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For professional advisers, or KiwiSaver members who take a close interest in their funds, Andy Mahony of Research IP runs his rule over the unnecessarily complicated world of KiwiSaver fees

Investing / analysis
For professional advisers, or KiwiSaver members who take a close interest in their funds, Andy Mahony of Research IP runs his rule over the unnecessarily complicated world of KiwiSaver fees
Apple and orange
Source: Microsoft stock file

Comparing KiwiSaver fees is like comparing apples to oranges. The intricacies inside the required disclosures make accurate comparisons difficult and time consuming, not to mention the time taken to find all of the relevant information in the first place. Even the inclusion of GST is inconsistent.

The following tables show the fee structures across different KiwiSaver Balanced Funds. Additionally, we have listed a number of key points to consider when comparing fees.

  • GST:
    • Fees can be inclusive or exclusive of GST.
    • Some fund managers will apply GST on some goods/services whereas other fund managers will not.
  • Actuals vs estimates:
    • Quarterly fund updates include actual fund charges as at the last financial year.
    • The product disclosure statement (PDS) provides estimates of fund charges and is forward looking.
  • Date of the PDS:
    • PDS documents are not published consistently like quarterly fund updates and key information often changes throughout the year.
  • Performance fee disclosure (where applicable):
    • Performance fees can be volatile, which means using the performance of previous quarterly funds to predict the future can be risky. We do believe, however, that there is value in looking at the magnitude of the historical fees.
    • Estimates could be based on past performance, or on forward-looking return projections in line with the risk profile of the fund.
    • The manager’s discretion has an influence. For example, at the start of the year, the estimated fee may be zero because the fund has not yet performed, but the disclosure can then be updated three or four times throughout the year.
    • Should the estimate simply be in line with the objective of the fund?
  • ‘Other Material Information’ (OMI) documents:
    • Important information regarding fees can extend into OMI documents. Investors may miss out on this if they do not bother reading the documents, or are unaware of where to find them in the first place. Very few people are aware of the disclose register.
    • Information relating to fees that is spread across several documents can lead to confusion, so sometimes having all disclosure in one place is better.

Table 1: KiwiSaver Scheme Balanced Fund Fees – Quarterly Fund Update Fee Disclosures

KS

GST

Management Expense Ratio (MER)

Other Fees and Costs

Performance Fee

Total Expense Ratio
(TER)

Calculation Date

1

Inclusive

1.03%

0.17%

0.00%

1.20%

31-Mar-21

2

Inclusive

0.90%

0.05%

0.00%

0.95%

31-Mar-21

3

Inclusive

0.89%

0.14%

0.00%

1.03%

31-Mar-21

4

Inclusive

1.41%

0.14%

0.00%

1.55%

31-Mar-21

5

Inclusive

1.02%

0.15%

0.00%

1.17%

31-Mar-21

6

Exclusive

0.65%

0.00%

0.00%

0.65%

31-Mar-21

7

Exclusive

1.00%

0.00%

0.00%

1.00%

31-Mar-21

8

Exclusive

0.58%

0.00%

0.00%

0.58%

31-Mar-21

9

         

Fund too new

10

Exclusive

1.21%

0.00%

0.00%

1.21%

31-Mar-21

11

Exclusive

1.16%

0.03%

0.00%

1.19%

31-Mar-21

12

         

Fund too new

13

Exclusive

1.17%

0.13%

0.00%

1.30%

31-Mar-21

14

Inclusive

0.91%

0.08%

0.81%

1.80%

31-Mar-21

15

Inclusive

0.86%

0.08%

0.00%

0.94%

31-Mar-21

16

         

Fund too new

17

         

Fund too new

18

         

Fund too new

19

         

Fund too new

20

Exclusive

0.43%

0.00%

0.00%

0.43%

31-Mar-21

21

Exclusive

0.96%

0.07%

0.00%

1.03%

31-Mar-21

22

         

Fund too new

23

Inclusive

1.00%

0.16%

0.00%

1.16%

31-Mar-21

24

Exclusive

0.68%

0.17%

0.00%

0.85%

31-Mar-21

25

Not specified

1.04%

0.01%

0.43%

1.48%

31-Mar-21

26

Exclusive

0.68%

0.38%

0.00%

1.06%

31-Mar-21

27

Inclusive

0.70%

0.22%

0.20%

1.12%

31-Mar-21

28

         

