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Fisher Funds buying Kiwi Wealth to become third biggest KiwiSaver provider, will seek to retain default provider status

Personal Finance / news
Fisher Funds buying Kiwi Wealth to become third biggest KiwiSaver provider, will seek to retain default provider status
[updated]
15th Aug 22, 11:08am by Gareth Vaughan
i
Image: Fisher Funds.

Kiwi Group Holdings has confirmed the sale of funds management business and KiwiSaver default fund provider Kiwi Wealth to Fisher Funds for $310 million.

It says the deal will see Kiwi Wealth integrated into Fisher Funds over time, with Kiwibank, Kiwi Wealth's sister company, referring KiwiSaver customers to Fisher Funds.

"Kiwi Wealth's more than 270,000 members will be gaining access to Fisher Funds’ award-winning advice and active investment team," Kiwi Group Holdings chairwoman Paula Rebstock says in a statement.

Fisher Funds CEO Bruce McLachlan says the priority is on working closely with Kiwi Wealth "to ensure a seamless transition for all members and clients involved."

Fisher Funds says it wants to retain Kiwi Wealth’s default provider KiwiSaver status, but there's a formal approval process to be worked through. Fisher Funds lost its role as a default fund last year after a government review, while Kiwi Wealth retained its position as a default fund provider.

According to Morningstar's latest KiwiSaver survey, Fisher Funds had $6.5 billion worth of assets under management at June 30, and Kiwi Wealth had $6.3 billion. That makes them the fourth and fifth biggest KiwiSaver fund managers, respectively. Combined, they'll leap frog Westpac to become the third biggest behind only ANZ and ASB.

Kiwi Wealth started out as Gareth Morgan Investments and was bought by Kiwibank in 2012 for $57.225 million.

In Kiwi Group Holdings' statement, Kiwibank CEO Steve Jurkovich says the partnership with Fisher Funds will enable Kiwibank to continue to offer KiwiSaver and other wealth products to its customers. TSB also markets Fisher Funds' KiwiSaver products through its branches.

The acquisition requires Overseas Investment Office approval because Fisher Funds is 34% owned by the US-based TA Associates. Fisher Funds' other shareholder is Toi Foundation Investments, which is ultimately owned by the TSB Community Trust, the parent of TSB Bank which bought into Fisher Funds in 2013, taking controlling ownership in 2017.

Kiwi Group Holdings is owned by NZ Post, the NZ Superannuation Fund and Accident Compensation Corporation. It sold life insurer Kiwi Insurance to NIB for $45 million last November.

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24 Comments

by  Contrarian  |  15th Aug 22, 11:37am 1660520258

Very good, that it is being retained by another set of NZ owners.

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by  Gummy Bear Hero  |  15th Aug 22, 12:38pm 1660523889

Fisher Funds has TA Associates ( USA ) as a co-owner .

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by  Contrarian  |  15th Aug 22, 12:55pm 1660524923

That kind of cross country investments are very common in Banks, Financial companies, Investment companies, etc. Ultimately they are all owned by a group of Hedge funds or such. 

Fisher funds is being managed by New Zealanders, right ?

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by  Gummy Bear Hero  |  15th Aug 22, 1:17pm 1660526232

Carmel Fisher & her team are indeed very astute investors ... Kiwis , I believe  ...

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by  Baywatch  |  15th Aug 22, 3:23pm 1660533824

Carmel sold out a few years back...now just a bunch or blokes (none as easy on the eye as Carmel)

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by  Advisor  |  15th Aug 22, 2:33pm 1660530832

34% owned by TA Associates via its Hong Kong subsidiary - a jurisdiction that has 0% tax foreign income.

Unusual partner for a community trust I must say; doesn't matter though as long as Fisher Funds' net profit is taxed appropriately in NZ.

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by  blobbles  |  15th Aug 22, 2:45pm 1660531540

Yep, he pulled his yacht into Wellington once and toured one of the offices who provides fisher funds services with his family.  Met the guy, seemed really nice dude which is rare for most people in his position.

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by  Spiceeh  |  15th Aug 22, 3:44pm 1660535098

"In 2012, certain members of TA Associates leadership, independent of the firm, began financially supporting various conservative political action groups backing candidates in favor of repealing the Dodd–Frank Wall Street Reform and Consumer Protection Act publicly claiming it was "government regulation run amok."[8] Landry was among of the leading Super PAC donors to the 2012 Mitt Romney presidential campaign.[9] Landry told the Boston Globe the Dodd-Frank legislation costs TA more than $600,000 a year in compliance-related costs which would be better spent supporting job growth fueled by private equity firms such as Bain Capital and TA Associates.[10]"

The problem, not the solution.

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by  Grattaway  |  15th Aug 22, 11:40am 1660520401

No real explanation yet as to why Kiwibank saw the need to sell Kiwiwealth - which it has only owned for a short period of time

 

And not a lot of information yet about the risk to investors from the owners being offshore and a community trust

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by  Contrarian  |  15th Aug 22, 12:58pm 1660525095

They exited Hatch too. May be they don't want to be in the shares/finance business. Next step, sell Kiwi Bank, perhaps ?

