KiwiWealth Investing Strategies
Kiwiwealth don't seem to do a regular Q&A member session like Fishers and Milford. Nevertheless I have tried to glean some of their investment tactics from their reports. The official statement on policies and investments is below:
https://app.companiesoffice.govt.nz/...928a58c0541d95
The following report below was posted on 21st November 2021.
https://www.kiwiinvest.co.nz/investm...ective-on-2021
1/ Look for liquidity and quality, and use diversification.
2/ Go for ESG companies that face lower regulatory risks and have a stronger social license to operate.
3/ Have removed carbon intensive companies from portfolios.
4/ Particular standout sectors for investment: Discount retail (Costco, Target and Walmart), Semiconductor value chain (companies behind the computer chips that go into phones, cars and smart refrigerators) and US banks (JP Morgan, Morgan Stanley and Bank of America)
5/ Have been taking profits on some of the themes that have done well during the pandemic (in particular snack foods and discount retailers).
6/ Investing towards next stage as economies recover (railroads, construction material companies and banks).
The latest update from February 2022 (not a video) is here:
https://www.kiwiinvest.co.nz/investm...year-in-review
7/ Rapid increases in interest rates, threatens the frothy valuations we see in certain Growth stocks. On the other hand, the combination of higher rates and more persistent inflation could spell good news for Value investors, those who favour stocks trading at lower multiples.
8/ Looking closely at trends in energy efficiency, efforts to electrify the global car fleet, and natural resource shortages.
9/ The withdrawal of government financial stimulus will present a challenge for some assets.
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KiwiWealth Fund basis for bonus - Nope!
https://www.kiwiwealth.co.nz/product...ed-funds/fees/
"There is one annual fee that applies for each of our Managed Funds. There are also some ‘Other costs’ that flow through to our funds which we’ve estimated in the table below (don’t worry – we don’t expect they’ll vary too much from the estimate)."
"Unlike some other providers, we don’t charge performance fees on top of the return your investment makes, so you get to keep more of your returns."
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Fisher Fund Fees: Sample calculation
Quote:
Originally Posted by
Fiordland Moose
$23.3m & $16.6m in performance fees paid across FY21 and FY20, respectively. Big sums. Note 1 page 28.
https://app.companiesoffice.govt.nz/...9381175A8E7B22
might have to go for a few years without any performance fees thanks to their high watermark. poor fellas and gals.
I take note of the way Fishers disclose their 'comparative information'.
As an example I look at their international growth fund
https://fisherfunds.co.nz/unit-price...onalGrowthFund
The above 'linked to' comparative graph shows the actual performance of their 'International Growth Fund' to the comparative 'International Equity Composite Index'. As it happens, their international growth fund shows a nice premium to their comparative reference index over time. However, my reading of the investor documentation is that 'bonus' payments to Fishers are not related to this difference. Instead the 'performance hurdle' for all Fisher funds is 'OCR + 5%'. (NZ weighted OCR over comparative period: = 0.25% => OCR + 5% = 5.25%)
The Fishers benchmark policy for international shares is to hedge 50% to the NZD (Refer Paragraph 3.3.6, Fisher Funds Investment Series, Statement of Investment Policy and Objectives, 25th March 2022).
Let's take the example of the year 1st April 2020 (NZD1 = USD0.6054) to 31st March 2021 (NZD1=USD0.7133) to see how the numbers work out.
If the 'International Equity Composite Index' is actually the MCSI world index
https://www.msci.com/our-solutions/indexes/acwi
then that index rose from 442.35 to 680.47 in USD terms over the year ending 31st March 2021.
The base annual fund fee is 1.42% of the asset value (refer https://fisherfunds.co.nz/assets/fac...Fact-Sheet.pdf)
Putting all this information together:
Year 01-04-2020 to 31-03-2021 |
Starting Position |
Ending Position |
Gain |
Unhedged Gain 'MSCI World Index' |
442.35/0.6054 |
680.47/0.7133 |
+30.6% |
Hedged Gain 'MSCI World Index' |
442.35 |
680.47 |
+53.8% |
Composite Reference Gain 'MSCI World Index' (50% Hedged, 50% Unhedged) |
|
|
+42.2% |
Comparative OCR Fisher Fund Reference Mark |
|
|
+5.25% |
Fisher Growth Fund after fees (Cumulative value $10k invested from 3 year chart) |
$10,165 |
$15,417 |
+51.7% |
Table Notes
1/ Fund performance figures are after deductions for charges but before tax.
