Imagine you had $40 billion to invest. Would you put some of it into oil exploration? How would you feel about investing in a casino or the lucrative adult entertainment industry? What’s your stance on holding shares in fast-food companies?
If you’ve got cash in KiwiSaver, there’s a good chance you’ve already got money in these industries. However, like most investors, you probably aren’t aware of it. Here's how to find out where your money's going, plus the results of our latest satisfaction survey.
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A decade since the launch of the retirement scheme, the pot has grown to more than $40 billion. But many consumers are still in the dark about where their money’s invested and how well it’s managed.
Everyone hopes their KiwiSaver funds will keep the wolf from the door in their twilight years. But our latest survey found most of us want more than good returns. Seven out of 10 also want to know their money’s invested ethically. Some are even prepared to accept a slightly lower return as long as their funds are being used for good.
The majority said they’d be concerned if their cash was put into “sin stocks”, such as gambling or pornography. However, most didn’t know if their fund manager excluded investment in these industries.
Just 23% were content their cash was being invested responsibly, down from 26% last year.
At last count, there were about 25 KiwiSaver providers in the market, offering more than 240 different funds. Despite the apparent choice, the industry has been slow to offer responsible investment options.
Bad press about KiwiSaver funds in munitions and tobacco stocks has forced some changes. After the publicity in 2016, most schemes ditched tobacco and investments in companies manufacturing cluster bombs, landmines and nuclear weapons (see our Table).
Several schemes have also published no-go lists of companies excluded for human rights abuses, poor environmental practices or other ethical concerns. ANZ has nine companies on its list, Milford 10 and Fisher Funds 23.
Kiwi Wealth, owned by Kiwibank, has a similar no-go list of 31 companies, though it’s yet to be published.
The media spotlight on schemes’ investment choices has also seen more providers promoting their commitment to take into account environmental, social and governance issues – dubbed “ESG factors” in the trade.
What this means when it comes to investment decisions will vary depending on the stance taken by the fund manager and the weight given to any particular issue.
In practice, negative screening – excluding or limiting investment in areas the fund manager deems undesirable – is still the main approach taken by most schemes, including funds marketed as responsible investment options.
Sustainability investing (targeting investment in industries making a positive difference on issues such as climate change) is less common. According to the Responsible Investment Association Australasia (RIAA), this approach is growing. However, it remains the exception.
Association chief executive Simon O’Connor says the leaders in responsible investment are doing more than just screening out companies. “They are shifting capital towards sustainable businesses and assets that are having a positive impact,” he says.
The RIAA’s definition of sustainability investing includes putting money into areas such as clean energy, green technology, and sustainable agriculture and forestry.
KiwiSaver providers haven’t been leaders in these fields. But Mr O’Connor is optimistic investor and consumer pressure will change that. KiwiSaver members can help by asking questions about where their super funds are invested, he says.
Finding out which horses your KiwiSaver cash is backing isn’t as straightforward as it could be.
KiwiSaver providers must regularly disclose the top 10 investments of each of their funds. They also have to file financial statements and lists of fund holdings showing where money is invested. These returns are held on the Companies Office Disclose Register. But in many cases, the information doesn’t tell you everything you need to know. Most schemes invest in global tracking funds, which means you need to dig deeper to find where these funds invest.
It’s a safe bet the majority will have holdings in stock exchange leaders and big name companies – think Apple, Microsoft, Facebook, BP, ExxonMobil, Shell, Nestle, Coca-Cola, PepsiCo and McDonald’s among others.
The online Disclose Register is free to access, although you need to know where to look for relevant information. To find your KiwiSaver fund’s holdings, search under “Offers” and enter the name of your provider. A list of “Full portfolio holdings” can be found under the “Investment Options” tab.
You’re entitled to ask your provider where it’s investing your money. Quiz your fund manager about its approach to responsible investment. Look for details on industries the fund screens, rather than general commitments to do the right thing. You can also ask what the fund is doing to support sustainability investing.
