NZ Funds launches “intelligent” KiwiSaver scheme
NZ Funds Management launched its KiwiSaver scheme today which looks to actively manage retirement savings relative to age and changing investment horizons.
Friday, October 22nd 2010, 3:01PM 
2 Comments
by Jenha White
NZ Funds' principal David van Schaardenburg says research shows that individuals going into a default fund are likely to accumulate less in wealth at retirement than they would likely achieve by utilising a dynamic, more growth oriented asset allocation.
"That is a very meaningful opportunity cost - there is little logic to a 30 year old having the same asset allocation as a 60 year old. But the majority of investors in default KiwiSaver schemes have done just that," he says.
NZ Funds says the intelligence of its scheme is achieved through applying two investing processes: Lifecycle Portfolio Management and ARMOR.
Under Lifecycle Portfolio Management NZFunds uses a proprietary asset allocation approach to automatically review and when appropriate, adjust each member's portfolio mix on an annual basis.
A client's savings will be invested in the Growth Strategy when they are younger and then each year from age 46, savings are progressively rebalanced between Growth and the Inflation strategies. When a client turns 60, a portion of their savings will be progressively allocated to the Income Strategy, however the ages are indicative and may be subject to change.
NZFunds chief executive Richard James says a KPMG report supports this strategy saying New Zealand should follow the lead of the Australian Government's Cooper Review and have a savings system that gives the best results for both active and passive savers.
"Introducing a "life-cycle" approach for KiwiSaver default funds - where the asset mix adjusts to match a member's age - would be a good step in that direction."
Each portfolio also benefits from NZ Funds' proprietary ARMOR investment management process. ARMOR stands for Absolute Return through the Mitigation of Risk. It is a systematic risk management framework developed over a number of years by NZ Funds which aims to protect each member's retirement capital from large market declines.
Van Schaardenburg says behavioural finance research shows investors are more concerned about losing money than they are stimulated by gain.
"The dual protections of our dynamic asset allocation and our proprietary ARMOR processes are designed to enable members in the NZ Funds KiwiSaver Scheme to save and invest with confidence, irrespective of their age or the prevailing market environment".
He says to foster additional understanding and confidence NZ Funds will publish a full breakdown of virtually every security owned in each portfolio, every month to enable members of the NZ Funds KiwiSaver Scheme to understand exactly what their retirement portfolio is investing in.
Van Schaardenburg also acknowledges that the opening of the NZFunds KiwiSaver scheme contrasts to a recent trend of KiwiSaver scheme closures, however he believes now is an opportune time to enter the market.
"With KiwiSaver now having greater scale and individual balances beginning to reach more meaningful amounts, we believe a KiwiSaver scheme adopting a disciplined asset allocation and risk management style will be highly appealing to the more discerning individual."
Jenha is a TPL staff reporter. jenha@tarawera.co.nz
| « FNZC sells funds to Fisher | KiwiSaver mismatch a 'huge challenge' for advisers » |
Special Offers
Comments from our readers
Of course they can. The question has never been "Can anyone time the market successfully?". Rather it has always been "Does the average market-timer beat a buy-and-hold strategy over the long term?"
Stop fighting the straw-man of the first question and consider the second. And dont forget to consider the costs (all costs, not just monetary).
"Even good old "gut feel" has successfully been used by advisers and investors alike..! "
Yes, there are some people who have successfully timed the market. Yes, those people made good money. But what about the people that tried to time the market and failed? How much did they lose? How many of them are there?
People should consider the expected value of market-timing, not just whether some positive outcomes are possible.
"Diversification proved to be a negative to investors (imagine having a "diversified" portfolio of houses???"
And THIS just reveals an embarrassing misunderstanding of diversification. A diversified portfolio of asset type X, IS diversified but only in that asset type. It does not represent the cross asset type diversification that is recommended by all good advisers.
Diversification is about what COULD happen, not what DID happen. You cannot judge diversification by a single observed outcome from all the billions of unobserved outcomes that were possible.
Diversification is not a magical strategy that will ensure you never lose money, or that you will get the best returns every time. In fact, diversification means that you will NEVER earn the best returns, because you will never have all your portfolio in the single best asset type. However, diversification does mean that you will never have all your portfolio in the worst asset type either. That is what it is there for. Risk reduction, not huge potential gains. LDO.
Commenting is closed
|
|
Printable version |
|
Email to a friend |
* A "default" fund is naturally assumed to be of potential risk to particular sectors (age groups), however, only if the 'default' fund asset mix is of such a structure as to be the 'wrong' mix for the particular time of the relevant market.
Much of this debate has previously focussed around the merits (or so-called 'farce' of "market timing."
I personally believe the markets can be 'timed.'
Even good old "gut feel" has successfully been used by advisers and investors alike..!
Surely, most (especially advisers rather than unsophisticated investors)would now be able to "re-cap" and realise that they knew the housing market was due to collapse, and that sharemarkets were to become a bad investment, and that commercial property was to have dived as it has?
Why then were portfolios not adjusted accordingly under the control of "MONITORING" services which were charged to relevant clients every year?
Diversification proved to be a negative to investors (imagine having a "diversified" portfolio of houses???
What was noted was the fact that the advisers just replied to their investors (who have now been proven to have had better vision than their advisers)with the common statement...."just hang in there, because it is not us (advisers) who are making your money lose...it is the markets....and they always rebound?
Still waiting aren't they?
* Secondly, I still wonder as to how people such as NZ Funds (and advisers) (and their investors) view what "inflation" really is..!
It does not exist as it is portrayed..!
My point here is that if investment advisers (managers) are approaching portfolio construction from a perspective of "inflation" as it is said to exist, then is the approach as correct as if they considered NOT inflation, but devaluation of currency?
While it may seem similar (on the surface) the result can be severely affected by which version you live by...!
eg: if say NZ Funds had introduced a "House-Investment fund" before the relevant "dive" to reap the rewards of "inflation",would they have left it 'as-is?'
After all...is there not a 3%"inflation" rate to take 'advantage" of?
The answer has been suggested as yes...much the same as their 'sister' company (Money Managers)did with DNZ Property funds? nothing.?
* Lastly, how interesting that the "secret" portfolios are now suggested to become 'public'...!
Up till now, fund managers have kept secret to enable them to have a claimed 'edge' over others.
Maybe now we may see Kiwisaver portfolios all the same mix, and investors just make their choice over 'fees' or maybe good-looking staff???
Let time prove if they get it more right this time?
Oh...'inflation' or 'currency devaluation'...which version.?
Michael Donovan