The $5 billion government-owned Kiwi Wealth business has hired an Australian consultant to review its fragmented back-office operations.
Sydney-based Drew Vaughan, principal owner of Dymond, Foulds and Vaughan, is due to wrap up the Kiwi Wealth review this month with services such as custody under the microscope.
According to Joe Bishop, Kiwi Wealth head of product and innovation, the administration review was focused primarily on the group’s new product suite that includes a range of just-launched wholesale and retail funds.
“But we will have the optionality to extend [any changes] across all our products,” Bishop said. If adopted, any broad administration update would happen within the next 12 to 18 months, he said.
Currently, Kiwi Wealth leans heavily on in-house administration services under arrangements first set up by predecessor business Gareth Morgan Investments (GMI).
GMI famously eschewed unit-pricing in favour of a bespoke home-built administration system that remains largely in place today under Kiwi Wealth – albeit that asset pricing for the KiwiSaver and other legacy schemes has moved from monthly to weekly pricing.
Kiwi Wealth delegates custody to JB Were for the $3.6 billion KiwiSaver scheme but acts as its own custodian in some other products. However, the new retail product range – designed to back into Kiwi Wealth’s almost-ready robo-adviser – uses Public Trust as custodian and MMC for unit pricing and registry.
Public Trust is supervisor for all Kiwi Wealth funds.
Unlike the original GMI funds, the new wholesale and retail Kiwi Wealth products have been constructed as portfolio investment entities (PIEs). While the Kiwi Wealth KiwiSaver scheme itself is a PIE, the underlying investment portfolios – conservative, balanced, growth etc – are not PIEs.
However, in further complications, the KiwiSaver portfolios do invest in relatively new Kiwi Wealth-built fixed income and global equity funds that are PIEs.
Kiwi Wealth retains admin duties on most of the underlying KiwiSaver funds except for the recently-launched Core Global Fund (CGF), which the scheme built last year as a responsible investment replacement for an incumbent Vanguard global equities fund.
According to fund documents, “the CGF is managed by Kiwi Wealth, it is valued and priced independently by BNP Paribas
(BNP)”. The CGF also uses JP Morgan to look after “stock-level implementation”, Kiwi Wealth chief investment officer, Simon O’Grady, said last year.
Kiwi Wealth has a large weighting to offshore equities with its KiwiSaver growth fund, for example, allocating over 80 per cent to global shares – about double the peer average.
Bishop said the administration review reflected the rapid growth and evolution of the Kiwi Wealth business over the last few years.
“We’ve had phenomenal growth,” he said. “The KiwiSaver scheme has over 190,000 members and [across all investments] we manage more than $5 billion… we’re pushing into new territory.”
For Vaughan, the review follows a busy year across the Tasman last year when he conducted securities servicing reviews for NZ’s two largest fiduciary investors – the Accident Compensation Commission, which consolidated its services providers under JP Morgan, and NZ Super, which retained Northern Trust.
Coincidentally, both ACC and NZ Super collectively own about half of Kiwi Wealth via parent, Kiwi Group Holdings.
Produced in association with Greg Bright is publisher of Investor Strategy News (Australia)