The Westpac KiwiSaver default fund will hold off transitioning its international shares portfolio to a Vanguard index strategy despite reaching the threshold for such a move.
According to Matthew Goldsack, BT Funds Management head of investment solutions, the Westpac KiwiSaver default option – the Defensive Fund – will remain invested in active global share managers for the time-being.
“I like our active [international shares] exposures at the moment,” Goldsack said. “We’re not in a big rush to switch the [Defensive Fund] portfolio to Vanguard but we will do it at some point.”
Currently, the roughly $3.3 billion Westpac scheme invests in global shares for all underlying KiwiSaver products via a BT Funds multi-manager fund that allocates to a suite of active managers including: AQR Capital Management; Lansdowne Partners; MFS; Ramius Alternative Solutions; Schroders; Tradewinds Global Investors, and; Trilogy Global Advisors.
Westpac launched the Defensive Fund last March following its appointment as a KiwiSaver default provider to house members allocated under the IRD auto-enrolment process.
In its offer documents, Westpac indicated it would switch the Defensive Fund international shares portfolio to an “index-based strategy… when its assets reach a certain threshold”.
Goldsack said while the approximately $20 million Defensive Fund had reached the required funds under management (FUM) to switch global equities to Vanguard, there was no obligation to do so immediately. The Defensive Fund has a benchmark allocation to international shares of 9 per cent.
KiwiSaver default funds are required by law to invest in growth assets between a range of 15-25 per cent of FUM. While the default investment rules result in generally low-cost, conservative products, government-mandated fee constraints have put pressure on providers to introduce further efficiencies – including switching to passive investment options.
Meanwhile, in its interim results released at the end of April, Westpac reported funds under management in its wealth division rose 23 per cent to $7.9 billion “driven by continued growth in KiwiSaver balances up 33%”.
“The number of Westpac New Zealand customers with a Wealth product increased 160bps to 28.0%,” a Westpac release says. “A highlight was the Westpac KiwiSaver Scheme5 being rated Platinum by Super Ratings across a range of services including investment performance, fee and charges, member servicing, administration and governance.