Cleansing KiwiSaver of bombs and baccy

Giant international fund manager Vanguard is to launch an international share fund excluding tobacco companies and the makers of ‘‘controversial’’ weapons such as cluster bombs, landmines and nuclear missiles.

It will be available to KiwiSaver providers wanting to cleanse their schemes of tobacco and weaponsmakers.

Already Simplicity said it would use the Vanguard fund for its overseas share investments.

Vanguard, which offers lowcost ‘‘passive’’ funds, is launching the fund following an outcry over KiwiSaver funds holding shares in tobacco companies and bomb makers.

But Vanguard’s Robin Bowerman said the fund was already in development before recent media coverage, though the launch date slated for late November was brought forward as a result of the outcry.

There had been pressure to rid Australian superannuation funds of tobacco as a result of Dr Bronwyn King’s campaigning across the Tasman, Bowerman said.

Concerns about KiwiSaver investing in companies involved in making landmines, cluster bombs and nuclear devices were first aired by Fairfax Media in August last year.

New Zealand laws prohibit New Zealand citizens’ involvement with these types of weapons, but the Financial Markets Authority found the laws to be badly worded and effectively unenforceable when it came to KiwiSaver.

Vanguard said it consulted with KiwiSaver managers like Simplicity in the design of the fund as some KiwiSaver managers invested through Vanguard funds.

The new fund will track the MSCI World ex-Australia, exTobacco, ex-Controversial Weapons, ex-Nuclear Weapons Index.

‘‘We know from our global experience that there are a variety of humanitarian, ethical and social concerns many people want to factor into their decision-making process when it comes to selecting investment funds,’’ Bowerman said.

Ironically, most of the weapon makers excluded are United States companies involved in supplying the US military, which is a key defensive ally of New Zealand.

Sam Stubbs, founder of Simplicity, said: ‘‘This fund reflects what Kiwis care about, and it’s satisfying that all our discussions have paid off.

‘‘We worked closely with Vanguard on this, and asked for a fund that mimicked the NZ Super Fund.

‘‘Clearly it’s hard to rely on the Super Fund blacklist being public forever, and they needed an internationally recognised benchmark to sell it into Australia. So, they chose an MSCI index, which is very close to the NZ Super Fund criteria. It’s a great result.

‘‘The MSCI index Vanguard’s fund will track excludes the tobacco, nuclear weapons, and controversial weapons sectors currently on NZ Super’s blacklist,’’ Stubbs continued.

‘‘This response from one of the world’s largest investment managers shows that they have listened to the concerns of Kiwis.

‘‘It’s very satisfying to know this fund will be available to Australian investors too.

‘‘KiwiSaver investors have led the Aussies on this issue, and they should feel proud.’’

The move by Vanguard showed the growing importance of KiwiSaver to offshore fund managers, Stubbs said.

By 2030, there will be an estimated $200 billion invested in KiwiSaver schemes.