Concerns over controversial and possibly illegal investments in clusterbomb manufacturers have led two major KiwiSaver providers to announce they're either reviewing or planning to divest their controversial holdings.

A Herald investigation, Dirty Secrets of KiwiSaver, disclosed three KiwiSaver providers had signed up more than 400,000 New Zealanders to funds with stakes in clusterbomb manufacturers, raising questions over whether these investments were breaking the law.

Westpac, AMP and Aon were found to run more than a dozen funds between them that had invested a combined $2.3 million in companies identified as producing the banned weapons.

When questioned over clusterbomb holdings, Westpac yesterday said it was "not aware of any non-compliance with any legislation as a result of the funds' holdings'".


But today a bank spokesman elaborated, saying stock selection decisions were "done by the third party managers of the underlying funds", and acknowledged a change of tack.

"We acknowledge the concern and are reviewing accordingly," the spokesman said.

Therese Singleton, AMP's general manager of insurance and investments, said yesterday the fund had been "moving to remove exposure from cluster munitions in accordance with its legal obligations" over the past few years but it would now accelerate planned changes.

"By the end of October this year, that indirect exposure will further reduce to 0.006% and [AMP Capital] have undertaken to fully exit these investments by the end of 2016, therefore exceeding its legal obligation," she said.

Between them, AMP and Westpac manage $7.5 billion held in around 725,000 individual KiwiSaver accounts.

Aon, who according to annual KiwiSaver disclosures to the FMA had invested $192,136 of client funds into clusterbomb makers, failed to answer questions for the second day running.

In Wellington, government and the Police were still formulating their response to the apparent law-breaking practice with high-level meetings expected early next week.

A spokesperson for the Minister of Commerce Paul Goldsmith said references in Parliament on Wednesday where Goldsmith said he had been told there was "some indication" the investments broke the law referred to preliminary verbal advice only and a more formal briefing would soon take place.

"We've asked our officials at MBIE and we will probably get some additional advice from Crown Law," the spokesperson said.

Police national headquarters said the cluserbomb issue had been picked up on their radar but they were in a holding pattern.

"Police are aware that there was discussion in parliament yesterday regarding this matter. At this stage there are no investigations underway," a police spokesperson said.

Following an international campaign seeking to ban clusterbomb use, due to their persistence in conflict zones posing ongoing hazards to civilians, New Zealand signed up to an international treaty and passed legislation in 2009 banning investments in companies manufacturing the weapons.

- considered a guide to how the law should be interpreted - gives some relief to individual KiwiSaver investors but suggests fund providers and managers will find it difficult to claim ignorance as a defence.

National Party MP John Hayes said: "The wording of the offence is not directed at investors who unknowingly find themselves with an investment in a company involved in cluster munitions production, but there would, however, be a reasonable expectation that fund managers and investors would investigate the full portfolio of a company before investing."

Labour Party MP Phil Twyford said the ban on investing in cluster munitions - New Zealand is one of ten signatories to the international treaty criminalising such activity - had wide support when Bill was considered by the Foreign Affairs, Defence and Trade Committee.

"I am very glad to say that members of the committee, from all parties, accepted the argument that our legislation should explicitly prohibit investment in cluster munitions," Twyford said.