FMA upset at KiwiSaver report leak

The Financial Markets Authority is upset at a breach of confidentiality of its report on active and passive management by KiwiSaver providers – and says it may change the way it deals with the sector in future.

Tuesday, July 28th 2020, 6:38AM

Sam Stubbs

It is understood to be “scathing” of active management and concludes that KiwiSaver fees are high by international standards. But it reportedly has not found evidence of so-called active managers delivering more than passive-style investors.

The report is expected to be published next month but summaries and copies of the document are understood to be circulating within the industry.

FMA spokesman Andrew Park said the regulator had written to chief executives of the KiwiSaver providers to express its disappointment at the report, or large parts of it, being shared with the media and reminding them of its expectations for the way it engaged on publishing important reviews.

“The fact that the confidential nature of our interaction was breached will have implications for the way we engage with the sector in future.”

Simplicity founder Sam Stubbs said the report was unlikely to make a significant difference in the sector.

He said, “sunlight is always a good idea” but the issues were ones that were already well known and understood by anyone willing to crunch the numbers. “I don’t think it’s going to be earth-shattering.”

It could prompt the trustees and governance structures of corporate superannuation plans and charitable trusts to ask what they were getting for the fees they paid, he said.

The report was commissioned from MyFiduciary and work is understood to have begun on it late last year.

The topic has been of interest to the FMA in recent months – it has indicated it wants to get a clearer picture of the value for money that investors get from their KiwiSaver funds, alongside the fees paid.

At a debate earlier this year, fund managers discussed the moot “passive management gives investors the best outcome”.

Stubbs said passive management was best because it put more money in investors’ pockets. “It’s not that passive investing gives managers the best outcomes, it gives investors the best outcomes. It’s about making money for them. Passive management makes more money.”

But Rebecca Thomas, founder of Mint Asset Management, said managers were fulfilling their fiduciary duties by actively managing. Passive investment was having a detrimental impact on markets, she said, and managers had an obligation to put clients’ interests first. “You can never beat the market with a passive strategy. You can never protect client capital in a falling market, you cannot manage returns relative to risk.”

By audience vote, MC David Boyle declared the active management team the winner.

Tags: Active v Passive FMA KiwiSaver