. The Guaranteed Income Fund and the Balanced Fund benchmark asset allocation is 44% income, 56% growth.
Simplicity believes their return objectives will be achieved by maintaining a consistent asset allocation through market cycles. They do not believe in frequent re-balancing of asset allocations, which can cause unnecessary activity (and associated costs) and can be overly emotionally driven in times of market volatility. In their opinion this approach has not shown that it can add value to investors.
The asset allocation of each Fund is set by determining the average strategic asset allocation to each asset class by the main KiwiSaver providers for each risk category; conservative, balanced and growth. This data is released every quarter as part of each provider’s regulatory disclosure.
While they use the averages as a basis for their asset allocation, Simplicity do not believe their investors need to hold the levels of liquidity that the average manager holds. Simplicity are a long term investor and believe they should collect the additional return from holding long term bonds. Their approach is therefore to allocate the average cash weighting over and above what is required for cashflow management (around 2%) into highly rated New Zealand corporate bonds.
Where the average allocations amongst Simplicity’s peers includes unlisted investments, or those not accessible via public markets (e.g. direct property, private equity, hedge funds), they will allocate the same amount into their listed equivalents i.e. shares or bonds. Liquidity and low costs of investing are paramount to their investors’ wellbeing.
The average strategic asset allocations are checked quarterly when the data is released.
Below is a link to the Statement of Investment Policy and Objectives, where you can find out more:
|Statement of Investment Policy and Objectives|
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 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.
Simplicity’s supervisor is Public Trust. Corporate Trustee Services are part of Public Trust and are a leading specialist corporate trustee company in New Zealand, with more than NZ$90 billion under trusteeship and supervision. They are New Zealand's sole Crown-owned trustee company.
Below you will find a link to The Public Trust:
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.
Simplicity’s custodian is Simplicity Nominees Limited, which is a Subsidiary of Public Trust that holds the assets of the Scheme on trust.
The investment processes followed by the manager
Each of the Funds has a strategic asset allocation to the major asset classes i.e. shares(including listed property) and fixed interest (bonds).
Simplicity believes in socially responsible investment and they also believe that markets are efficient.
So they have adopted a predominantly ‘passive’ index approach to investing. Simplicity do not actively pick or select securities, because they believe that using index funds and having very low costs will return investors more money over time.
Each asset class is represented by an index fund where possible. These funds are designed to track the investment return of a particular market index. For offshore investments, the scheme invests in funds managed by Vanguard Asset Management Limited (Vanguard), a subsidiary of the VanguardGroup, Inc.
If no suitable Vanguard index fund is available for a particular asset class (specifically New Zealand bonds and shares) they have established our own sector funds that hold a portfolio of securities, designed to provide the respective market return. Although these funds are not index funds, they invest as closely as practically possible to the market index, and minimise costs wherever practicable by keeping transaction and holding costs low.
By investing in index funds, Simplicity also maximises diversification, with over 3,000 different share and bond investments in each Fund.
For more information on Simplicity’s investment beliefs, follow the link below:
The performance of each asset class is monitored against its respective benchmark on a daily basis.
Performance is reported to the Supervisor monthly. Investors will receive a quarterly fund update, with current information available through the Scheme’s website on a daily basis.
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.
Conflicts of Interest may occur at multiple levels and Scheme members’ interests take priority at all times.
In order to avoid, mitigate and manage potential conflicts, Simplicity has adopted a Conflicts of Interest Policy. The key principle is that any potential conflicts of interest are avoided where possible. If that is not possible, then they are clearly disclosed by any person making decisions on behalf of Scheme members and mitigated to the extent possible.
A register of potential conflicts of interest is maintained by the chair of their Board of Directors. The chair must be notified of any changes to the register if and when they occur.
Continual disclosure of potential conflicts of interest is a contractual requirement for all members of staff or parties contracted to Simplicity.
Simplicity’s business is ultimately a social enterprise, thus investing responsibly is an important issue for us and our members. They specifically exclude investments in companies with significant involvement in the following activities:
Their investments also exclude companies that have contravened the principles of the UN Global Compact (www.unglobalcompact.org), under the following categories:
Simplicity believes in social responsibility and seeking areas where they can be constructive. They do this by being an active shareholder advocate and through the 15% of their fees that Simplicity Charitable Trust donate to charity.
For more information on policies, follow the link below:
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.
Our KiwiSaver recommendations look at the big picture and not just the scorecard. So, what are you waiting for?
Simplicity KiwiSaver Plan has the following KiwiSaver Funds. More details on each of these funds can be found in the links below.