The debate over whether to chose a fund manager to actively select companies to invest in or a passive computer system has, until this year, seemed a moot point for those looking to invest in foreign companies.
Passive index tracking funds have had a distinct advantage because they
were only taxed on dividends and many foreign companies have only had low dividends, while actively managed funds, those in which a team of people research and analyse which companies to invest in, have been hit by taxes on their total returns.
But changes brought in by the Government earlier this year mean investments in companies outside of New Zealand and Australia will be taxed at the fair dividend rate resulting in both active and passively managed funds being treated the same tax-wise.
It's a move which has been keenly looked at by investment professionals and will be a key point at today's 12th annual fund management conference hosted by research firm FundSource.
AMP chief financial officer Leo Krippner, who will speak at the conference, said the changes were not a recommendation to go into actively managed international share funds for their own sake but had created a level playing field.
"You will pay higher fees for active management. You have to ask yourself whether the added value given by an active manager exceeds the extra fees payable."
Krippner said investors needed to be careful when deciding on an active fund manager as performance was not the only factor that should be taken into account.
"Performance is only a small part of the picture - investors need to concentrate on the philosophy of the manager and whether they have a reliable strategy that can be replicated."
And the changes don't necessarily mean that investors should ignore passively managed funds.
Yvonne Davie from NZX-owned index tracker fund manager Smartshares said there was still very much a place in the market for them.
"They are still a good way to get a broad market exposure in a very cost effective manner." Smartshares runs four index tracking funds which are listed on the stock exchange. They replicate the performance of certain indexes in New Zealand and Australia such as the NZX-50.
