Kiwi Investment Management (KIM) has emerged from its shell to engage more actively with the wider NZ wholesale market.
KIM, which houses the funds management arm of Kiwi Wealth, has already secured about $50 million in seven wholesale mandates since launching seriously into the arena over the last year or so, according to Peter Verhaart.
Verhaart, KIM head of wholesale and private investment, said the manager’s suite of seven portfolio investment entity (PIE) funds covering offshore equities, fixed income and cash is resonating with NZ investors looking for a home-grown take on global markets.
“Our investment philosophy that starts with a risk position is not new,” he said. “But we’re unique in implementing a global view all from the perspective of the NZ investor.”
Currently, KIM manages about $6 billion, mostly on behalf of sister entity Kiwi Wealth’s KiwiSaver scheme. Last week Kiwi Wealth also rebooted its range of three managed funds that feed into the KIM growth and fixed income funds. In turn, the growth and fixed income funds invest into a mix of the five KIM PIEs (or eight with both hedged and unhedged versions of its three global equities strategies).
Famously, Kiwi Wealth (and, by extension, KIM) has limited exposure to local shares, which is highlighted in the group’s KiwiSaver asset allocation. For example, the Kiwi Wealth KiwiSaver growth fund has over 74 per cent in international equities compared to about 56 per cent for AMP Capital aggressive fund, which has the second-highest global shares allocation in the risk profile, according to the Melville Jessup Weaver quarterly investment survey.
“The NZ stock market is just .06 per cent of the index,” Verhaart said. “We think that because people have most of their income and assets in NZ, they need to look offshore for diversification in financial investments.”
KIM has three international equities PIEs on offer as stand-alone wholesale products: the Global Thematic fund managed by Nathan Field in Auckland; the Global Quant fund, headed by the Wellington-based Steffan Berridge; and, the Core Global fund, an enhanced index strategy outsourced to JP Morgan.
The Thematic fund is the largest of the trio with about $1.4 billion under management followed by the Quant ($1.1 billion) and Core ($800 million).
Verhaart said all the global equity funds are benchmarked against the MSCI All Countries World Index but follow very different strategies.
For example, the Quant fund – launched in April last year and the newest in the KIM stable – follows in-house built computer-driven factor strategies that at the moment hold about 250 stocks.
Meanwhile, the Thematic fund holds closer to 100 shares selected under a “very active” stock-picking process designed to take advantage of emerging themes such as online retail, payments technology, modern entertainment consumption (such as Netflix) and ‘pet humuanisation’. The latter trend has set companies such as Zoetis and Purina (a division of Nestlé) on a growth path.
Since inception five years ago, the Thematic fund has outperformed the benchmark by an annualised 5 per cent, Verhaart said, while the Quant fund has been sub-index – like the majority of factor strategies of late – but is ahead of most peers
The Core strategy, launched in 2017 to replace the Vanguard in the Kiwi Wealth portfolio following the public furore around controversial weapons held in KiwiSaver index funds, has performed as per label, he said, adding slightly above benchmark returns over time.
As well as outsourcing the Core enhanced index fund management job to JP Morgan, KIM also invests in alternative assets via a handful of external managers such as MAN AHL, iSAM, GMO and Two Trees.
But the KIM stock-picking team has shown that NZ-based managers can successfully manage offshore equities from afar, Verhaart said.
He said the easy availability of information and modern technology has put NZ managers on an equal footing to anyone in the world.
“The Australians [Magellan and Platinum, for example] have shown you can manage global equities from anywhere – why can’t we do the same in NZ?”
KIM applies the house environmental, social and governance policies to all funds including the fixed income fund, which also has a wide investment brief. The $2.2 billion KIM fixed income fund, managed by Diana Gordon, invests in local securities (including ‘supranationals’ – offshore company bonds issued in NZ) but also has an exposure to global markets through PIMCO, which can be dialled up or down.
The range of KIM investment funds should start appearing in wholesale fund surveys, including MJW and Aon, for the September quarter, Verhaart said.
He said the wholesale suite could eventually be offered to the retail market through platforms such as the Kiwi Wealth-owned Hatch, InvestNow or other vehicles.
Verhaart joined KIM, then known as Gareth Morgan Investments, in 2016 as head of implemented investment following a five-year stint at AMP Capital NZ.
KIM is part of the government-owned group that features NZ Post, the NZ Superannuation Fund and the Accident Compensation Commission fund as shareholders.
