Grosvenor dumps Vanguard over cluster bombs

Grosvenor Financial Services has moved quickly to the furore around index funds investing in cluster bomb manufacturers by replacing one of its index managers, although the move comes at a cost.

Tuesday, August 23rd 2016, 6:00AM

David Beattie

The Grosvenor Default Saver Fund is switching its investments in the Vanguard International Share Index Funds into the UBS MSCI World SRI Index ETF that Grosvenor already uses in its Socially Responsible Investment funds.

This will remove from the Default Saver Fund the small, indirect and unintended exposure to cluster bomb manufacturers that exist in the Vanguard Index Fund. Grosvernor chief investment officer David Beattie says the firm has around $200 million invested in Vanguard fund, but overall New Zealand managers have around $2 billion in the fund across KiwiSaver and non-KiwiSaver funds.

Beattie says the firm will just "suck it up" on costs. Currently it charges a management fee of 0.38% on the fund and it will now pay 0.38% to use the MSCI fund.

"We will be a philothropic charity on that front."

The Vanguard International Share Index fund holds around 1,500 individual company investments in its fund in order to track the MSCI Index. It is held by a number of KiwiSaver providers and the MSCI index is widely tracked by NZ and global investment managers.

"Grosvenor prides itself in providing transparency to its investors and responding quickly to issues of concern. Whilst we have been monitoring this particular issue as part of our ongoing assessment of the investment vehicles we use, we have decided this is the appropriate thing to do right now for our Default Saver Fund members,” Beattie said.

“The UBS SRI Index fund is significantly more expensive than the Vanguard Index funds, but we will absorb that cost and not pass it on to our default KiwiSaver investors.”

Grosvenor has also actively re-engaged with Vanguard in Australia to identify alternative cost-effective index-tracking funds to potentially switch into for all other Grosvenor KiwiSaver funds. “We do need to take a little time with this engagement however, as the universe of appropriate and reasonably priced index-tracking funds to choose from is quite small.”

Grosvenor’s Socially Responsible Investment funds

Since its beginnings in 1998, Grosvenor has offered a range of “ethical” investment portfolio options which exclude direct investments in companies where a significant component of their business derives revenue or earnings from tobacco, alcohol, gambling or armaments.

Its Socially Responsible Investment funds are specifically managed so they do not invest in companies identified as being involved in the manufacture of cluster bombs or land mines, or any other un-ethical investment categories.

Grosvenor’s SRI funds have been certified by the Responsible Investment Association Australasia according to the strict operational and disclosure practices required under the Responsible Investment Certification Program.

Grosvenor is one of only a few KiwiSaver providers to offer New Zealand managed socially responsible investment funds.

Tags: Grosvenor Financial Services responsible investing Responsible lending SRI