Fund too new

29

Inclusive

0.90%

0.05%

0.00%

0.95%

31-Mar-21

30

Exclusive

1.10%

0.04%

0.00%

1.14%

31-Mar-21

31

Not specified

0.97%

0.04%

0.03%

1.04%

31-Mar-21

32

Not specified

0.85%

0.18%

0.00%

1.03%

31-Mar-21

33

 

 

 

 

 

Fund too new

34

Inclusive

0.28%

0.01%

0.00%

0.29%

31-Mar-21

35

Not specified

0.86%

0.04%

0.00%

0.90%

31-Mar-21

36

 

 

 

 

 

Fund too new

37

Inclusive

0.69%

0.01%

No % disclosed

0.70%

31-Mar-21

38

Inclusive

0.59%

0.01%

No % disclosed

0.60%

31-Mar-21

39

Inclusive

0.55%

0.17%

0.00%

0.72%

31-Mar-21

40

 

 

 

 

 

Fund too new

Source: Research IP, fund manager disclosures, April 2022

Note: the disclosures within the quarterly fund updates are calculated as at 31 March. 11 funds were too new so the data was not available.

Table 2: KiwiSaver Scheme Balanced Fund Fees – Product Disclosure Statements

 

Product Disclosure Statements

KS

GST

Management Expense Ratio (MER)

Other Fees and Costs

Performance Fee

Total Expense Ratio
(TER)

Date of PDS

"Estimate" disclosed?

1

Exclusive

0.69%

0.09%

Not specified

0.78%

1-Apr-22

Yes

2

Inclusive

incl. in TER

incl. in TER

Not specified

0.99%

31-Mar-22

Yes

3

Not specified

incl. in TER

0.17%

Not specified

1.07%

1-Dec-21

Yes

4

Not specified

incl. in TER

0.17%

incl. in TER

1.51%

1-Dec-21

Yes

5

Not specified

incl. in TER

0.17%

Not specified

1.24%

1-Dec-21

Yes

6

Exclusive

incl. in TER

Not disclosed

Not specified

0.65%

28-Sep-21

Yes

7

Exclusive

incl. in TER

Not disclosed

Not specified

1.00%

28-Sep-21

Yes

8

Exclusive

incl. in TER

incl. in TER

Not specified

0.45%

28-Sep-21

No

9

Exclusive

incl. in TER

incl. in TER

Not specified

0.35%

28-Sep-21

No

10

Exclusive

incl. in TER

incl. in TER

Disclosed. N/A

1.18%

30-Mar-22

Yes

11

Exclusive

incl. in TER

incl. in TER

Max total fund charge 1.71%

1.22%

30-Mar-22

Yes

12

Exclusive

incl. in TER

incl. in TER

Not specified

0.35%

18-Mar-22

Yes

13

Exclusive

incl. in TER

incl. in TER

Max total fund charge 1.71%

1.29%

30-Mar-22

Yes

14

Not specified

0.91%

0.08%

Range 0%-1.10%

0.99%

31-Mar-22

Yes

15

Not specified

incl. in TER

incl. in TER

Not specified

0.94%

31-Mar-22

Yes

16

Inclusive

1.33%

incl. in MER

Disclosed. N/A

1.33%

4-Apr-22

Yes

17

Inclusive

1.09%

incl. in MER

0.32%

1.41%

4-Apr-22

Yes

18

Inclusive

0.37%

incl. in MER

Disclosed. N/A

0.37%

25-Jan-22

Yes

19

Inclusive

1.05%

incl. in MER

0.15%

1.20%

1-Apr-22

Yes

20

Exclusive

incl. in TER

incl. in TER

Disclosed. N/A

0.56%

30-Nov-20

Yes

21

Exclusive

0.95%

0.08%

Disclosed. N/A

1.03%

28-Sep-21

Yes

22

Exclusive

0.37%

"N/A"

Disclosed. N/A

0.37%

28-Sep-21

Yes. "N/A"

