Geared KiwiSaver fund offers bigger returns - and risks

The Geared Growth Fund, which may be leveraged up to 50% of the net asset value of the fund, is aimed at those long term savers who are comfortable with using leverage to maximise investment returns, Grosvenor chief investment officer David Beattie says.

The fund was a natural fit not only with the philosophy behind the KiwiSaver Scheme, but also with the long-established principles of optimal investment portfolio design, he says.

“Many New Zealanders will already be quite familiar with the use of gearing and leverage relating to long term property investing, so gearing to buy other growth assets such as shares follows the same fundamental rationale,” Beattie said. “This is a particularly good time to make a geared option available, as both interest rates and share markets are currently very attractive from a long term fundamental perspective.”

“Indeed, it is now possible to implement a self-funding geared strategy, with borrowing costs effectively offset by the dividend income generated by the underlying share investments.”