Vanguard has switched on a new screened global bond fund developed explicitly for the NZ market.
The NZ dollar hedged Vanguard Ethically Conscious Global Aggregate Bond Index Fund – issued last week under the trans-Tasman mutual recognition regime– was seeded with about $220 million from Wellington-based investment firm, Booster.
David Beattie, Booster principal, said the group transitioned all of its global bond holdings to the new Vanguard product last week.
Beattie, who recently swapped his chief investment officer hat for a strategic development role in Booster, said the global bond holdings now align with the firm’s environmental, social and governance (ESG) policies previously applied to equities.
He said the Booster bond money was large enough to swing the deal – first announced in June – for Vanguard to build the ESG fund for the NZ market. Simplicity, which mainly resells Vanguard funds to NZ investors, may also switch to the new international fixed income product.
According to the product disclosure document: “Vanguard has engaged Bloomberg Barclays to provide an index of securities for the Fund that excludes companies associated with [fossil] fuels, alcohol, tobacco, gambling, military weapons and civilian firearms, nuclear power and adult entertainment.”
Beattie said while investors have primarily focused on ESG in equity products the issues were just as important in the fixed income sphere.
Other international bond funds, including the PIMCO-managed Hunter Global Fixed Interest Fund and AMP Capital products, also have built-in ESG screens and processes.
The new Vanguard fund, which exists only in an NZ dollar-hedged version at present, features an annual management fee of 0.28 per cent and a buy/sell spread of 0.15 per cent.
“The amount of this [management] fee may be negotiated,” the Vanguard note says.
Beattie said the in-built Vanguard currency-hedging component also simplified the process for NZ investors.
“We’ve been trying to get Vanguard to build a NZ dollar-hedged global bond fund for ages,” he said. “Previously, we did the hedging ourselves but it’s much smoother [in the product].”
Despite stepping down from his CIO role last month, Beattie said he would be just as busy promoting the Booster brand to the wider public.
“We need to tell our good story to more people,” he said.
Booster has over $2 billion in funds under management including almost $1.4 billion in its KiwiSaver scheme.
Recently, the Booster KiwiSaver added a number of front-end features such as the ability for members to view their net wealth in a single location.
For example, the tools enable Booster members to automatically download bank balance information to see alongside their KiwiSaver assets.
“It’s great that we can use technology to counteract one of the bank KiwiSaver selling points of being able to show all balances in one place,” Beattie said.
Despite the technological upgrade to member engagement tools, he said Booster would shy away from offering a full robo-advice service for now.
“I don’t think a robo-advice service aimed only at KiwiSaver is adding much value,” Beattie said. “We will build robo-advice tools that take in a much wider range of assets.”
He said Booster would likely wait until the Financial Services Legislation Amendment Bill – which formally legalises robo-advice – rather than apply for the regulatory exemption put in place earlier this year.