[Breaking News] Kiwibank to buy Gareth Morgan Investments

Kiwibank has announced it will buy fund manager Gareth Morgan Investments (GMI), including the Gareth Morgan KiwiSaver Scheme.  

Kiwibank has announced it will buy fund manager Gareth Morgan Investments (GMI), including the Gareth Morgan KiwiSaver Scheme.

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Kiwibank buys Gareth Morgan Investments

Kiwibank has announced it will buy fund manager Gareth Morgan Investments (GMI), including the Gareth Morgan KiwiSaver Scheme.

GMI currently manages over $1.5 billion, of which $650 million is KiwiSaver related, on behalf of more than 57,000 clients.

GMI will operate as a stand-alone entity under the Kiwibank Wealth and Insurance line of business. Gareth Morgan will remain a major client of the business and a member of the investment strategy team. Both GMI principals, Morgan and Andrew Gawith, will remain directors of GMI alongside two Kiwibank-appointed directors.

The deal will significantly increase the size of Kiwibank’s KiwiSaver business, which launched last year after the bank ended its distribution deal with default provider Mercer.  It currently has about 15,000 members.

Kiwibank chief executive Paul Brock described the purchase as “a unique opportunity to rapidly grow our Wealth and KiwiSaver businesses, while remaining true to the values that have built Kiwibank”.

“GMI’s core values of trust and honesty; transparency; respect for clients’ interests; and the continual pursuit of excellence mirror Kiwibank’s values of doing what’s right; making it easy; and raising the bar.”

Mr Brock added “we started our own KiwiSaver scheme just over a year ago and while the growth has been impressive we were aware of the need to extend our investment management capability. Our plan to do this looked very much like what GMI has developed”.

“The aligned values of both organisations reinforced the decision to buy rather than build and we are delighted to have GMI as part of the Kiwibank group and the ongoing participation of its principals”.

Morgan maintains a high profile outside of the fund management industry and was in the news again this week for his offer to pay for the funeral of “blanket man” Ben Hana.

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Fees only one part of default fund debate

The fees issue is just one of many around how to get the best out of KiwiSaver default funds, according to Savings Working Group member Paul Mersi.

While the current default fund system isn’t up for review until 2014, the Green Party’s election policy of creating a “public option” default fund managed by the Guardians of the New Zealand Superannuation fund has put the issue into the spotlight.

The Savings Working Group, which was set up by the government to look at policy around savings, mooted a similar policy but didn’t make a recommendation either way.

“We had a view that it was worth looking at but we didn’t have the time or resources to fully investigate that,” Mersi said.

“The government’s got this product where there are a lot of people coming in who don’t care who the provider is.  Our perspective was that one fund, five to six times bigger might be able to be of sufficient scale to paddle in bigger pools and deliver low fees.

“The level of fees is only one bit of it – the other bit is to make sure that they have an asset mix that is appropriate to their circumstances.  There needs to be a more structured approach to tailoring people’s assets to people’s age.”

Mersi said it was proving harder than expected to shift people out of default funds and the managers of the funds weren’t finding them as lucrative in that regard as they’d hoped.

He said the default fund issue would need sorting regardless of which party won the election, and it would be particularly important if KiwiSaver became compulsory as many thousands more would end up in default funds.

“If you’re going to be sucking more people into the machine there’s actually an increased responsibility to make sure the machine you’re sucking them into is the best it can be.”