sign up log in
Want to go ad-free? Find out how, here.

Managed funds guaranteed, but only if in banks, bonds

Managed funds guaranteed, but only if in banks, bonds

The Reserve Bank of New Zealand (RBNZ) said that collective investment schemes, such as cash PIEs, will be guaranteed under the new deposit guarantee scheme, provided they invest in government bonds or other guaranteed financial institutions. Collective investment schemes will be guaranteed provided they are currently invested in New Zealand Government securities or debt securities issued by institutions covered by the new crown deposit guarantee; and provided that they do not increase investments in non-registered banks, the RBNZ said. In order to remain guaranteed, collective investment schemes that are looking to increase their investments must now only increase the investments they have in registered banks. If a collective investment scheme increases its investments in a non-registered bank or entity, then it would not be covered under the new deposit guarantee scheme.

On it's frequently updated questions and answers page, the RBNZ said that:

Collective investment schemes (such as PIEs, unit trusts and superannuation schemes) will be able to claim on the guarantee provided:
  • they invest exclusively in New Zealand government securities or debt securities issued by institutions covered by the Crown guarantee; and
  • they do not increase their investments in guaranteed institutions that are not registered banks beyond the level that existed as at 12 October 2008.

Also, the RBNZ said bonus bonds will be covered only if the investments underlying the bonds are exclusively government securities or debt securities issued by institutions covered by the Crown guarantee. If bonus bonds include investment in non-guaranteed securities they will not be covered, it said. The guarantee does not include interests in superannuation schemes, unit trusts, shares or similar instruments where the income from the investment is shared, except for cash PIEs. "Subordinated debt issued by banks or finance companies will not be covered by the guarantee (different rules may apply for building societies and credit unions). Subordinated debt refers to deposits or loans that are repayable after all other creditors of the bank or finance company have been repaid. It ranks behind other creditors in terms of distributions on insolvency (but ranks before distributions to shareholders)."

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

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.