New equities only KiwiSaver fund

Index manager Kernel rolls out a KiwiSaver product and cuts fees.

Tuesday, April 12th 2022, 6:00AM

Kernel is planning to launch a KiwiSaver scheme next month which will feature equities only and potential members are warned it is a long-term investment option.

It recommends members have a minimum timeframe of five to seven years and an ideal horizon of 20-30 years.

Kernel chief executive Dean Anderson said "while most providers have 20 to 25% of their growth KiwiSaver funds in bonds and/or cash, the Kernel funds are pure equities, which can be more susceptible to short-term fluctuations yet have greater long-term growth potential."

The boutique firm is putting fee pressure on competitors with its lowest fee being 25 basis points. This comes on top of Kernel's position as offering tax efficient funds to clients.

Anderson says the target member has many years until retirement or has already purchased their first home. "With time on their side, the higher rewards that may come from investing in equities can be an appealing choice and align better with long-term goals."

He says it is a good time to be launching KiwiSaver as the six largest KiwiSaver providers have steadily lost market share over the past two years, and younger members (aged 25-36) were switching funds at a rate almost double that of other groups.

In addition to building a KiwiSaver product Kernel has added two new funds the S&P 500 and Kernel High Growth Fund bringing its fund suite to 13 funds.

It now has a set of core funds plus a range of thematic funds investing in EVs, new ideas, commercial property and infrastructure, alongside three sustainability-themed funds.

Anderson says the S&P 500 (Hedged), is a long-time investor favourite thanks to its scale, performance and market influence.

"Often referred to as the ‘pulse’ of the US economy, this fund targets a 100% hedge to the NZ Dollar - a New Zealand first."

The Kernel High Growth Fund is designed in-house leveraging Kernel's existing product offering. It offers a well-diversified, high growth equity exposure suitable for investors with a long investment horizon.

Anderson says these new initiatives are an important development for the sector, supporting a range of client bases, from Kernel's existing wholesale clients through to adviser groups looking for efficient tools to support smaller clients.

All 10 core funds now have an annual management fee of 25 basis points. The three thematic funds will reduce to 45 basis point annual management fee. There are no transaction, foreign exchange, or brokerage fees – a major benefit across industry wrap platforms.

Tags: Kernel KiwiSaver