What would a sale to Fisher Funds mean for Kiwi Wealth’s 270,000 investors? – صحيفة الصوت

ANALYSIS: The Kiwi Wealth funds management and KiwiSaver operation could be sold to Fisher Funds this week.

It’s causing uncertainty among Kiwi Wealth’s 200-odd Wellington-based staff, who are responsible for managing about $9 billion of savers’ money in Kiwi Wealth’s KiwiSaver and non-KiwiSaver funds.

A bleakly pessimistic mood has settled over the Wellington business with staff fearing redundancy should Auckland-based Fisher Funds get its deal across the line.

Some of them would prefer the operation be sold to locally-owned KiwiSaver rival Booster, or investment company Jarden Partners, and it’s not known what the 270,000​ people with KiwiSaver and other fund accounts with Kiwi Wealth think about the proposed deal.

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If the sale goes ahead, it would be another KiwiSaver coup for Fisher Funds, having snapped up the Huljich KiwiSaver scheme in 2011​, the Tower scheme in 2013​, and the Aon scheme last year​.

At the end of March, funds research company Morningstar ranked Fisher Funds as the fourth-largest KiwiSaver provider behind ANZ, ASB and Westpac.

Had it owned Kiwi Wealth, it would have been the third-largest KiwiSaver provider with a combined KiwiSaver operation of nearly $14 billion, just a whisker behind ASB.

Willing seller

Kiwi Wealth was founded by economist Gareth Morgan. It’s been successful, growing to manage around $9 billion for savers, around two-thirds of which is in its KiwiSaver scheme.

Many savers picked Kiwi Wealth because it was New Zealand-owned, attracted first by the charismatic Morgan, and then because it was a sister company to Kiwibank, and the bank promoted it as its KiwiSaver provider of choice.

Kiwi Wealth is said to be on the block because Kiwibank’s ultimate owners need capital to expand the bank.

It’s the third Kiwibank-related company to be sold, following the sales of the online share investment service Hatch, and Kiwi Insurance last year.

Wiling buyer

Fisher Funds was founded in 1998 by talented fund manager Carmel Fisher​, and it’s grown organically, and through a series of KiwiSaver acquisitions.

It’s now co-owned by the TSB Community Trust (which owns TSB bank), and American private equity firm TA Associates.

It’s assumed TA Associates is doing what private equity firms do, and building an asset it can one day sell for a lot of money.

Fisher currently manages around $14b for investors in KiwiSaver and non-KiwiSaver funds.

Because of TA Associates’ involvement, a sale of Kiwi Wealth to Fisher Funds would have to be approved by the Overseas Investment Office, and that includes whether the deal is in the national interest.

Some Kiwi Wealth staff argue it’s not as it would gut the fund management industry in Wellington, and result in people heading overseas in search of work. The Government has remained silent on that threat.

What about the KiwiSavers?

When deals like this are cooked up, nobody asks the account holders what they think.

If a sale takes place, savers who don’t approve, can shift their money to another scheme at any time.

A deal would likely include a long-term arrangement with Kiwibank, so Fisher Funds would become the bank’s chose KiwiSaver provider.

Why might they want to move?

There are differences in the way Fisher and Kiwi Wealth invest.

Fisher invests more of its savers’ money in New Zealand assets, while Kiwi Wealth has more of an international investment focus.

Kiwi Wealth has made more of a play of being a socially-responsible investor, but neither have got ticks from the Mindful Money ethical KiwiSaver website.

Both describe themselves as “active” managers, who use their skills in an attempt to deliver higher returns than investors would get through passive funds.

Fisher Funds sees itself as more of a pure stock-picker focusing on analysing individual companies to find the best ones to invest in, while Kiwi Wealth has more of a reputation as “macro” investor, picking big investment trends.

Fisher Funds’ main KiwiSaver scheme charges higher KiwiSaver fees, but that may not be an issue for Kiwi Wealth investors, at least in the short term.

What would Fisher Funds do with Kiwi Wealth KiwiSaver?

When Fisher Funds took over the Tower KiwiSaver scheme, it rebranded Tower’s scheme Fisher Two, and continues to run it alongside of its main KiwiSaver scheme.

This gives it two KiwiSaver schemes charging different fees.

If Fisher Funds snaps up Kiwi Wealth, it would certainly run three schemes, at least for a while.

The Kiwi Wealth KiwiSaver scheme is a default scheme, and Fisher Funds schemes are not.

Default providers get a chunk of their investors allocated to them by the Inland Revenue when they fail to choose schemes for themselves.

That’s a stamp of government approval, but default investors are not high-value investors.

Buying Kiwi Wealth would potentially secure default status for Fisher Funds, pending approval from the government, and that’s not to be sniffed at.

But a minimum condition for that would surely be that Fisher Funds runs the Kiwi Wealth scheme separately, at least until its default status runs out in mid-2028.