Are you buying your KiwiSaver fund manager a Porsche? Rob Stock looks at the fees transparency move that might shock some contributors.
From this week, all KiwiSaver account statements must for the first time show the fees paid by savers to their fund managers in dollars and cents.
It’s a move predicted to unsettle many savers, who up until now have seen fees presented only as confusing percentages of the amount they have saved.
Many in the KiwiSaver industry see this as a watershed moment that could prompt a lot of savers to ask whether they are getting value for money.
It could also drive greater interest in the debate that rages over high-fee ‘‘active’’ fund managers, and low-fee ‘‘passive’’ managers.
The active KiwiSaver schemes such as Summer, Milford, Fisher Funds, Booster and Generate charge relatively high fees, and aim to earn them by using fund manager skill to beat the market.
Their fund managers research companies, and markets, and try to earn high returns by picking winners, and avoiding losers.
Figures from fund researcher Morningstar show that an activelymanaged balanced fund may cost savers as much as $36 in administration fees, and 1.2 per cent of their fund value each year.
On the other side are the passive fund managers such as ASB and Simplicity.
They will not beat the market because passive investors do not seek to beat markets, but merely to mirror them, and will underperform the markets they invest in by the amount they charge in fees.
Their argument, based on overseas research, is that active managers do not, over the long term, tend to outperform markets, so the best course for investors is to keep costs low, and go passive.
Morningstar figures show the Simplicity Balanced Fund costs $30 in administration fees and 0.31 per cent in management fees.
Both the active and passive managers argue that they are the best, highestreturn long-term bet for KiwiSavers.
Martin Hawes from Summer said active management made sense for KiwiSaver schemes where a large chunk of savers’ money was invested in New