Start-up benchmarkian KiwiSaver scheme, Simplicity, has cracked through the $50 million mark more than six months ahead of budget.
Andrew Lance, Simplicity chief operating officer, said the scheme, officially launched in July this year, hit $50 million late in November and was on track to reach close to $70 million before Christmas.
Lance said Simplicity had racked up more than 2,000 members – the firm’s one-year target – with another 300 or so in transit.
While the scheme initially attracted a flurry of individuals new to KiwiSaver, he said the bulk of members were now arriving via transfers from rival providers.
“It’s been about as good a start as we could have hoped for,” he said.
The scheme, which invests mostly into underlying Vanguard funds, appeared to have gained traction in the high-net worth market with aan verage member balance close to $30,000, Lance said.
As at the end of March this year the mean KiwiSaver account balance stood at about $13,000. Milford Asset Management recorded the highest average member balance of $39,000 and the Islamic-friendly Amanah scheme the lowest (about $6,500), according to Investment News NZ research.
Lance said Simplicity members have overwhelming adopted the scheme’s growth option, in contrast to the general conservative bent in the wider KiwiSaver market.
“The growth fund is about 10-times bigger than the balanced fund,” he said. “And the conservative fund is smaller again than the balanced option.”
Lance said both the high average account balance and an overall investment choice heavily skewed to the growth option suggested Simplicity had hit a nerve among “better-informed” investors.
“I suppose high net worth investors not only would have an idea of how funds management works but they also benefit the most from low fees,” he said.
Simplicity was also on track to launch a range of broader retail funds next year that mirror the three KiwiSaver options.
“We don’t see them as being a conduit for advisers who want to invest in Vanguard products,” Lance said. “But if [launching the non-KiwiSaver funds] is a way to get critical mass and bring fees down further that would be commercially sensible.”
He said Simplicity, which so far has relied on word-of-mouth and social media marketing strategies to build membership, would also consider more traditional distribution strategies.
“There are two or three angles I would like to pursue,” Lance said. “I think we can challenge in the employer preferred provider market and there are some not-for-profit distribution networks that we could also work with.”
Simplicity would also switch the underlying funds from the vanilla Vanguard options to the index manager’s new ethically-flavoured variety when they launch this week, he said.
In October Vanguard said it would fast-forward the release of its International Shares Select Exclusions Index Fund for Australasian investors following an outcry about potential exposure of KiwiSaver investors to cluster munitions manufacturers through passive products.
Lance joined the fast-growing Simplicity team in July following a temporary assignment at AMP. Previously, he was head of institutional for Fisher Funds from 2013 to 2015 after a three-year stint as fixed interest manager at predecessor firm Tower.
Simplicity also recently hired former Interest analyst, Craig Simpson, in a marketing role.