2/ Average value of funds under management over period = ($10,165m+$15,417m)/2= $12,791
---------------------------
The above performance table is all very well. But what we want to know is the growth in the 'International Growth Fund' before fees, so we can get a real handle on what the fees are. This figure is not given. However, if we declare 'F' as the unknown base fee and 'B' as the unknown bonus fee (both measured in the same 'dollar units' as displayed on the fund performance chart), then there is enough information given to allow us to solve this problem. It becomes an exercise in algebra and solving two simultaneous equations.
Base Fee = F = 0.0142x(15,417+F+B) <=> 70.4F=15,417+F+B <=> 69.4F = 15,417 + B <=> B=69.4F-15,417 (i)
Bonus Fee = B = 0.1x( (15,417+F+B)-(1.0525x10,165) ) <=> 10B = 15,417+F+B - 10,699 <=> 9B = 4,718 +F (ii)
Substituting the expression for B from equation (i) into equation (ii) we get:
9x(69.4F-15,417) = 4,718 +F => (625-1)F = (138,753+4,718) => F=230
Putting this value for F back into equation (i) we can now calculate B
B=69.4x(230) - 15,417 = 545
Double Check
Base Fee = 230 / (15,417+230+545) = 1.42% (Check as correct)
Bonus Fee = 545 / (15,417+230+545) = 3.37% (Ouch! No wonder Fisher Funds did not want to disclose this!)
I do note though, that in recent years, Fishers have revised their bonus policy, so that the bonus fee never comes out as more than 2% of the gross value of the fund. That means the total fund fee for the period under consideration was 'only' 1.42%+2%=3.42%. That does sound high, even though we were dealing with an unusual period which started from the 'near the post Covid-19 shock low' and ended with a substantial market recovery.
The total value of the 'International Growth Fund' stood at $98.8m as at 31-03-2021. So this implies 'management' plus 'bonus' fees of
($98.8m x 0.0142=) $1.4m and ($98.8m x 0.02=) $2.0m respectively.
The performance fee figure quoted by FM of $23.3m was across all funds managed by Fisher Funds. The particular fund example that I have looked at is likely one of the worst affected by performance fees. Was that excessive over such an exceptional year? Fisher Funds have not been reappointed as a default provider for Kiwisaver funds at the latest reset which took effect from December 1st 2021. Perhaps therein lies the answer?
SNOOPY
Net Profit Margin of Fund Managers
Quote:
Originally Posted by
Fiordland Moose
Check out those margins...npat as a % of revenue - 40% across both years (more or less). Not gross profit margin, EBITDA, not EBIT, not PBT margin....but good old fashioned statutory npat as a % of revenue.
don't think i've ever seen a business with such high margins.
bugger all capex, bugger all working capital....the perfect cashflow business. all npat paid out as dividends.
losing kiwisaver default will hurt - will be interesting to see how much default FUM transfers out.
Yes the 'Net Profit Margin' at Fisher Funds is certainly eye-watering. But in any industry where you use other peoples money 'off the books' to generate your income, your 'net profit margin' is going to look impressive. Whether it is out of line with other market players is something I am trying to determine.
Kiwi Wealth is publicly owned, for now. I have found the annual report from the point of view of the individual funds, but not from the point of view parent management company. If anyone can find where that 'public' management firm information might be, I would love to fill in the gaps in the table below. (Edit: Thanks to Haumi, post 17, who tracked down the missing information!)
FY2021 Comparison |
Fisher Funds |
Kiwi Wealth |
Milford Funds Limited |
NPAT {A} |
$49.778m |
$11.961m |
$11.726m |
Fee Income (B} |
$125.906m |
$51.908m |
$162.710m |
Net Profit Margin {A}/{B} |
39.5% |
23.0% |
7.21% |
References
1/ Kiwi Wealth https://www.kiwiwealth.co.nz/assets/...ments-2021.pdf, https://www.fma.govt.nz/assets/Repor...er-AR-2021.pdf, https://app.companiesoffice.govt.nz/...4E226E1FFDC7AA
2/ Fisher Funds https://app.companiesoffice.govt.nz/...9381175A8E7B22
3/ Milford Funds Limited https://app.companiesoffice.govt.nz/...49ACF3BF8AD107
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