Booster has dropped the Nikko Asset Management Options Fund from its stable in a move that could see over $100 million change horses.
In a just-released supplementary disclosure document, Booster says the Options product – offered via the Wellington-based firm’s KiwiSaver and superannuation funds – would close to new members from March 21 this year.
“Members invested in the Options Fund have been notified of the closure and wind-up and the options available to them,” the Booster document says. “The wind-up of the Options Fund will start on 20 April 2018 and is expected to finish mid-May but may take longer.”
The Booster decision comes just a couple of months ahead of Nikko’s planned KiwiSaver scheme launch. According to Nikko NZ chief, George Carter, the in-development KiwiSaver would offer the Options fund.
“Nikko AM [Asset Management] is disappointed that Booster has decided to no longer the Nikko AM Options fund to its members,” Carter said. “However, Nikko is delighted to be launching its own KiwiSaver Scheme which will be available from early April. Any investor that wants to continue using the Option Fund will be able to do so directly with Nikko.”
David Beattie, Booster chief investment officer, said unless notified otherwise the manager would transfer affected members to the group’s High Growth Fund.
Beattie said about 14,000 Booster members have exposure to the Nikko Options product with just under $95 million invested through the firm’s KiwiSaver scheme and a further $15 million in its superannuation fund.
He said the Options fund relies on underwriting insurance on government bonds, particularly US Treasuries – a market that is facing “increasing headwinds”.
“We concluded that the Options fund was not a good strategy for long-term savers,” Beattie said.
However, Carter said while global bond markets were facing changing conditions the Options fund was not tied to a “directional” strategy.
But Beattie said many investors likely didn’t understand the nuances of the Nikko product, which was difficult for advisers to explain in simple terms.
Aside from its KiwiSaver default product, Booster distributes exclusively through its network of tied and aligned financial advisers.
According to the Booster product disclosure statement: “The [Options fund] is suited to investors who are comfortable with a very high level of risk in order to potentially achieve higher returns.”
Booster inherited the Options fund in its purchase of the Fidelity KiwiSaver and superannuation products in 2013 and 2015, respectively.
The latest Booster fact sheet shows the Options fund returned 3.7 per cent after fees over the last 12 months: for the latest 10-year period the fund reported a return of 8.2 per cent after fees.
Carter said the imminent launch of the Nikko KiwiSaver scheme marked an “exciting” phase for the Auckland-based firm, which was recently named Morningstar fund manager of the year
“And as part of our initial launch we intend to waive our management fees until 31 March 2019, which together makes for an exceptionally attractive offering in the market,” he said.