Booster adds to wine portfolio

Booster has snapped up the former Mahana Estates winery site, and announced the formation of the Booster Wine Group.

The high-profile Nelson winery went into receivership as its owner became embroiled in a bitter legal fight with a Las Vegas businessman.

KiwiSaver provider Booster spotted the opportunity to add the site to its other wine investments: Awatere River, Waimea Estates, Bannock Brae and Sileni Estates.

The fund manager said the purchase, and formation of Booster Wine Group, would create a new investment opportunity for members.

“Most New Zealand wineries, as small independent businesses, have always been challenged by scale.  The Booster Wine Group allows our wineries to focus on what they do best – produce world-class wine, while still remaining Kiwi owned and operated,” said managing director Allan Yeo.

“The wine industry is one of New Zealand’s most successful exports.  We’re pleased to be keeping a piece of it in local ownership and giving everyday Kiwi investors the chance to share in its success.”

He said only a fraction of KiwiSaver money was being invested in New Zealand businesses at present.

Booster has several other investments in its pipeline which are expected to be finalised and announced this year.

“Booster Tahi helps invest Kiwi savings back into successful New Zealand businesses to help fulfil their growth potential and to keep them Kiwi owned.  While our initial focus has been on horticulture investments in wine, kiwifruit and avocados, we see exciting opportunities in other areas as Tahi grows,” Yeo said.

Govt moves to allow early KiwiSaver withdrawal

Government is exploring its options to allow people with life-shortening conditions to access their KiwiSaver money earlier.

Two independent advisers, Claire Matthews from Massey University, and the IHC's Donna Mitchell, will help Commerce and Consumer Affairs Minister Kris Faafoi find the best solution.

Faafoi met with Down syndrome man Tim Fairhall earlier this year, who drew attention to the issue of people in situations like his.

People with Down syndrome have a shorter life expectancy and Fairhall said he wanted to be able to use his KiwiSaver money to travel overseas.

“KiwiSaver helps New Zealanders enjoy the best retirement they can,” Faafoi said.

“Part of the success of KiwiSaver as a retirement savings scheme is because funds are not available until the age of 65, so the savings grow and help people considerably towards a financially secure retirement.

“However, it’s important KiwiSaver works for all New Zealanders. Tim has Down Syndrome and is aging prematurely. He hopes to retire in his mid-40s and access his savings – but at the moment, he can’t.

“I think it’s fair and just that New Zealanders who have been paying into KiwiSaver throughout their working life should expect to one day enjoy the benefits of their savings in their retirement – be that at 45 or 65.”

At present, savers can only access their money for a first home or in serious of sever financial hardship.

”I think we have to acknowledge that the one-size fits all retirement age does not work for this group faced with life-shortening conditions – so we are going to fix that,” Faafoi said.

“Dr Matthews and Ms Mitchell have been tasked with looking into how special circumstances could cater for people like Tim, enabling them to withdraw their money at the point at which they choose to retire.

“The two advisers will consult with people who are faced with this issue, with medical practitioners and KiwiSaver experts, before reporting back to me in early 2019.

“It is a technically complex area so I can’t promise a quick fix for Tim personally but I am going to move this forward because this Government is committed to ensuring its policies work for all New Zealanders.

“Everyone deserves the right to use the money they have saved for their retirement.”

Advice is expected back to the Minister by the end of February. Changes to the KiwiSaver withdrawal criteria would require legislation.

KiwiSaver tracker an own goal?

If the Financial Markets Authority's KiwiSaver Tracker was designed to make investors wary of higher-fee funds, it is not achieving its goal, one fund manager says.

The FMA has updated its KiwiSaver tracker, which shows fees as a percentage of funds' five-year average return.

Aggressive funds ranged from Mercer High Growth's 7.9% of return paid in fees to 17.2% for Booster's Geared Growth fund and 23.5% for NZ Funds Growth Strategy.

Growth funds varied from ASB's 5.5% to NZ Funds' Inflation Strategy's 21.3%.

Cash funds had high fee-to-returns ratios because their returns were so low.

When it was launched, the FMA said the tracker made it clear that there was no evidence that paying a higher fee got a better return.

But Booster's outgoing chief investment officer David Beattie said that was now not so clear.

He pointed to the scatter plot with the data which shows that all the lowest-fee providers have after-fee returns at 5% or below. 

The best performers in the market hit more than 15% over five years.

The highest performers after fees over the five years were the Quay Street New Zealand equity fund (15.1% return, 1.3% fee, OneAnswer International Share fund (14.5% return, 1.1% fee) and OneAnswer Australasian share fund (14.4% return, 1.1% fee).

“At best there’s no relationship and when all the funds are together there’s potentially a positive correlation between fees and returns. We wouldn’t disagree with that.”

The most expensive KiwiSaver fund was the Lifestages Growth Portfolio, at 2.8% fees and a return of 9.1% after fees and NZ Funds Growth Strategy with 2.7% fees and 9.9% returns.

Booster’s Geared Growth fund also had fees of 2.7% but Beattie said that would soon change because it would no longer have to include its interest costs as part of the calculation. The fund borrows to leverage up its total exposure to equities. “They are not fees paid to us, they go to the bank as part of funding the facility.”

That would cut the fees recorded in half, he said. 

Beattie said the onus for anyone charging fees that were higher than the average was to justify how they were adding value.

“If you aren’t you will go out of business because investors will go to those who are better at proving they are adding value or who say they offer cheap fees and don’t add a lot of value. The evidence does not support the proposition that the higher the fee the lower the return after fees.”

He said when funds went into negative returns the percentage calculations would look meaningless.

“It’s useful to plot the return versus fees but not to portray it as a percentage.”





Knowledge still lacking on KiwiSaver

New Zealanders still have a lot of unanswered questions about KiwiSaver, a new survey shows.

The latest ASB KiwiSaver survey shows that 63% of respondents said they needed to save more for retirement and 18% were unsure.

But many did not know what was an appropriate amount to be aiming for.

A full 17% of respondents were unsure how much saving would be required each year in retirement.

A fifth thought the amount required per year was less than $30,000 while another 31% thought a figure between $30,000 and $50,000 each year would be needed. A remaining quarter thought that more than $50,000 per year would be required per year of retirement.

Four in 10 of respondents planned to use KiwiSaver to cover day-to-day expenses and provide income within retirement, and 11% planned on leaving the money in KiwiSaver once retired. Another 11% of people planned to use KiwiSaver to pay off mortgages or other debt.

“With good returns a key reason for satisfaction, markets remaining volatile, and KiwiSaver knowledge still low, the survey highlights the importance of good financial planning and seeking advice to help with all the uncertainties,” ASB wealth economist Chris Tennent-Brown said.

“At times like now when sharemarkets are volatile it’s especially important to seek help if investors are unsure what they should be doing."