Liquid gold in KiwiSavers
Milk isn’t just something we have in the fridge. It’s in our KiwiSaver funds as well.
KiwiSaver funds have investments in dairy companies all over the world. In some KiwiSaver growth funds, NZX-listed dairy company A2 has grown to be the largest, or second largest, investment.
KiwiSaver funds are not bank deposit accounts. They invest in hundreds, often thousands, of companies listed on stock exchanges around the world.
And it’s not only company shares they own, in the search for dividends and capital growth.
They also buy company bonds, seeking interest.
The spectacular rise of A2 Milk, which is listed on the NZX, has seen it become the most important share in some KiwiSaver growth funds.
All KiwiSaver funds publish lists of all the shares and bonds they own. This is done through the Disclose Register.
At the end of March, the latest holdings list for the ASB Growth fund showed 2.39 per cent of the money it contained was invested in A2 Milk, the largest single share investment the fund had.
Westpac’s KiwiSaver growth fund had 2.71 per cent of its money in A2 Milk.
In balanced funds, favoured by many KiwiSavers, the holdings in A2 can make up about 1 per cent of the portfolio of bonds and shares.
A2 has been a spectacular success for investors. It now has a market capitalisation of $7.8 billion thanks to a share price of just over $10.80. Just two years ago, its shares were worth $2.25.
Its total revenue of $550 million in the year to the end of June 2017, and net profit of $91m, were dwarfed, however, by cooperative dairy giant Fonterra, which had revenue of more than $19b during the same period.
But despite Fonterra being a co-operative, whose shares are owned by farmers, some KiwiSaver funds have a chunk of Fonterra bonds.
The AMP KiwiSaver balanced fund, for example, had various bonds adding up to 0.41 per cent of the money it had invested.
Synlait, which is also listed on the NZX, was also there, but it was a tiny 0.0367 per cent of the fund.
It’s not only our home dairy companies that KiwiSavers have a stake in.
They’re also in global dairy companies listed on the US, Hong Kong, and European stock markets. KiwiSavers stand to benefit from the profits of Fonterra’s global rivals.
The AMP balanced fund, for example, had small investments in two Chinese dairy companies, the China Mengniu Dairy Company and China Huishan Dairy Holdings.
The first is a tiny blip on the radar scope of the global dairy industry, but it is profitable. The second ran into serious trouble last year, but KiwiSaver funds are spread widely. One poor investment does not have a massive impact.
Other overseas dairy players KiwiSavers routinely have exposure to include the giant Kraft Heinz, Nestle, Unilever (including Unilever Hindustan) and Danone.
Smaller dairy players sometimes found in KiwiSaver funds include Canada’s Saputo and Japan’s Meiji.
While dairy exposure is dwarfed by KiwiSaver investments in other industries like banking, it’s playing a part in helping Kiwis build their wealth for retirement. – By Rob Stock
KiwiSaver funds have a chunk of Fonterra bonds.