Is fund jumping the future

By Annie Gray

DLA Phillips Fox partner Tracey Cross. Photo / Supplied
DLA Phillips Fox partner Tracey Cross. Photo / Supplied

Will KiwiSaver members start changing between schemes or funds to follow the best performers once the new disclosure regime is in place?

DLA Phillips Fox partner Tracey Cross says investors jumping between funds is a danger, but what is important is ensuring that KiwiSaver members are financially literate and know that is not a good thing to merely chase the returns.

Cross notes when the new disclosure statements come out investors need to appreciate what they are comparing and need to get advice before making any decisions. "You need to look at the available options and the investment characteristics of each investor and ask 'is it the right fund for me'."

Simpson Grierson's corporate commercial partner, Stephen Ward, is a fan of the new regulations. Ward says that, historically, comparing two products against each other took "an amazing amount of work" but with the data file, in a proscribed format, doing the same comparisons is much easier.

Ward thinks fund-jumping will occur. But that will put pressure on those that have higher fees and lower returns to look a themselves "and say we are losing market position".

He notes too there is a lot of detail in the disclosures. For instance not just a disclosure on fees, but break-downs of the different fees charged.

"Overall the pressure will be very much on KiwiSaver providers to rank each other internally. The biggest users of the data file could well be trustees and competitors."

As to the challenges ahead for KiwiSaver, Cross says a lot of resources have now been put into protecting KiwiSaver's reputation with investors and ensuring that they have all the information they need, all as part of a swathe of recent capital market reforms.

"Increasing transparency and information, that's the real focus from all of us. Periodic disclosure is just part of that and increasingly this will result in a better investing world for investors."

- NZ Herald

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