Kiwis at risk of losing in passive investing “bubble”

Simon O’Grady, Chief Investment Officer with Kiwi Invest, the funds management division of Kiwi Wealth, said Kiwis with a strong proportion of passive holdings in their investments, including KiwiSaver accounts and many Exchange-Traded Funds (ETFs), may not fully understand the level of risk they were taking on.

“We believe the best chance for investors to navigate these turbulent times is through an actively managed portfolio.

“Ten years of bull markets had led to a charmed run for passive funds, which many New Zealanders are exposed to via their KiwiSaver accounts and other investments.  However, this performance has masked the risks of passive investing.

“One of the design flaws of passive index investing is their inbuilt tendency to buy more and more of the most expensive shares as they rise.