KiwiSaver providers don’t have any legal obligation to tell their members how much they have lost in the recent US bank collapses, despite some losing millions of dollars.
Silicon Valley Bank and Signature Bank were shut down by state regulators last week after a run on their deposits.
While the US Government moved quickly to ensure deposits were covered through inclusion in a bank-funded deposit scheme, shareholders have been left with assets worth nothing.
Many KiwiSaver funds were invested in the banks, especially Silicon Valley Bank (SVB), which was listed on the S&P 500.
The Herald asked the five largest KiwiSaver providers how much they had lost in the two banks but only some were prepared to say.
Last week Newsroom reported that Fisher Funds had lost up to $80 million in Signature Bank.
But asked about the size of its loss, Fisher Funds chief executive Bruce McLachlan said Signature Bank was in its select international portfolio and its NZX-listed investment company Marlin Global had a 3.3 per cent weighting at the last NAV (net asset value) advised to market.
“We do not give dollar exposures across all of our portfolios as the number itself is irrelevant.
“What we did advise and what is relevant is that across the KiwiSaver portfolios that have this exposure, it ranges between c. 0.2 per cent and 0.6 per cent of the fund. That is, the exposure is a very small part of the diversified portfolios.”
McLachlan said it did not have any exposure to Silicon Valley Bank within these same portfolios.
He said the overall loss from the banking sector wobbles in the last week had been extensive across the industry but Fisher Funds was overall underweight in the sector.
Fisher Funds is the second-largest KiwiSaver manager as it also owns KiwiWealth now.
ANZ, which is the country’s largest KiwiSaver provider, said it had seen a loss in value of $31m from its investment in Silicon Valley Bank across both its KiwiSaver and non-KiwiSaver investment, which had total funds under management of $30.5 billion. It did not have any exposure to Signature Bank.
An ANZ spokeswoman said the collapse of the bank underlined the importance of diversification.
“Having many different investments helps to smooth out the returns for our investors. It meant the fall in the price of investments in this one company was able to be absorbed by other better-performing investments elsewhere in our funds.
“We regularly remind members of the importance of long-term investing, especially in periods of market volatility such as this.”
But she said the bank was not proposing to write to all of its members specifically on this issue.
A spokeswoman for ASB, the third-largest KiwiSaver provider, said as of February 28 its exposure to SVB was worth less than $2m and for Signature Bank it was less than $1m across total funds under management of over $20b.
“The impact on client funds is very small, less than 0.01 per cent.”
Milford Asset Management also declined to put a dollar figure on its loss.
“Milford had a small exposure to SVB through preference shares and ordinary shares. Because the holding was small and the funds are broadly diversified it did not have a material impact on performance i.e. the impact experienced from that position was consistent with usual daily variations for unit prices for these funds,” its spokesman said.
“We have not done a mass communication to investors because the impact on the funds was minimal. We will update our investors in our usual monthly updates.”
Nigel Jackson, chief executive of BTNZ, the manager of Westpac’s KiwiSaver scheme, said its funds had a very small exposure to Silicon Valley Bank with around $100,000 in shares and $2m in bonds.
“The shares are now valued at zero and we sold the bonds for around half their original value.”
Jackson said at a fund level, this would result in a performance impact ranging from 0.004 per cent in the Westpac KiwiSaver Growth Fund to 0.015 per cent in the Westpac KiwiSaver Defensive Conservative Fund.
“This means if a member in our Defensive Conservative Fund had a balance of $1,000, the performance impact from Silicon Valley Bank bonds and shares would equate to a loss of approximately 15c. The impact is even lower for members of other KiwiSaver funds.”
David Ireland, a partner at law firm Dentons Kensington Swan, said there wasn’t a legal obligation on KiwiSaver providers to tell members if they lost money on a single investment unless it was material in the context of the investment portfolio.
“It will come down to the extent of any position as a significant exposure.”
If it was in the top 10 investment holdings in a portfolio it could be considered to be a material exposure, he said.
But otherwise it was up to the provider to decide whether to communicate with members about what was happening in the market and give them comfort and confidence.
Oliver Mander, chief executive of the NZ Shareholders Association, said in the context of a long-term investor with a diversified portfolio, the impact of Signature Bank or SVB collapsing was likely to be minor.
“KiwiSaver members should be getting transparent information from their provider, in terms of portfolio allocation between different geographies, sectors and/or segments and the levels of fees they are paying.”
Mander said the disclosure rules on the NZX operated at a higher standard than legislation, which was why Marlin, the NZX-listed company which is managed by Fisher Funds, had to disclose its level of exposure to Signature Bank.
“That may form some justification to ‘level the playing field’ between listed and unlisted funds, to ensure we continue to maintain healthy capital markets in New Zealand.”
But he said that would need to be balanced with any increased costs of disclosure that would be passed to investors in the form of fees and the value of ongoing disclosure for what should be a long-term investment.
A spokesman for the Financial Markets Authority said managers were required to provide quarterly fund updates showing the size of the fund and its top 10 holdings and a full list of holdings every six months.
But they were not obliged under regulations to report on the loss for any individual asset or holding in a managed fund.
“Managers can and do provide non-regulatory communications and reports to their investors which may go into the performance of individual equities, holdings or asset classes.”
He said the FMA also encouraged managers to provide communications to their investors to help them understand how the investment works and how market fluctuations and volatility can impact their investment.
“If investors are concerned about market events then it is a good idea to seek financial advice, or seek support directly from your provider.”
OPINION: There are a number of factors to be aware of once a new scheme comes into force.