A indicates a provider has excluded making a direct investment in these industries:
|KiwiSaver provider||Cluster bombs[tick]||Landmines[tick]||Nuclear weapons [tick]||Tobacco [tick][width=small]||Other exclusions[width=large]|
|AMP||yes||yes||yes||AMP's Responsible Investment Balanced Fund additionally avoids investment in alcohol, arms, gambling, pornography, tobacco and uranium, and limits exposure to thermal coal, oil sands and brown coal-fired power generation.|
|ANZ||yes||yes||yes||yes||Nine other companies excluded for human rights, environmental or other ethical concerns. ANZ's OneAnswer Sustainable International Share Fund additionally excludes gambling and pornography.|
|ASB||B||B||B||No other exclusions.|
|BNZ||yes||yes||yes||yes||No other exclusions.|
|Booster||yes||yes||yes||yes||Booster's two responsible investment funds additionally exclude alcohol, arms, fossil fuels, gambling, genetically modified organisms, nuclear power, uranium mining and adult entertainment, where the company or managed fund receives more than an incidental part of its revenue from these industries.|
|Fisher Funds||yes||yes||yes||yes||Thermal coal is excluded where a significant proportion of company revenue is derived from it; 23 other companies excluded for human rights abuses, environmental or other ethical concerns.|
|Fisher Funds Two||yes||yes||yes||yes||Thermal coal is excluded where a significant proportion of company revenue is derived from it; 23 other companies excluded for human rights abuses, environmental or other ethical concerns.|
|GenerateA||No other exclusions.|
|Kiwi Wealth||B||B||B||B||Whaling and whale meat processing are excluded; direct investment in 31 other companies excluded for environmental practices, human rights abuses or illegal activities. Investments in arms, gambling, thermal coal, nuclear power and palm oil are screened. |
|Mercer||B||B||B||B||No other exclusions.|
|Milford||yes||yes||yes||yes||Whale meat processing and manufacturers of recreational cannabis products are excluded; 10 other companies excluded for human rights abuses, environmental or other ethical concerns.|
|Westpac||yes||yes||yes||yes||Whale meat processing is excluded.|
GUIDE TO THE TABLE DATA on responsible investment policies are shown for the 12 providers rated in our survey. Information is from companies’ published reports and websites. AGenerate is developing a responsible investment policy. Bindirect investment is also excluded.
Six KiwiSaver funds are promoted as dedicated responsible investment options:
These funds exclude a broader range of investments than the companies’ other KiwiSaver offerings. Common exclusions include alcohol, arms, gambling and pornography. Investment in fossil fuel extraction is also excluded by Booster, QuayStreet and SuperLife.
Combined, membership of these funds is small. About 8600 investors have signed up. Most (6400) are with Booster. SuperLife’s Ethica fund is the next largest, with about 1300 members. The small size of these funds means it’s difficult to measure customer satisfaction in our surveys.
|Industry||% concerned about investment in industry[bar][width=large]||% unsure if funds are invested in industry[bar]|
|Oil and gas exploration||47%||75%|
|Do you know how your KiwiSaver fund has performed relative to the rest of the market?||68%||32%|
Customer satisfaction in the KiwiSaver market is trickier to gauge than in other industries. Most of us have far less contact with our KiwiSaver provider than we do with other service providers, such as our bank, power or phone company.
Our survey found just 52% of KiwiSavers were happy with the service they received. You’re more likely to be a satisfied customer if you think you’re getting regular information about your investment and you’ve hand-picked your provider, rather than staying in a default scheme.
Of the 12 companies rated in our survey, Milford scored the highest overall satisfaction at 80%. Its customers were more likely to be active investors who’d switched to the fund chasing high returns.
BNZ followed with a satisfaction score of 71%. However, BNZ customers were also more likely than average to be thinking about switching. AMP, which rated lowest last year, again returned below-average results. Its satisfaction score of 40% was an improvement on 2017 (27%) but still well below the industry average.
