Auckland-based investment boutique Generate sliced fees down across all funds in August to reflect growing scale benefits.
After lowering fees on its growth products by between 3-5 per cent, Generate has set “lower fees for all funds from August 2020”, according its latest KiwiSaver report.
Generate now manages over $2 billion, almost all of it in the KiwiSaver scheme. The company, headed by Henry Tongue, launched a unit trust version of the growth fund late last year.
Under the new fee schedule, Generate has knocked off between 2-10 basis points (bps) across its fund suite, following a similar price cut last year.
Fees now range from 1.21 per cent for the Generate conservative fund to 1.49 per cent for the Focused Growth fund. The Focused Growth product is now 20 bps cheaper compared to 2018.
While Generate has held its management fee at a flat 1 per cent across all funds, Tongue said the group was able to lower administration and underlying fund manager costs based on rising scale.
The firm uses MMC for administration and Public Trust as supervisor and has a menu of offshore fund managers including T Rowe Price, Magellan and Platinum.
But Tongue said Generate was also taking more investment management in-house across global equities as well as other asset classes.
“We have reduced our exposure to underlying managers as we grow our investment team,” he said.
In addition to Tongue, Generate hosts an investment team of four and will be recruiting another portfolio manager by the end of the year.
Since launching in 2012, the manager has had a mostly charmed run as solid investment performance coincided with rapid member growth. The group’s KiwiSaver has consistently been among the top two or three fastest-growing and now is the 11th largest by member numbers and 13th as per funds under management (FUM).
Over the year to March 31, Generate added almost 21,000 net new members (up 33 per cent) despite a security breach hiccup and the coronavirus market volatility. As at March 31 Generate FUM was down 8 per cent compared to the end of last year but has bounced back almost 20 per cent by late August: member numbers are now approaching 90,000, Tongue said.
He said most Generate members have given the manager a “second chance” in the wake a hack reported this February that compromised the personal data of about 26,000 individual investors.
Generate has beefed up security and paid for new identity documents (out of its own profits) of about 2,000 members, Tongue said.
While Generate remains one of the pricier KiwiSaver options, the scheme has delivered outperformance after fees across most time periods.
The Financial Markets Authority (FMA) is currently focusing on ‘value for money’ in KiwiSaver with a new report, due out any day now, scrutinising managers for active and passive exposure and fees.
“We’ve always focused on value for money,” Tongue said.