ANZ banks on 'active' fund success
ANZ is increasing the fees for its default KiwiSaver scheme as it switches to an "active" fund management style.
The country's biggest bank last week sent a letter to customers signed by products and marketing general manager Ana-Marie Lockyer.
While the front page of the letter promises lower fees, the overleaf tells a slightly different story.
The bank is lowering its monthly membership fees from $2.75 to $2, a saving of $9 a year.
At the same time it is increasing its "fund fees" almost across the board, charged as a proportion of money under management.
An investor in the balanced fund will pay a 1.05 per cent fee from the start of next month, up sharply from 0.65 per cent.
For a customer with an account balance of $10,000, the net increase in fees would be $31 a year.
The bank was unable to immediately supply a schedule of the changes to its other funds.
ANZ was recently reappointed as a default KiwiSaver provider, which means new savers are automatically entered into its scheme.
The bank has made the changes to align with its non-default scheme, which uses a different management style.
Lockyer said the funds would change from a combination of passive and active management to fully active management.
Active management aims to beat the returns generated by simple passive management, which involves tracking a market or index.
"We've seen great results from managing ANZ Investments' other KiwiSaver schemes this way, and we believe it will result in improved investment performance for you," Lockyer wrote.
The merits of active management are hotly debated in investment circles.
Ben Brinkerhoff, an accredited investment fiduciary at Consilium, said: "In our view, it's unfortunate that ANZ has decided to go down this path."
He pointed to recent research from AUT University that found actively managed KiwiSaver funds could not systematically beat a global benchmark.
Brinkerhoff said in sum, all any investor could ever earn was the average market return.
"If they're winning, someone else is losing."
He said many fund managers would swing for the fences and hope for an impressive result anyway.
They could then market the scheme heavily and justify the increase in management fees, even if the success was short-lived.
"The funny thing about this game is when your performance starts to suck, the money sticks," he said.
"So from a business decision standpoint, it makes perfect sense. From a consumer standpoint, all these active people cannot be adding value."