Digital-only index player, Kernel Funds, is on track to break the billion-dollar barrier this year following a surge of interest in a soon-to-launch climate change-focused offshore equities strategy, according to co-founder, Dean Anderson.
Anderson said Kernel had secured almost $300 million from various wholesale sources ahead of the planned April 3 opening of the Global ESG Fund – an international shares fund aligned with the Paris Agreement on climate.
With the bulk of the ESG fund commitments booked to enter on day one of the launch, Kernel will grow assets under management by roughly 60 per cent in one fell swoop.
“We’ve got almost $500 million under management now [across all Kernel funds],” Anderson said, “and we should have $1 billion pretty soon.”
The Auckland-based passive manager also rolled-out a KiwiSaver scheme in 2021 that reported about $25 million under management (invested into underlying Kernel funds) as at the end of last year.
While the new Kernel climate international shares vehicle will immediately surpass the group’s current most-popular product (the global listed infrastructure fund) at launch, he said the business is poised for growth in other strategies too.
“We now have a three-year investment record that is often required by wholesale investors and we’ve showed that we can closely track indices,” Anderson said.
All of the 17 Kernel products (including a few recently launched diversified funds) are portfolio investment entities, which he said provides tax efficiencies for NZ investors.
Kernel is about to update a tax paper first published in 2020 with new data on fixed income and the impact of hedging.
The Kernel global equities ESG fund (to be offered in hedged and unhedged versions) will track an underlying S&P Dow Jones Indices (S&P DJI) benchmark built around the Paris Agreement climate goals of limiting world temperature increases to 1.5°C.
Established in 2020, the S&P DJI Paris-aligned indices comply with tight “legally defined” conditions around carbon emissions and other targets, Anderson said.
“… in addition to lowering carbon emissions relative to their underlying benchmarks, the indices also seek to decarbonize on an absolute basis at a rate of 7% year-on-year,” Jaspreet Duhra, S&P DJI global head of sustainability indices, said in a 2021 article.
Last September, the NZ Superannuation Fund (NZS) moved about $25 billion of its global passive shares exposure to an off-the-shelf MSCI Paris-aligned index. Following the benchmark shift, the NZS international equities reference portfolio reduced from about 8,500 securities to just 1,100.
In line with most of the Kernel suite, the upcoming Global ESG fund features an annual management fee of 0.25 per cent.
Meanwhile, the mainly passive investment manager and KiwiSaver provider, Simplicity, lowered its diversified fund fees by 0.01 per cent last week to land at 0.3 per cent.