The emergence of a new not for profit Kiwi Saver provider , launched by ex-Tower and Westpac executive Sam Stubbs, will shake up the industry, New Zealand is known for its higher than average fee structure compared to other OECD countries, and this addition to the Kiwi Saver Stable of providers can only be good news for Kiwi Saver contributors. With an admin fee of only $30pa and 0.30% a year management fee, this provider scheme appears attractive. Known as Simplicity, and tracking market indices, and using the well-known Vanguard fund management, the provider also has an interesting board including Peter Neilson, Financial Services Council and Kirsty Campbell ex FMA. Research strongly favours tracking marketing indices over active management attempts, and it appears lower remuneration for those involved with this scheme, again can only advantage contributors.
Good to see a new entrant setting new standards for both administrative fees and Management Expense Ratios (MERs).
You say all the research points to indexed (passively managed) funds outperforming actively managed funds. This is constantly reiterated by the press and appears to be based on US research. It appears US companies are analysed to death and the chance of finding undervalued companies is very unlikely: hence it is nigh impossible to beat the index.
By contrast, New Zealand companies are not subject to quite this level of analysis and the prospect of picking up undervalued companies still exists for an actively managed fund manager with the fire power to investigate companies. There is also the issue of IPOs. Some IPOs are cynical operations looking to cash out the existing stockholders, but not all of them. Some IPOs are clearly winners and active managers can invest in them. Not so passive funds: if an entity is not on the index (already a public company) by definition an index fund cannot invest in it.
It would be good to see some sound New Zealand analysis of passive versus active funds.
Michael
Good discussion point by Michael. The work by Bait Frijns of the Auckland Centre for Financial Research supports the passive fund index proponents, and some analysis by Greg Peacock also. Australian research on their markets appears to strongly confirm the the US research,but he point are we comparing apples with apples is sound
My own view is that the NZ market contains similar elements and approaches to those above, and it is difficult to argue that uniqueness or a set of skills/circumstances NZ based, produces different results to elsewhere.
The more local discussion and research on this topic the better,and Michael’s caution adds depth and balance to the issue