Fund platform InvestNow has packaged up two ultra low-cost Vanguard exchange-traded funds (ETFs) with NZ tax wrappers amid rising demand for passive products.
Offered under the InvestNow Foundation Series brand, the two funds feed into respective US-listed Vanguard S&P 500 and Total World ETFs – both of which feature single digit basis-point annual management fees.
But while NZ investors in the new S&P 500 and Total World PIEs will pay the standard Vanguard ETF annual fees of 0.03 per cent and 0.07 per cent, respectively, the Foundation products come with a catch.
In a break from historical practice on the platform, InvestNow will charge a buy-and-sell transaction fee of 0.5 per cent on the Foundation Vanguard-backed PIEs.
Anthony Edmonds, InvestNow founder, said in a release that the “simple and well-disclosed transaction fees are a unique feature of the two new Foundation Series funds”.
“The transaction fees cover InvestNow operating costs and margins, which ensures the long-term sustainability of the funds while maintaining the super low annual management fees,” Edmonds said.
Kiwi investors can already access the two Vanguard funds, and a wide selection of other ETFs, direct via platforms such as Sharesies or Hatch or even in PIE form through the NZX-owned Smartshares but the Foundation products put a different twist on the pricing.
“Unlike other platforms, which may offer access to the same underlying ETFs, we don’t charge any other brokerage, foreign exchange, or account fees, which can often easily exceed our all-inclusive and transparent transaction fee model,” Edmonds said. “We have built these funds for long-term investors, not traders, reflecting the fact that long-term buy-and-hold investors will benefit the most over the years from these super-low annual management fees.”
He said the PIE packaging also provides the usual tax-efficiencies for NZ investors compared to direct holdings of offshore-domiciled funds.
“Because the new PIE funds invest in US-domiciled ETFs there is no non-resident withholding tax levied on the US holdings,” Edmonds said. “But NZ investors in offshore-based funds accessing exactly the same underlying shares stand to lose up to 0.3 per cent each year through this slippage.”
The new Foundation Series funds are unhedged with investors able to enter and exit at daily unit-prices: directly held listed ETFs are subject to constant pricing fluctuations during exchange opening hours.
InvestNow also markets the Smartshares versions of the Vanguard US S&P 500 and Total World funds that carry respective annual management fees of 0.34 per cent and 0.4 per cent.
Boutique manager, Kernel Wealth, also launched a PIE-ed up hedged S&P 500 fund (again through the Vanguard ETF) last month with a total annual management fee of 0.25 per cent as competition for the passive dollar rises.
The Bermuda-headquartered Apex Group bought InvestNow parent, Implemented Implemented Investment Solutions, in a deal cemented this month.