KiwiWealth takes aim at Simplicity

KiwiWealth says some fund managers are shirking their duty when responsible investing gets ‘too hard’.

Wednesday, August 7th 2019, 8:00AM 5 Comments

It says KiwiSaver members are unwittingly backing shady companies because some New Zealand investment funds are outsourcing management responsibilities to overseas fund managers.

Joe Bishop, Kiwi Wealth’s General Manager Customer, Product and Innovation, said fund managers that relied on low-cost passive index funds such as Vanguard were leaving investors exposed to companies with highly questionable, and even unlawful, records on environment, human rights and governance issues.

Simplicity chief executive Sam Stubbs said, last week, that "too hard" to make exclusions on human rights grounds.

He said New Zealand managers only have so much control over international investments. Simplicity invests in a Vanguard international equity fund which owns shares in Barrick Gold which has a chequered history.

However, Bishop says “KiwiSaver funds are being exposed to Barrick Gold via Vanguard’s ironically-named Ethically Conscious International Shares Index (see story here). Barrick is a company that for years has been implicated in the abuse, rape and murder of workers and locals at a mine they operate in Tanzania. Similar allegations have been made about their operations in Papua New Guinea.

“The only tool the Vanguard funds have available to them is to exclude entire sectors from investment portfolios. But what about individual companies that operate in sectors that aren’t excluded, but which have highly questionable, even unlawful, records?

“We dumped Barrick years ago, as did the New Zealand Super Fund. That Barrick is a dodgy operator comes as no surprise to us, nor should it to any other responsible New Zealand fund manager. In our view, those who continue to invest in Barrick are either lazy, don’t care or both.

“That’s the benefit of managing members’ investments from here in New Zealand, based on what Kiwis want, rather than outsourcing decision-making. We make the decisions on what we invest in and we can adjust our investments to suit the views of New Zealanders.

“The tools are there. All it takes is a bit of extra work to research and to implement – precisely the skills investors want from their fund manager.

“Our view is that responsible investing is sadly becoming a bit of a box-ticking exercise or a marketing play. Statements that profess responsible investment values may get a cheap headline, but the talk hasn’t necessarily been followed up with action – at the expense of doing good for both investors and the planet.

“For fund managers to absolve themselves of their responsible investing duties because it’s ‘too hard’ is, we think, frankly shameful. Kiwis deserve more.”

Tags: kiwi wealth KiwiSaver Rob Everett Sam Stubbs Simplicity

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Comments from our readers

On 7 August 2019 at 3:40 pm John Milner said:

Sadly the last sentence is probably even more appropriate for those managers like Simplicity that use Responsible Investing as a platform to promote themselves. If "too hard" means they don't have the infrastructure to manage this, perhaps they need to review their pricing which again they use as a platform for promotion. You can't have it both ways Mr Stubbs.

On 7 August 2019 at 6:30 pm AndyB said:

Yea.. Sorry Stubbsy. Almost three years ago you opened the door to the munitions investing saga and told us other managers where mismanaging their clients money whilst at the same time overcharging on fees.

Now you are saying what?... "the fees aren't enough to be able to do our job properly"... "It's not practical to review every investment"

You have changed your tune a bit in three years.... very easy to be principled when you don't have to do the work... but now you have an inkling of the work (and resources) required, its all too hard.

On 8 August 2019 at 8:49 am Brent Sheather said:

The fact that individuals perception of responsible investing can change so dramatically depending upon the institution for whom they work says everything that there needs to be said about the double standards and duplicity of the whole responsible investing scene.

RI, in the retail space anyway is more often than not an excuse for high fees and underperformance. Far better to invest widely, save on fees, collect the sin premium and donate the savings to a genuine charity i.e. not a fund manager promoting responsible investing.

On 8 August 2019 at 7:20 pm Michael Gray said:

The academic research is very supportive of the benefits of ESG, particularly at the company level. No reason why retail investors cannot access these benefits at a fair fee level.
It is a matter of implementation and approach taken. This is an ongoing challenge, not the least because of the variance in company data, index providers will likely continue to find this as a struggle, active managers can integrate into their investment processes.
Changing attitudes toward RI probably reflects rushing into it without a solid philosophical position and/or an unawareness of the commitment required.

On 9 August 2019 at 8:28 am Pragmatic said:

I share Brent Sheather’s cynicism around RI. In the rush to defend various ESG/RI requests, the majority of industry players have come out with elaborate marketing projects that contain limited substance. These tend to be over-priced, and ill conceived. While Michael Gray’s evidence is correct, this tends to apply to those entities who apply their ESG/RI values with rigour.

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