Inside Money: KiwiSaver investment styles soon to be on show

The information at the very least will keep the providers honest. Photo / Thinkstock

Fund research house Morningstar is working on an analysis of KiwiSaver funds that will show some surprising differences in how the managers invest, according to the firm's NZ head Chris Douglas.

Douglas told me the research - limited so far to the six default providers plus Westpac and Fisher Funds - has already unveiled a few quirks in KiwiSaver scheme investment styles.

For example, he says ASB - the single largest scheme - gains exposure to the property sector only via global listed vehicles while fellow default Tower couldn't be more opposite, plonking its property bets in the unlisted New Zealand market.

Once complete, Douglas says the report should help members better distinguish between KiwiSaver providers on the basis of underlying investment strategies, rather than marketing profiles.

While my money is still on marketing, investors might appreciate a clearer explanation of how the various KiwiSaver funds operate - even amongst the default schemes that are legally required to follow similar asset allocation models.

Douglas says distinctions such as that between the Tower and ASB property exposures can have important implications for expected performance of the funds.

But even if most KiwiSaver members probably won't be shifting providers based on sophisticated analysis of the underlying investments, the information is still useful - at the very least it keeps the providers honest.

It's the kind of information, too, that institutional investors - including KiwiSaver and other superannuation funds - use to make their investment calls.

For example, as I highlighted in a July blog Tower's decision to drastically alter its equities investment process was likely to have consequences.

In August, NZ Harbours, which runs a superannuation and KiwiSaver scheme - announced in a newsletter it was reviewing its approximately $25 million mandate with Tower.

NZ Harbours asked its investment consultant, Melville Jessup Weaver, to offer its opinion on the Tower turnaround.

"Initial reports from the consultant have been received and are under consideration," the NZ Harbours newsletter says. "The Trustees are likely to make changes and appoint a new management structure."

While individual KiwiSaver members don't generally receive reports from asset consultants to help them fire their investment managers, the imminent Morningstar research is a positive step in that direction.