David Chaplin 's Opinion

A personal finance columnist for the NZ Herald

Inside Money: BNZ confirms Russell, goes organic

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Photo / File
Photo / File

As revealed here last March BNZ has hired global asset manager and consultancy firm, Russell, to run the money (once it arrives) for its brand new KiwiSaver scheme.

The news, finally confirmed in the BNZ KiwiSaver prospectus last week, was therefore not much of a surprise.

But I read the prospectus anyway, hoping for further plot twists. There weren't many, if any.

BNZ has constructed a fairly standard, of its type, KiwiSaver product. The scheme offers members five different investment options ranging up the risk scale from cash to growth (with matching management fees of 0.30 per cent to 1.1 per cent plus a $2 per month member fee).

With the exception of cash (all of which will be invested in BNZ products) the KiwiSaver money will be directed into a proscribed selection of Russell funds, which in turn flow into a mix of underlying fund managers that make the ultimate investment decisions.

There's nothing particularly different in this approach as plenty of other providers take the multi-manager route. A BNZ executive quoted in another publication (whose name escapes me) did point out that the Russell relationship is unique in KiwiSaver, for an Australian-owned bank at least, because it doesn't own the underlying investment business as well.

This could remove some potential conflict-of-interest for BNZ, plus it's also easier (and cheaper) to fire a third-party fund manager if things don't work out rather than disestablishing an internal crew. (However, Russell, which already manages some KiwiSaver money via the Aon scheme, has to date performed pretty well in the league tables.)

And even though BNZ has delegated certain duties to Russell the bank, as you would expect, maintains strong controls over the manager. The 'Statement of investment policy and objectives' lays out the varies responsibilities of each party to an almost anal level of detail.

BNZ, for example, retains the right to penetration testing and ethical hacking to ensure Russell systems are up to scratch.

As reported elsewhere, too, BNZ will be counting on 'organic' KiwiSaver growth (ie mainly by 'engaging' with existing customers) rather than acquisition after bowing out of the battle for Tower.

It is understood ASB, a consortium of TSB and Fisher Funds (backed, allegedly, by private investor and Infratil board member, Duncan Saville) and a mysterious 'Australian boutique fund manager' are still chasing Tower's investment business.

David Chaplin

A personal finance columnist for the NZ Herald

David is a freelance journalist who has covered the financial services business on both sides of the Tasman for over 15 years. David has edited magazines and websites for the financial advice, investment and superannuation industries. Today, he contributes to various publications in Australia as well as his bi-weekly blog for the NZ Herald under the 'Inside Money' banner.

Read more by David Chaplin

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