Fund managers worry comparison tool unfair

Fund managers have taken issue with Sorted’s new tool for investors, which allows quick comparisons of a range of investments, including managed funds.

Wednesday, February 27th 2019, 6:00AM 1 Comment

The Smart Investor tool is based on information on the Disclose register.

It bases its managed fund fee comparisons on a $10,000 invested balance.

Some fund managers said that distorted the fees when quoted as a percentage of that balance, because fixed management fees are a larger proportion of a lower balance than they would be of a higher one.

The most expensive KiwiSaver fund was listed as NZ Funds' Growth Strategy Fund with 2.76%.

QuayStreet's Altum Fund was second at 2.6%.

QuayStreet savings and distribution manager Helen Skinner said the tool was useful but there were issues.

"The tool takes any flat annual fee and converts it into a percentage based on a $10,000 investment - a $30 annual KiwiSaver fee [as QuayStreet charges] converts to 0.35% being added to the fee quoted.

"The average KiwiSaver balance sits at around $17,000 so using this figure the QuayStreet KiwiSaver fee would be 0.17%, making the total fee for Altum as at Marhc 31, 2018, 2.35%. We'd be keen to see the tool increase the base amount used for this calculation."

At NZ Funds. Geoff Motion said using $10,000 was not an accurate reflection when its average balance was $28,000.

"Other successful managers, like Milford, are similarly penalised by this calculation.

Tom Hartmann, managing editor at Sorted, said he could understand the concerns.

But he said a sum had to be selected.

Using $10,000 was one way of getting the total expense ratio in a way that could be compared, he said.

"If we had our way, someone would be able to type in their own particular balance and have the tool recalibrate the fee on their balance."

He said $10,000 was not far off the average balance across the scheme.

In this first iteration of the tool, Booster's Geared Growth topped the table with 3.45% fees but once the cost of borrowing was removed, it dropped to 2.07%.

Tags: Commission for Financial Capability Sorted

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Comments from our readers

On 27 February 2019 at 11:51 am greg bunkall said:

The tool would have easily been improved by allowing a user to put in their balance. A simple calculation could have weighted in the $ based fee and worked out the asset based fee and come up with a $ based figure taking into account both types of fees - and analysed closer the situation for that investor. Fixed $ investment disclosures rarely allow for meaningful conclusions for anyone, and should be avoided for anything other than crude analysis.

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