|Milford||80%||17,762||$805m||4||No||Milford earned the highest overall customer satisfaction score. Milford customers in our survey were active investors, with most switching to the fund to chase higher returns. They were the least concerned about investments in sin stocks such as alcohol and gambling.|
|BNZ||71%||109,814||$1.2b||5||Yes||BNZ’s customer satisfaction score was the highest of the nine default schemes. Customers particularly liked the access to account information. However, they were also more likely to be thinking about switching: 22% said it was likely they’d switch in the next year.|
|Booster||65%||101,873||$1.2b||5||Yes||Booster (formerly Grosvenor Financial Services) had the highest proportion of customers (25%) who’d opted for the scheme on the recommendation of a financial adviser. Its customers in our survey were the least likely to be thinking about switching.|
|Generate||65%||30,143||$396m||3||No||Generate had a high proportion of customers who had switched to the scheme wanting higher returns. Along with Booster, it also had a higher-than-average proportion of customers (19%) who’d picked the scheme on the recommendation of a broker.|
|Fisher Funds||61%||131,019||$1.8b||7||No||Fisher Funds’ customer satisfaction score of 61% was above the industry average (52%). It had a higher proportion of customers who thought it was very important to know where their money was invested. They were also more likely to be concerned about sin stocks.|
|Westpac||59%||389,740||$4.6b||10||Yes||Westpac’s results were mixed. It rated above average for access to account information but below average for keeping customers updated about their investments. Customers were also more likely to be unsure about what type of fund their money was invested in.|
|Kiwi Wealth||55%||174,265||$3.0b||8||Yes||Kiwi Wealth, owned by Kiwibank, rated above average for communication with its customers: 81% were satisfied they were kept up-to-date about their investment. Kiwi Wealth is a default provider, but the majority of customers in our survey had chosen the scheme independently.|
|Mercer||55%||96,807||$1.6b||6||Yes||Just over half of Mercer customers in our survey (54%) didn’t choose the scheme but had been allocated to the default provider when they enrolled. Most had been with the scheme for five years or more.|
|ANZ||45%||722,079||$10b||12||Yes||The biggest KiwiSaver provider, ANZ joined AMP at the tail-end of the customer satisfaction table this year. One in five ANZ KiwiSaver customers said they’d joined the scheme because they were already customers of the bank and it recommended they sign up.|
|ASB||42%||487,489||$7.1b||11||Yes||Along with AMP and ANZ, ASB rated below average for customer satisfaction. ASB customers in our survey were also the most likely to be dissatisfied with their provider’s communication: 18% felt they weren’t kept up-to-date about their investment.|
|AMP||40%||236,000||$4.5b||9||Yes||This is the third year AMP has rated below average for customer satisfaction. The company also stood out for below-average scores for its communication with customers. Most AMP members in our survey didn’t pick the scheme but were automatically allocated to it when they enrolled in KiwiSaver.|
|Fisher Funds Two||35%||106,466||$1.8b||7||Yes||Fisher Funds Two, a scheme created after Fisher Funds took over Tower’s KiwiSaver investment, couldn’t match the performance of Fisher Funds’ other offering. Customers were the most likely to be thinking about switching: 34% thought it was likely they’d do so.|
GUIDE OUR DATA are from a nationally representative survey of 1531 New Zealanders, aged 18 and over, carried out in March 2018. Satisfaction ratings show the proportion of respondents who scored their KiwiSaver provider 8, 9 or 10 on a scale from 0 (very dissatisfied) to 10 (very satisfied). Information on member numbers and value of funds is from providers’ 2017 annual reports. Ratings are for providers that had 30 or more responses.
"I'm now going to check how their returns rate against others. They need to show me where they sit in the market in terms of returns and ethical investment. "
"It would be good to have more readily available information about where my KiwiSaver is invested."
"I’ve only just started KiwiSaver in the past three months. I’ve not yet received any information."
"I've heard that it's one of the best-performing funds, but I would like to know more about what it invests in, and where it sits compared to other funds."
"It would be good to either be sent a breakdown of investments or somewhere on the website be able to access this."
"Very hard to understand what they are investing in."
A brand must be a standout performer for customer satisfaction to receive a People’s Choice award.
BNZ chief executive Angela Mentis says: “Becoming the first back-to-back winner of the KiwiSaver People’s Choice award is a real testament to the hard work we do at BNZ to help New Zealanders be good with money. KiwiSaver is such an important element of how we plan for our retirements in this country – but it’s also become a way for people to save towards a first home. We are proud to be a first choice for New Zealanders making savvy decisions that help them achieve their financial goals.”
“This year we’ve been talking to our KiwiSaver customers about the importance of making an active choice of fund type so they are more likely to choose an option that suits their stage of life and their future plans. I encourage all New Zealanders to take an enthusiastic interest in how your money is invested to ensure it’s working as hard for you as possible.”
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