Craig Simpson reviews the Socially Responsible Funds available in KiwiSaver in the wake of ASB closing the FirstChoice Global Sustainability Fund

By Craig Simpson*

ASB announced in February 2013 its intention to consolidate its KiwiSaver offering and close the FirstChoice range of funds.

At the time of the original announcement, ASB highlighted its own product had 370,000 members versus the sister products 15,000.

Economies of scale and cost minimisation will have been key considerations in deciding to close the smaller funds, despite one of the FirstChoice products being the star performer across the entire ASB suite of products.

The Global Sustainability Fund was consistently the pick of all the ASB/FirstChoice funds on a pure performance basis.

Another fund closure within the Socially Responsible sphere that went under the radar was the Forsyth Barr Balanced SRI Fund. We understand Forsyth Barr reviewed the merits and viability of operating the funds and decided the ongoing costs and administration made the venture commercially unviable.

With ASB having received permission from the regulator to amalgamate the two businesses, ASB has written to KiwiSavers outlining their options.

With there not being a Global Sustainability Fund or alternative offering this is creating some angst for investors if the emails we have been receiving is anything to go by.

The pool of funds that are ethical or socially responsible in the KiwiSaver space is limited.

Not all KiwiSaver schemes that are ethical or SRI are open to all-comers. Koinonia (Christian) and BCF (Exclusive Brethren) KiwiSaver schemes are restricted to members of specific groups or faiths and are not required to produce quarterly or annual disclosure statements. Koinonia does in fact provide this information on its website which is great to see and for those interested see here.

The following Schemes are recognised in the market as being either ethical or socially responsible and follow appropriate investment mandates.

• Amanah KiwiSaver Plan
• ANZ OneAnswer Sustainable Growth Fund
• Craigs Investment Partners Balanced SRI Fund
• Grosvenor Socially Responsible Investment Fund
• Fidelity Ethical Kiwi Fund (now owned by Grosvenor)
• SuperLife Ethica Fund

Of the above list interest.co.nz does not actively report on the SuperLife Ethica Fund or Amanah KiwiSaver Plan. SuperLife has declined to provide unit pricing data to us. Amanah KiwiSaver Plan will start to appear in our performance tables shortly once sufficient return data has been collected.

Below we have outlined a brief summary of the key features of each fund based off information released in the latest disclosure statements provided submitted to the Financial Markets Authority dated 30 June 2014.

Note 1: Amanah KiwiSaver Plan began 7 days before the end of the March 31 financial year and all fees and expenses during this period were absorbed by the management. The fees shown are those stated in the investment statement. Amanah KiwiSaver Plan does charge a performance fee of 15% and is subject to a high water mark, however the investment statement states the manager is not charging a performance fee for the year 1 April 2014 to 31 March 2015. The first performance fee will be calculated as at the 31 March 2016 provided the high watermark has been exceeded.

Where are the funds invested?

Not all ethical or SRI funds invest in the same markets as the table below highlights. The data is as at March 31, 2014 per scheme provider disclosure statement and rows may not add up to 100% due to rounding.

Transparency in holdings

The beauty of accessing scheme provider disclosure statements is you can see where they are invested and get a sense for where your money is actually invested. The top 10 holdings for each of the funds listed is shown below. Under each table are comments pertaining to those investments where the manager is using a fund or other investment vehicle and the underlying investment holdings are not immediately transparent to investors.

Amanah KiwiSaver Plan

Amanah KiwiSaver Plan investments are made via a US$ denominated vehicle (Amanah New Zealand's Unit Trust) and hence the cash deposit listed in the top 10 holdings is in US$.

ANZ OneAnswer Sustainable Growth Fund

The fund currently invests over 94% of investor funds into the ING (L) Invest Sustainable Equity Fund, a Luxembourg based investment vehicle. The ING fund in turn invests in companies listed on stock exchanges worldwide that pursue a sustainable development policy. The companies ING invest into combine respect for social principles (e.g. human rights, non-discrimination, the issue of child labour) and environmental principles with a financial performance. The companies selected must closely match the criteria ”Best in Class approach”.

For this particular KiwiSaver fund we have listed the top 10 holdings taking into account both the ANZ OneAnswer (as at 30 June) and ING products (as at 31 August).

Craigs Investment Partners Balanced SRI Fund

The CIP Cash Management Nominees account is a Craigs Investment Partners account. Both the iShares USA ESG Select and Guggenheim fund are US listed exchange traded funds.

Fidelity Ethical Kiwi Fund (owned by Grosvenor)

The Vanguard International Fixed Interest Fund is a passive investment vehicle accessed via Australia. The UBS MSCI World Socially Responsible UCITS ETF is a listed security traded on the German Stock Exchange (DAX) The investment objective is to replicate the price and return performance of the MSCI World Socially Responsible Index net of fees.

Grosvenor Socially Responsible Investment Fund

Refer to comments made above regarding the UBS MSCI World Socially Responsible Fund. The Vanguard International Property Index Fund is a passive index tracking investment accessed via Australia.

SuperLife Ethica Fund

For those investors who are coming out of the FirstChoice Socially Responsible Fund there are a few options available to you. It is important you find a fund which matches your existing risk profile and that you understand the various fees and expenses. You should also seek advice from a suitably qualified financial adviser on which scheme is the most appropriate for you and your personal situation.

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*Disclosure: The author and/or parties associated with him have their KiwiSaver with Amanah KiwiSaver Plan and are involved with the company either directly or indirectly.