Non-profit organisation Simplicity has launched two new investment funds, offering ‘the magic of compounding returns whilst avoiding the tyranny of compounding fees’
Non-profit organisation Simplicity has announced the launch of New Zealand-focused investment funds focusing on bonds and shares.
The launch comes as a result of enquiries from members and aims to allow cheaper and more efficient management of investment funds, along with a broader range of investment options.
There are currently two funds on offer; The NZ Share Index fund, which focuses on shares and invests in the 50 largest companies that make up the NZX50 index, and The NZ Bond Index fund, which tracks an index of 30-plus investment grade bonds.
The key appeal of the funds is the low management cost, which is several times lower than similar passively-managed funds from platforms such as SmartShares.
“What we want to do is to show New Zealand investors and advisers what it really costs to manage money,” managing director Sam Stubbs told NZ Adviser. “What it turns out to cost is about one fifth of the current price. Because Simplicity is a non-profit, we’re only interested in charging people what it costs. It’s a direct challenge to other platforms, particularly to SmartShares, whose products are simply way too expensive for many investors.”
“For years Kiwis have been overcharged for fund management by their banks, fund managers and the Stock Exchange,” Stubbs went on. “Witness the $525m in KiwiSaver fees this year. It’s wrong, so we’re doing something about it.”
Simplicity’s fees are consistent with those of international markets.
Key figures:
- The two funds have an annual administration fee of $30 each regardless of investment amount, and annual management fees of $1 for every invested $1000 (0.1% p.a.).
- The minimum investment is $10,000
- There is no establishment fee or buy/sell spread
As a result, an investment of $10,000 would be approximately 20% cheaper through Simplicity than through traditional investment platforms, and a higher figure would widen the gap significantly.
Simplicity also states that these funds are ‘a statement of optimism in the New Zealand economy’, which is expected to grow by 3% in 2018.
“The treasury estimates KiwiSaver funds will have over $200bn by 2030, and that around 50% of that will be invested in New Zealand,” says Stubbs. “It’s a rising tide of capital, and New Zealand capital markets have a very bright future. We want investors to have the chance to capture as much of that upside by offering funds with very low fees.”