23

Inclusive

0.95%

0.14%

Not specified

1.09%

23-Jun-21

Yes

24

Exclusive

0.68%

0.05%

0.08%

0.81%

31-Mar-22

Yes

25

Inclusive

1.05%

incl. in MER

0.01%

1.06%

1-Apr-22

Yes

26

Exclusive

0.67%

0.19%

Not specified

0.86%

14-Mar-22

Yes

27

Inclusive

0.70%

0.24%

incl. in Other

0.94%

1-Feb-22

Yes

28

Exclusive

0.00%

0.00%

Disclosed. N/A

0.00%

3-Dec-21

Yes

29

Inclusive

incl. in TER

incl. in TER

Not specified

0.98%

31-Mar-22

Yes

30

Exclusive

1.10%

0.04%

Disclosed. N/A

1.14%

16-Dec-21

Yes

31

Exclusive

incl. in TER

incl. in TER

Disclosed. N/A

1.04%

29-Sep-21

Yes

32

Exclusive

incl. in TER

incl. in TER

Disclosed. N/A

1.03%

29-Sep-21

Yes

33

Exclusive

0.93%

0.30%

Not specified

1.23%

15-Dec-21

No

34

Exclusive

0.30%

0.01%

Not specified

0.31%

22-Dec-21

Yes

35

Inclusive

incl. in TER

incl. in TER

Not specified

0.90%

30-Nov-21

Yes

36

Inclusive

incl. in TER

incl. in TER

Not specified

0.20%

1-Dec-21

Yes

37

Inclusive

incl. in TER

incl. in TER

Not specified

0.70%

1-Dec-21

Yes

38

Inclusive

incl. in TER

incl. in TER

Not specified

0.60%

1-Dec-21

Yes

39

Not specified

incl. in TER

incl. in TER

Not specified

0.50%

28-Sep-21

No

40

Not specified

incl. in TER

incl. in TER

Not specified

0.40%

28-Sep-21

No

Source: Research IP, fund manager disclosures, April 2022

We make the following observations on the Balanced fund disclosures:

  • 14/29 disclosed ‘inclusive of GST’ in the quarterly fund update, 11/29 ‘exclusive of GST’, 4/29 did not specify.
  • 13/40 disclosed ‘inclusive of GST’ in the PDS, 20/40 ‘exclusive of GST’, 7/40 did not specify.
  • 12/29 had different GST disclosures between the quarterly fund update and PDS.
  • The average difference in Total Expense Ratios between disclosure documents was 0.073%.

Within this, 12/29 disclosed a lower TER in the PDS, 7/29 were higher, and 10/29 were the same. Note, there may be valid reasons for these differences, e.g. some fund managers have reduced fees over the past year or so, meaning the forward-looking PDS will have a lower fee disclosed than what was in the quarterly fund update.

Searching for information on managed funds to make accurate comparisons can be frustrating to say the least. It’s often hard to know which documents to read and which numbers within the documents are being disclosed. This is where good advice from a financial adviser will provide value to investors.

To help make managed fund information more transparent, comparable, and accessible, we’ve developed the RIPPL Effect report. The RIPPL (Research IP Pty Ltd) Effect is freely available to financial advisers and DIY investors. Information on fees is provided on page 5 in every report.

The RIPPL Effect is designed to bridge the gap between our Quantitative Tear Sheets and full Qualitative Research Reports. The RIPPL Effect standardises data and information so it can be found in the same place in a report for all managed funds – KiwiSaver or investment fund.

Simple data points are collected and presented in the same place on every report.  In particular key information typically found in the PDS, SIPO, or on the Fund Manager’s website, but often hard to find.

 

 


Andy Mahony, CFA, is an investment consultant at Research IP. You can contact him here.

We welcome your comments below. If you are not already registered, please register to comment.

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2 Comments

To help with decision making there are a few simple rules. Kiwi owned funds. Non Kiwi owned. Discard these ones. Especially any that have any connections with Aussie owned banks. They have a special licence to steal Kiwis' money. Then make up your own mind on moral investments. That might eliminate a few. Then look at fees for the work they do. There will be some that are obviously better than others.

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Those are 'rules' that won't will help you make intelligent investment choices. They are political biases (and nothing to do with investment).

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