Kernel launches NZ-first target maturity bond funds

Kernel expands its bond offering with two funds with target maturity dates.

Monday, March 11th 2024, 7:54AM

In a New Zealand first Kernel has added two bond funds with target dates of March 2027 and March 2029 respectively.

By providing a fixed maturity date, similar to that of an individual bond, Kernel’s new target maturity funds aim to offer a more predictable return profile, making them an ideal choice for investors looking to manage their investment and cash flow needs more effectively, chief executive and founder Dean Anderson says.

Historically, Kiwi investors and advisers have bought and held bonds to maturity. This is evidenced by the traded value of NZX-listed bonds in 2023 being just 4.6% of the market capitalisation - a fraction of the equity market equivalent.

Kernel is seeking to change the way Kiwis access and invest in the $60 billion listed bond market by launching a growing series of target maturity bond funds which are designed to offer investment returns, credit exposure and interest rates that will closely correlate with a hypothetical A- credit rated bond maturing on the date of the fund.

Offering a strategic approach to bond investing that has been previously unavailable in the New Zealand market, these funds are designed to decrease in volatility as they approach their maturity date. In turn, providing investors with a clearer outlook on their investment returns.

“These funds are designed to offer significant advantages for individual investors over direct bond purchases due to their diversification, superior liquidity, tax benefits from their PIE structure, active management to optimise returns, and zero transaction costs," Kernel fixed income portfolio manager Matthew Winton says."

"We are already seeing significant initial interest from sophisticated individual investors and financial advisors.” he says.

The Kernel March 2027 NZ Bond Fund and Kernel March 2029 NZ Bond Funds have a fund management fee of 0.50%.

These funds aim to generate returns comparable to investment-grade bonds with set maturity dates in March 2027 and March 2029, respectively.

In addition, Kernel is launching a broad NZ Bond Fund. This will be an actively managed fund designed for those seeking exposure to the New Zealand bond market, aiming to surpass the return of the Bloomberg NZ Bond Composite 0+ Year Index. This fund is available with a fund management fee of only 0.40% p.a.

“Kernel is proud to be at the forefront of innovation in the New Zealand investment space. The launch of our Target Maturity Bond Funds represents our commitment to providing Kiwis with sophisticated, yet accessible investment options," Anderson says.

"We believe that these funds will become a vital tool for investors seeking to enhance their portfolios with fixed income investments."

Tags: Kernel