There’s a lot more to selecting a KiwiSaver fund than just checking past returns and fees. If your hard-earned money is invested in KiwiSaver, you need to ask the important questions to understand where and how that money is invested.
Note: The following information is taken from Aon KiwiSaver Scheme’s own website, fund updates, and the product disclosure statement published in March 2020.
Updated: 14th April 2022
Reviewed by: Muhammad Lambat (Senior Financial Consultant @ National Capital)
Aon KiwiSaver Scheme review
The Aon KiwiSaver Scheme is a relatively smaller KiwiSaver provider. However, has been awarded a Gold rating by independent research company SuperRatings.
They offer thirteen KiwiSaver funds, ranging from a lower-risk cash fund to a higher-risk growth fund. A unique offering to the scheme is its Target date funds. These funds allow you to choose a target date nearest to your planned retirement date. The fund allocation is automatically adjusted to be more conservative as you get older.
Aon selects external investment managers, including ANZ, Milford Asset Management, Russel Investment Group Limited and Nikko Asset Management to maintain the provider’s high standards. Each of the managers have an active investment management approach and a responsible investment policy.
Aon charges annual fund fees in the range of 0.84%-1.51% for all of its funds in addition to an annual membership fee of $39.96. It is free to switch between different funds within the scheme.
In general, the returns of Aon KiwiSaver funds in the last 5 years have been above the average KiwiSaver returns.
Changes within the Aon KiwiSaver Scheme
In Nov 2021, the Aon New Zealand KiwiSaver Scheme and Master Trust businesses were acquired by Fisher Funds.
In closing
Aon’s partnership with multiple investment managers gives investors a variety of funds to choose from. Based on past performance alone, over the past 5 years, Aon’s active investing approach has led it to continuously perform above the average KiwiSaver fund after fees and taxes.
Sources:
*Past performance is not necessarily indicative of future performance.
*All returns are per annum after fees and tax (28% PIR) as of the quarter ended 30th September 2024.
*Source: National Capital Research
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Aon is a specialist superannuation division of Aon New Zealand, an insurance broker with over 30 years of industry experience. They currently administer a large portion of corporate superannuation and KiwiSaver schemes in New Zealand.
While the Aon KiwiSaver does not employ investment managers in-house, they utilize the talents of managers such as ANZ Investments, Nikko Asset Management, and Russell Investment Group to manage their KiwiSaver Scheme.
The Aon KiwiSaver Scheme manages fourteen funds. It has total KiwiSaver Assets Under Management (AUM) of over $567 million and 19,247 KiwiSaver clients as stated in the annual report from March 2021.
Aon employs the use of Investment Managers to manage their KiwiSaver Scheme outside of the organisation, therefore Aon does not have its own Investment Team.
The Manager seeks to offer a variety of investment options which cater to a diverse range of KiwiSaver members with differing needs and objectives. The AIC makes recommendations to the Manager on underlying investment manager selection with advice from the investment consultant. Information is drawn from:
Selection criteria include:
With operational due diligence, an assessment is made of the firm’s operations and control infrastructure in the context of its size, business complexity, and asset class exposure.
The Scheme uses a related party to provide investment consulting services, namely Aon New Zealand. Related party services are provided on arm’s length commercial terms in accordance with the rules on related party transactions that apply to managed investment schemes under the FMC Act. Aon’s Global Conflicts of Interest Policy provides guidance on identifying potential and actual conflicts and on avoiding and managing them.
Below is a link to Aon Global’s Conflict of Interest page:
All KiwiSaver Scheme Providers must ensure they meet regulatory standards and act with customer interests in mind.
KiwiSaver Scheme Managers must exercise care, diligence, and skill in the investment of scheme assets, and act in accordance with the stated investment policy and objectives. The FMA monitors that KiwiSaver Schemes are compliant with their obligations. Additionally, KiwiSaver Scheme Trustees also have a responsibility as front-line supervisors for monitoring the management and administration of these schemes.
A custodian plays a key role in protecting your investments. They hold your money and investments (i.e. keep custody of them) on your behalf. So they are the legal holder of your assets while you are the beneficial and ultimate owner.
