Kiwi Wealth has finalised its indexed-style default KiwiSaver fund arrangements, outsourcing most investment duties to Northern Trust Asset Management and BlackRock.
A spokesperson said Kiwi Wealth had hired the quantitative specialist Northern Trust to implement its default fund global equities strategy while investing in an “off-the-shelf” BlackRock vehicle for international fixed income.
The government-owned KiwiSaver provider would keep local shares and fixed interest in-house, the spokesperson said, for the soon-to-be-live default fund.
As well as an expected influx of newly allocated members from the axed providers, the new Kiwi Wealth default fund shifts to the government-mandated balanced asset allocation (with some fossil fuel equities-only exclusions) from the previous conservative settings.
With a higher shares exposure, and tight constraints on fees, all of the six incoming default KiwiSaver providers have increased exposure to passive-like investments – if they weren’t already mainly indexed (notably, SuperLife and Simplicity) – to limit costs.
Generally an active management house, Kiwi Wealth has changed tack to index for the default fund that is priced at 0.37 per cent compared to over 1 per cent for the scheme’s regular balanced fund.
The new Kiwi Wealth default fund will also include its recently installed indexes from German provider, Solactive, as part of the benchmark while BNP Paribas Fund Services Australasia has been appointed as custodian for some of the assets.
BNP Paribas already runs administration for most of the Kiwi Wealth underlying wholesale funds while MMC won the contract in September to upgrade the scheme to daily unit-pricing ahead of the default transition.
According to Kiwi Wealth KiwiSaver disclosure documents: “During November 2021, the Investment Manager will in turn appoint MMC Limited to provide some of the administration functions, including registry services and unit pricing, for the Scheme. At that time, the Manager intends to unitise the Scheme and move to operate on a daily valuation/investment cycle.”
The $6 billion plus Kiwi Wealth scheme joins a raft of other providers in appointing Northern Trust and BlackRock to KiwiSaver mandates.
While BlackRock recorded recent big wins with the AMP and ASB KiwiSaver schemes, Northern Trust also picked up a major client with ANZ last year (to replace Vanguard) closely followed by Westpac/BT Funds Management.
Westpac added an index-tracking fund to its investment mix (including KiwiSaver) earlier in November after handing UK-based global asset manager Legal & General (L&G) a significant international shares mandate.
Philip Houghton-Brown, BT head of investment solutions, said in a release at the time that the group has seeded the L&G strategy with $200 million – a figure expected to hit $300 million over the following six months.
L&G would ultimately manage about 10 per cent of the Westpac/BT global shares portfolio, a bank spokesperson said.
“The mandate involves tracking an index, but the index itself has a number of important differences from the a standard market capitalisation index,” the spokesperson said.
“… those differences include the EU Paris climate benchmark alignment (emissions reduction and tilt to green revenues) and the additional tilts which reflect L&G’s ESG scores. It will also incorporate L&G’s market leading engagement programme.”
Produced by the same index provider as Kiwi Wealth – Solactive – the just-released L&G index slashes the greenhouse gas emission exposure of a comparative cap-weighted benchmark by half with further reductions in sight, the Westpac release says.
“We’re working to align our entire portfolio with our climate objective of a 1.5 degree C pathway, increasing exposure to climate solutions, decreasing climate risks, and supporting ecosystem, biodiversity, pollution prevention and water stewardship,” Houghton-Brown said in the statement.
Along with L&G and the factor-based Northern Trust mandate, Westpac/BT uses five active strategies in its multi-manager line-up, including: Ardevora; MFS; Ninety One Australia; River and Mercantile; and, T Rowe Price Australia.
Mercer NZ also appointed L&G for a passive global equities strategy launched in 2018.