How three sacked KiwiSaver default providers reacted

Three default providers have names starting with A, but they did not make the A list in the recently announced KiwiSaver shakeout.

Saturday, May 15th 2021, 2:58PM 5 Comments

ANZ spokesman Stefan Herrick said, In a statement, the bank is disappointed to be dropped as a default provider but is looking forward to continuing to make KiwiSaver a success and helping New Zealanders prepare for a more secure financial future.

"We believe active management will deliver better outcomes for investors over time.

"We have some of the best performing funds, our fees are near the median for default providers and we have strong environmental, social and corporate governance policies.

"One of the main reasons we were appointed at the beginning was because as New Zealand’s biggest financial services provider, trust and reach were critical to it being successful and we’re proud of playing a part in that.

"We’ll now be working through plans to transition out of being a default provider on 1 December," the statement says.

Last month the head of ANZ's KiwiSaver business, Craig Mulholland, announced he was leaving the business.

For many AMP's ousting was fully expected as the business had poor returns, a high number of members sitting in default funds and it recently announced its investment philosophy was changing from active management to passive.

AMP Wealth Management said, in a statement, it remains committed to KiwiSaver, despite not being reappointed as a default provider.

AMP Wealth Management chief executive Blair Vernon says while the company is disappointed not to be reappointed "...we deeply value our default KiwiSaver clients, our current default portfolio represents less than 7% of our total assets under management and around 3.5% of total revenue so this decision doesn’t have a major impact on our business or our commitment to KiwiSaver".

Vernon says the company continues to invest in the ongoing strengthening of its offer to members.

"This is underpinned by the current renovation of our AMP KiwiSaver Scheme through the appointment of BlackRock as our key investment manager.

"This transition will be complete in the coming weeks and we expect it to result in even greater value for money, stronger fund performance, and further support our clients’ sustainability aspirations," says Vernon.

ASB, who has a reasonably proactive corporate communications arm, has yet to make a statement.

Like ANZ its head of KiwiSaver, Jonathan Beale, recently left the business to join Tower.

Tags: AMP Wealth Management ANZ default funds KiwiSaver

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Comments from our readers

On 16 May 2021 at 11:38 am jeff m said:

The deselection of ANZ, ASB and Fisher were all a surprise as they added value. Agree with this editorial that AMP not being chosen seemed inevitable. At least the Wealthpoint team has escaped.

Wonder how many corporate super schemes stay with AMP. Shame as they had some great staff but as many have out AMP NZ would be a great business school case study of the impact of ileadership.

On 17 May 2021 at 8:44 am John Milner said:

Not quite sure what you mean by Value Jeff. As per the FMA’s recent guidance paper on KiwiSaver manager fees and value for money, I find it hard to see where the value from these three and the majority of the other managers are. Five year returns from all of them don’t illustrate value from either active or passive. Any alpha shown over that period is just sad - if on the odd occasion you find it.

On 19 May 2021 at 6:06 pm JPHale said:

What has been interesting to see in the FMA KiwiSaver tracker is the risk for return with banks has been a lot higher than the risk for return for the non-bank providers.

Some basic analysis would suggest the bank funds weighted to cash taking on higher risks to make up for lower returns from cash are a worse option than the alternatives.

I.e. Bank growth funds returning similar and sometimes less consistent returns than non-bank balanced funds.

But then most people aren't looking at this and doing the default thing they're told...

Good for ensuring banks have plenty of cash for lending aye ;)

On 21 May 2021 at 12:04 pm Pragmatic said:

@JohnMilner: using a throw away comment (“ Five year returns from all of them don’t illustrate value from either active or passive”) to attack a throw away comment (“ The deselection of ANZ, ASB and Fisher were all a surprise as they added value”) is unhelpful for this discussion.

Managers do add value, with a decent number delivering meaningful alpha over the past 1, 3, & 5 years. Sadly, the set & forget strategies (aka complacency and/or sticking with your favourites) approach to selecting Managers/funds is - or at least - should be a thing of the past. Advisers now need to add value by filtering through the noise & promise to identify robust & predictable solutions.

I’ve said it before: in the upcoming environment of normalized portfolio returns, advisers will need to support low cost beta solutions (ie: single digit expense), & spend their fee budgets on active tilts. This requires work, monitoring & a pragmatic approach.

On 23 May 2021 at 2:07 pm d lythgoe said:

@johnmilner thx for your comments.

Would be interested to know how you calculate alpha for multi asset funds which a range of asset allocations. You were quick to throw a quick dart at another commentator but they may have been close to the mark than you imply.

If one looks at the MJW investment survey to the end of March 21 the balanced funds mentioned for ANZ and Fisher appear to have outperformed their peers over the longer term as have Milford. This includes passive indexed funds and could be a proxy for value. Refer the MJW website.

Are you able to reference where the alpha is published and the reasoning behind your comments?

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