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by  bw  |  15th Aug 22, 1:41pm 1660527671

It is understood the mooted Kiwi Wealth sale was triggered by a desire by ACC to exit its Kiwi Group Holdings shares.

http://investmentnews.co.nz/investment-news/kiwi-wealth-sale-enters-fin…

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by  Advisor  |  15th Aug 22, 2:46pm 1660531580

Is ACC inflating the value of its holdings by swapping Kiwi Wealth for cash to then offload these shares for a higher return?

This could also be their attempt to reduce their exposure to NZ's housing bubble, already having a large proportion of its business levies coming from the likes of construction companies and subbies.

Something to note here is that ACC would have to offer its shares to an existing shareholder (Post and Super) first and then to the Crown before going out to external buyers.

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by  morepork  |  15th Aug 22, 12:20pm 1660522832

Are Fisher Funds just trying to buy back into default provider status?

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by  Gummy Bear Hero  |  15th Aug 22, 12:36pm 1660523811

Yes .

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by  Spiceeh  |  15th Aug 22, 3:50pm 1660535407

Of course but food for thought...

"In 2014, TA Associates helped organize a syndicated loan worth $1.77 billion for Millennium Health LLC. Most of the loan – $1.27 billion – was channelled back to TA Associates and others, who used it to hand out special dividends.[11] Shortly thereafter, Millennium Health LLC declared bankruptcy.[12] Voya Investment Management, the creditor, subsequently, and unsuccessfully, filed a racketeering lawsuit against TA Associates and Millennium Health founder James Slattery.[13]"

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by  Hardly  |  15th Aug 22, 12:28pm 1660523280

Nothing makes you feel valued as a customer - and I’m speaking personally - like getting sold like a sheep.

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by  Hardly  |  15th Aug 22, 12:29pm 1660523398

I’m also really disappointed in Kiwibank. The purpose of the whole enterprise is to grow a viable 5th bank. Why sell off a clearly valuable component? Sounds like they need capital. If only they were owned by an entity that had access to unlimited capital at a cheap price. Yes, I know they aren’t owned by the government directly but they could have worked something out from the $50B+ we spent in the pandemic. 

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by  DaveB1978  |  15th Aug 22, 2:10pm 1660529431

They should stick to core banking and do a much better job of it before branching out. 

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by  Takere  |  15th Aug 22, 12:58pm 1660525123

Am I reading this article right?

A $310m investment for $6.5b of the NZ Kiwsaver market?

What can go wrong?

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by  Gummy Bear Hero  |  15th Aug 22, 1:20pm 1660526412

... supposing their KS fee is 1 % , that's $ 65 million annually from overseeing  $ 6.5 billion in funds  ... at 0.5 % , they'll earn  $ 32.5 million ...

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by  DaveB1978  |  15th Aug 22, 2:55pm 1660532121

That is revenue, not profit. They will have costs too. Investment managers aren’t cheap. 

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by  mfd  |  15th Aug 22, 3:37pm 1660534627

Do they need new investment managers or just piggyback on the existing funds? 

I'm sure there'll be costs but probably a decent margin to be had.

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by  Spiceeh  |  15th Aug 22, 3:51pm 1660535491

"In 2014, TA Associates helped organize a syndicated loan worth $1.77 billion for Millennium Health LLC. Most of the loan – $1.27 billion – was channelled back to TA Associates and others, who used it to hand out special dividends.[11] Shortly thereafter, Millennium Health LLC declared bankruptcy.[12] Voya Investment Management, the creditor, subsequently, and unsuccessfully, filed a racketeering lawsuit against TA Associates and Millennium Health founder James Slattery.[13]"

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by  Spiceeh  |  15th Aug 22, 3:50pm 1660535448

Hmmm...

"In 2012, certain members of TA Associates leadership, independent of the firm, began financially supporting various conservative political action groups backing candidates in favor of repealing the Dodd–Frank Wall Street Reform and Consumer Protection Act publicly claiming it was "government regulation run amok."[8] Landry was among of the leading Super PAC donors to the 2012 Mitt Romney presidential campaign.[9] Landry told the Boston Globe the Dodd-Frank legislation costs TA more than $600,000 a year in compliance-related costs which would be better spent supporting job growth fueled by private equity firms such as Bain Capital and TA Associates.[10]

In 2014, TA Associates helped organize a syndicated loan worth $1.77 billion for Millennium Health LLC. Most of the loan – $1.27 billion – was channelled back to TA Associates and others, who used it to hand out special dividends.[11] Shortly thereafter, Millennium Health LLC declared bankruptcy.[12] Voya Investment Management, the creditor, subsequently, and unsuccessfully, filed a racketeering lawsuit against TA Associates and Millennium Health founder James Slattery.[13]"

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