Aon’s custodian is Aon KiwiSaver Nominees Limited. While still under the Aon umbrella of companies, it is set up by Aon’s supervisor and is managed separately, their assets under management are approximate $NZ 171.78 billion.
A supervisor is a licensed entity independent of a KiwiSaver scheme provider that supervises the provider’s management of the scheme. KiwiSaver schemes are trusts, and (except for restricted KiwiSaver schemes) the terms of the trust deed states that the supervisor (or another custodian) must hold all contributions and investments in trust for the investors.
Aon’s Supervisor is Public Trust. Public Trust of New Zealand was a government-appointed corporation sole providing trustee services to those unwilling to use private services or required by the courts or legislation to use the Public Trustee. From 2001 Public Trust ceased to be a corporation, adopting a structure similar to a company as a Crown entity and was renamed Public Trust. It administers 50,000 estates, trusts, funds and agencies. They supervise seven KiwiSaver Providers with approximately $13.5 billion assets under management.
Aon, a subsidiary of Aon Holdings New Zealand, is the Scheme’s investment manager and investment consultant and provides investment advice to the Manager.
The Aon Investment Committee (AIC) assists the Manager in overseeing the investment activities of the Scheme, in particular with respect to performance monitoring and SIPO reviews.
Day-to-day investment management responsibilities have been delegated to four experienced underlying investment managers, as follows:
The Aon Retirement and Investment Risk and Compliance Committee (ARIRCC) assists the Manager in managing risks in relation to the Scheme. These risks include operational, compliance, information technology, money laundering and business continuity risk considering the risk of reputation damage and financial loss.
The Manager believes that currency exposure can increase volatility in asset class performance and this is not desirable in all asset classes. Therefore the international property, listed infrastructure and international fixed interest portfolios will be managed to a 100% hedged benchmark at all times. However, the underlying investment managers are permitted to take currency risk within the international fixed interest portfolios in order to seek to outperform the benchmark.
Within an international share portfolio, currency exposure is desirable as it adds diversification and can be a source of additional return. However, for New Zealand based investors there may be a premium to be earned by hedging currency exposure as a result of interest rate differentials. Therefore the Manager has determined that the benchmark position for international shares is to be 50% hedged.
Follow the link below to Aon’s Statement of Investment Policy and Objectives, for more:
The underlying Manager’s investment philosophy is framed by a set of fundamental beliefs:
Underlying investment managers used by the Scheme may invest in a broad range of shares, fixed interest investments, listed property trusts, cash instruments and in managed funds. Securities held by underlying investment managers may be listed or unlisted. Underlying investment managers may borrow, short-sell securities and use derivatives. Underlying investment managers provide Aon with a list of authorised investments or mandate details for each investment fund that is consistent with the SIPO and must notify Aon in writing as soon as practicable if this list or mandate changes. If a breach occurs, the underlying investment managers must notify Aon of the breach as soon as becoming aware of it or within the timeframe specified in the agreement Aon has in place with the underlying manager. Aon has to report any changes or breaches to the manager as soon as AON becomes aware of them.
The performance of the investment funds towards their long term objectives and the underlying investment managers against their performance targets is monitored quarterly by the investment consultant with the assistance of the underlying investment managers. The underlying investment managers are required to report on the following areas:
Socially responsible investing (SRI) or Environmental, Social and Governance investing (ESG), also known as sustainable, socially conscious, “green” or ethical investing, is any investment strategy which seeks to consider both financial return and social/environmental good to bring about social change regarded as positive by society.
Basically, SRI investing is investing in companies that have a positive impact on society, based on a number of factors.
The Manager believes that over the long term, companies with strong environmental, social and governance (ESG) practices should deliver stronger risk-adjusted returns than those without. Aon globally as well as all the underlying investment managers are global signatories to the United Nations Principles for Responsible Investment. These six principles recognise the importance of incorporating environmental, social and governance issues into investment processes. The Manager, Aon globally and the underlying investment managers seek out companies with good ESG practices, to provide scheme members with funds that meet members’ needs and expectations.
While Aon is not directly responsible for the investments within a particular fund, they have outlined the process for which they measure the ESG requirements for their underlying fund managers. Here is their policy framework below:
Aon is a signatory to the United Nations Principles for Responsible Investment and a member of the Responsible Investment Association Australasia.
Follow the link below for more information:
