A new savings venture founded by former Fisher Funds fixed income head, David McLeish, is set to launch in about a month after gaining a managed investment scheme (MIS) licence last week.
McLeish ended a 13-year stint at Fisher last August later establishing Wedge Management to target lazy money sitting in low-interest bank savings accounts and term deposits.
While the Wedge product is still under wraps, he said gaining the MIS licence from the Financial Markets Authority (FMA) marked a key milestone for the business.
“We’re excited to have the licence after a long and rigorous process with the FMA,” McLeish said. “Now we’re looking forward to getting our innovative savings product to market.”
Structured as a portfolio investment entity (PIE), Wedge will offer savers a set daily interest rate underpinned by a globally diversified portfolio of high-quality, AA-rated fixed income assets and cash.
He said Wedge would allocate to six developed world fixed income markets including NZ, Australia, Canada, western Europe, US and the UK.
“We’re looking to offer returns decently above the official cash rate,” McLeish said.
Wedge enters a market that now boasts a wider range of bank alternative cash-like PIEs including managed funds from the likes of Milford, Mercer-Macquarie or Nikko as well as products issued by Kernel and Sharesies. Banks themselves also play in the cash PIE game.
Booster took the concept further late in 2023 with the launch of its Savvy interest-bearing transaction service backed by a PIE.
However, McLeish said the Wedge edge hinges on its exposure to a globally diversified pool of high-quality, super-liquid fixed income assets and daily rate-setting process.
“As a fixed income investor I never liked having all my eggs in one country basket,” he said.
“… Investors will get the rate we announce every morning at 8am. If they don’t like it they can exit with no penalties and receive their funds the next day.”
The product is also performance fee-based with Wedge pocketing any margin between the promised investor rate and actual portfolio returns in a monthly accounting wash-up: the manager will also be liable for making up the difference should the fund not deliver on the advertised rates.
Investing into the larger reservoir of high-grade, short duration fixed income assets on tap in global developed markets compared to NZ-only cash funds also requires Wedge to apply currency and interest-rate hedging overlays.
But McLeish said the manager is not trying to outperform global fixed income benchmarks. Instead, Wedge is looking to chip away at the bank term deposit and savings account market with a rate-competitive product backed by low-risk assets.
“There’s something like $250 billion sitting in NZ bank savings accounts and term deposits,” he said. “That’s twice the size of the KiwiSaver market.
“I’m surprised that no-one has tried to disrupt the savings market in NZ – there’s lots of non-bank lenders but few alternative savings options like in other parts of the world. For example, US money market fund manage over US$7 trillion.”
Post-launch, Wedge plans to distribute via several channels including wholesale funds and advisory networks with a direct-to-retail app also almost ready to go.
McLeish works alongside his brother, Andrew, at Wedge along with former Fisher colleagues Lyle McNee and Angela Quirk.
Wellington-based Adminis will provide administration and custody services for the Wedge fund.