The new BlackRock-managed AMP KiwiSaver index-style diversified funds come with an all-in fee of almost 0.8 per cent, just-filed scheme documents reveal.
According to an AMP NZ spokesperson, the switch from AMP Capital to BlackRock as underlying manager for the firm’s diversified funds has seen fees “reduced significantly” while the cost “structure has been simplified by combining the management and administrative fee into one single amount”.
“The reduction in fees to 79bps [basis points] across AMP named funds, alongside our offer of help and guidance to clients, supported by a range of market-leading services and digital tools, in our view represents real value for money,” the spokesperson said.
AMP has bundled the investment management and administration fees into a 0.69 per cent charge across all its home-brand diversified funds (except the default fund) with annual estimated other costs of 0.1 per cent.
Before transitioning to BlackRock this month (a process due to complete by September) the AMP KiwiSaver diversified funds total fees ranged from about 1 per cent to 1.3 per cent, barring the default option (0.39 per cent). AMP has also retained an annual member fee of $23.40 across all KiwiSaver funds.
Typically, institutional passive investment mandates at the AMP scale – an estimated $10 billion should end up with BlackRock – carry price-tags of 10 basis points or less.
The NZX-owned Smartshares has set the benchmark for low-cost passive KiwiSaver funds with a 0.2 per cent fee (with no dollar-based member fees) on its yet-to-be-launched default balanced option. Smartshares was one of the surprise winners in the recent default scheme review that will saw AMP ousted from the role by December.
Other index-leaning KiwiSaver fund fees include fellow new default appointee Simplicity (0.31 per cent plus $30 annual member charge) and ASB, where fees range between 0.35-0.7 per cent for passive diversified options.
While the BlackRock move also extends to the AMP employer superannuation master trust, the NZ Retirement Scheme (NZRT), the quoted headline product disclosure statement (PDS) fees of up to 3 per cent are not much of a guide.
The AMP spokesperson said: “NZRT is a highly customisable offer and the fees are agreed between us and the employer based on that customisation. The majority of our schemes already receive significant discounts to our published rates referred to in the PDS.
“We use discounts to the Member fee and Administration fee in schemes to recognise schemes of significant size, and prior to this change going live we have reduced fees directly for a number of our corporate schemes as well as the investment management fees for [several other funds].”
The fee cuts range from 6 per cent for the diversified AMP Growth Fund to 60 per cent for the AMP International Shares Fund (which is shifting from an active AMP Capital-managed strategy to BlackRock).
“We have completed key stages of the transformation of our investment offer which aims to simplify sustainable investing and fees for clients while delivering stronger returns through an index management investment approach,” the AMP spokesperson said.
However, both the NZRT and AMP KiwiSaver schemes will continue to offer options from other managers including AMP Capital, ANZ, ASB, Mercer and Nikko.
According to AMP scheme documents: “The Manager recognises that some clients may have a different philosophy towards investing. Accordingly, we will continue to offer a selection of funds offered by third party managers which are available for our clients to choose from. These funds will provide access to a range of different investment styles and philosophies.”
AMP has also made changes to five other savings schemes in the wake of the BlackRock appointment. However, the $6.5 billion KiwiSaver schemes and the $3.4 billion NZRT represent the bulk of AMP assets.
The NZ wealth group made the shock BlackRock announcement public last October in a move that effectively cuts the assets under management of sister firm AMP Capital NZ in half.
Earlier this month, the ASX-listed AMP confirmed a deal to sell certain fund management assets, including AMP Capital NZ, to Macquarie.
Prior to the BlackRock change AMP based its KiwiSaver (and other scheme) strategy on the aim “to provide investors with a range of investment choices and investment management styles to enable them to tailor a portfolio that suits their unique goals and needs”.
The new AMP ‘investment philosophy’ states: “The Manager will access returns using mainly index management strategies, as we believe that it is difficult to consistently outperform the market via the adoption of short term active positions, and keeping investment costs down is an important component of returns. We may consider other investment strategies if they can clearly demonstrate that the anticipated returns outweigh the additional investment management cost.”
Furthermore, AMP has broadened its sustainable investment approach across all schemes “not just a specific single fund, with a focus on helping to reduce the impacts of climate change”, the spokesperson said.
“Our philosophy covers exclusions, embedding sustainable investment into all investment processes, and stewardship.”
In April this year AMP NZ named former head of intermediaries, Aaron Klee, to the newly created head of investment management role ahead of the BlackRock transition.