The Aon KiwiSaver scheme will add more than double the estimated assets under management set to exit Fisher Funds through the default transition process later this year, taking some sting out of the loss for the Takapuna-based manager.
As reported last week, the $14.5 billion Fisher Funds purchased the Aon KiwiSaver and employer master trust assets (with roughly $800 million and $200 million under management, respectively) for an undisclosed sum in a deal set to close at the end of November – almost exactly the same date the default member transfer to newly appointed providers begins.
Fisher Funds chief, Bruce McLachlan, said the group is likely to see off about 38,000 default members and $380 million post transition while welcoming 20,000 KiwiSaver clients via the Aon scheme worth about $800 million.
McLachlan said the Aon members would probably be housed in the Fisher Two KiwiSaver scheme (the old Tower fund that was an original default provider).
As at the end of March this year, the average Aon KiwiSaver member balance sat over $38,000 compared to the implied $10,000 for Fisher default members.
“Default members tend to have limited balances and high needs,” he said. “They need looking after.”
By that gauge, Fisher appears to be swapping out low-margin, high-maintenance members for more lucrative, no-fuss KiwiSaver clients.
However, there are a few complications for Fisher given the mix of underlying funds and Aon adviser relationships to assuage.
As at the end of March, Aon KiwiSaver reported about $480 million of its then total $734 million was managed in various Russell Investments funds with almost $200 million held by Milford Asset Management: ANZ ($42 million) and Nikko Asset Management ($15 million) fill out the remainder.
The $200 million Aon employer master trust has the same investment choices. Post-sale the Fisher employer master trust would see funds under management rise to about $850 million – putting it slightly above Mercer into fourth in what will be a five-horse race minus Aon.
Fisher would ideally bring all those assets under its own funds, McLachlan said, but that may be a drawn-out process convincing members (and advisers) of the benefits.
“We have a strong case that Fisher can deliver the same investment proposition – if not better,” he said. “But we’ll need to consult with clients, advisers and distributors.”
Furthermore, the fact both Russell and Fisher share a common part-owner in the shape of US private equity firm, TA Associates, may come into play.
Of course, Fisher has some history in merging KiwiSaver schemes after acquiring three in the past including the default provider Tower, the largish Huljich scheme and the tiny First NZ Capital between 2011 and 2013.
For Aon, at least, the sale brings some certainty with the team of four managing the KiwiSaver and employer super schemes all to be offered roles at Fisher. The group put the NZ investment assets on the block earlier this year soon after a proposed global merger of Aon and Willis Towers Watson collapsed on the back of US regulatory intransigence.
Despite the loss of default status, Fisher would likely continue to run two different KiwiSaver schemes for the time-being, McLachlan said.
But the changing of the old guard among default providers looks set to trigger some product rationalisation.
For example, ANZ will close its stand-alone default scheme to new members as at December 1, shrinking the number of open KiwiSaver schemes to 35. The ANZ Default scheme reported about 87,000 members and almost $2 billion under management at the end of March.