Simplicity has set the stage for the incoming KiwiSaver default era as the first provider to unveil product specifications, opting for a classic 60/40 (or almost) balanced fund asset allocation.
According to the just-released Simplicity product disclosure statement, the scheme’s new KiwiSaver default fund follows the same asset allocation as its existing balanced fund – 56 per cent growth, 44 per cent income – but at a slightly different price.
As per its winning default provider bid in May, the passive-leaning Simplicity will charge an all-in annual management fee of 0.31 per cent for the default fund (due to start accepting members in December).
Simplicity has waived the $20 annual member fee for the default product (and for members under 18), although the charge still applies to all other funds including the almost identical KiwiSaver balanced fund.
The Simplicity KiwiSaver default product will invest in the same underlying mix of Vanguard Australian unit trusts for global asset classes while managing most local exposures in-house – including a portion of the private equity portfolio (along with external manager, Icehouse Ventures).
Furthermore, the Simplicity default fund can invest as much as 5 per cent into the manager’s mortgage book, which funds home loans to all scheme members who meet certain lending criteria.
Despite favouring an index-style approach for most assets, the latest Simplicity KiwiSaver statement of investment policies and objectives (SIPO) says the local market holds some promise for alternative strategies.
“Because of the limited breadth and scope of capital markets in New Zealand, there are also opportunities for investment managers with a large pool of long term funds to earn higher risk adjusted returns for their members,” the September SIPO says.
The Simplicity actively managed alternative asset bets includes the in-house mortgage book, private equity and a new direct private property portfolio flagged in the latest SIPO.
Both the Simplicity growth and balanced funds “may invest into a company that develops and owns New Zealand residential property that is designed to be long term rental housing”, the SIPO says.
“We are treating this asset class as an unlisted New Zealand property investment for which there is currently no suitable benchmark.”
Founded by Sam Stubbs in 2016, Simplicity reported about $3 billion under management at the end of June including roughly $2 billion in the KiwiSaver scheme.
The scheme was appointed as a default provider in May under a contract due to formally begin on December 1.