The Financial Markets Authority (FMA) has commissioned Auckland-based research firm MyFiduciary to explore the active-passive terrain in the KiwiSaver market as part of its ‘value for money’ campaign announced last year.
MyFiduciary began collecting data from KiwiSaver schemes and underlying managers late last year covering a wide range of metrics including fees, monthly returns, sector exposures and tactical asset allocation.
But the information request blitz apparently caught many managers off-guard late last year with the FMA link not immediately obvious.
The researcher is still gathering data but should complete the study next month.
According to the FMA, MyFiduciary was appointed “to perform a detailed study of the application of active and passive management across the portfolios of KiwiSaver providers, fees incurred for this, and an assessment of whether investors are getting good value for money from their provider”.
“We’re expecting to release the report in the first half of this year,” the regulator says.
The FMA flagged a further investigation into KiwiSaver fees following the publication of its 2019 annual report on the sector that included a preliminary study carried out by Melville Jessup Weaver (MJW).
Liam Mason, FMA director regulation said last October that during the year ahead “we will be asking KiwiSaver providers to demonstrate how they are providing value for money for members”.
“This includes explaining investment styles and how higher fees are justified for services such as active fund management or responsible investment strategies,” Mason said.
The MJW analysis found some evidence that KiwiSaver fund fees were generally higher than comparable UK retirement products.
However, the MJW study says further research is needed “to better understand this outcome”.
The MyFiduciary project will measure aspects such as ‘active share’ of KiwiSaver funds that may out closet-indexers among the manager mix.
In the wake of the 2019 KiwiSaver report Mason said: “Studies in overseas markets have found that a number of fund managers are not as active as they claim to be. [The value-for-money study] is really about managers being more transparent about how they are active.”
Founded by Ross Fowler in 2006 as an investment governance specialist, MyFiduciary has expanded rapidly in recent years to include fund research and consulting. Former NZ Superannuation Fund principal economist, Aaron Drew, joined the firm in 2016 followed by ex Morningstar head of manager research Asia Pacific, Chris Douglas, in 2018.
Late last year, MyFiduciary also hired Greg Peacock – previously NZAM chief investment officer – as an associate.