Westpac KiwiSaver has confirmed today that it will exit any investments, however indirect, to companies that are involved in the manufacture of cluster bombs, landmines or nuclear explosive devices.

The move follows a Herald investigation, Dirty Secrets of KiwiSaver, which 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.

Westpac says the process, which was a result of customer feedback, is expected to involve exiting from the existing funds, and identification or creation of funds which don't have exposure to those entities but which otherwise achieve the closest possible match to the existing fund.

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"The process is under way and will be completed as soon as is practicable," Westpac said in a statement.

The statement made the point that the investments were indirect, and into funds which run a globally diversified investment strategy.

"Any exposure by Westpac KiwiSaver to companies that are involved in the manufacture of cluster bombs, landmines or nuclear explosive devices is not direct."

The Westpac KiwiSaver Default fund has an exposure to a passive fund managed by Vanguard which matches the global stock market index.

Exposure to any stock only arises to the extent that any of those companies constitute part of the index.

Passive funds such as these have been proven to generate returns for investors at a lower cost.

Part of the cost saving is that those monitoring the fund need only track the overall index, rather than analysing and selecting investments in individual companies.