AMP New Zealand Wealth Management (NZWM) announced on Tuesday that their KiwiSaver scheme will be switching from active to passive fund management. Rather than having active managers making investment decisions, it will be driven by computer algorithms to track indexes instead. Their 200,000+ members should be expecting a major fee reduction from this move.
The AMP KiwiSaver scheme has around $6.2 billion of Kiwi’s savings that will be managed by BlackRock Investment Management by mid-2021. BlackRock will also take over the management of the AMP New Zealand Retirement Trust, which managed $3.42 billion.
Members are expected to benefit from this switch
This change in management is part of their plan to boost returns for their members. Jeff Ruscoe, acting chief executive of AMP Wealth Management says that shifting to a predominantly index-tracking investment approach is the right decision to enhance long-term returns, provide greater value for money, and continue supporting their clients’ financial well-being
There was a fee reduction when BNZ moved some of their portfolio holdings to passive management as it is a much cheaper way of investing. Principal at MyFiduciary, Chris Douglas, expects AMP Scheme fees to drop down to 0.5% as part of the next stage of the investment transformation. AMP however, did not give a timeframe on when the fee reduction would be made.
Ethical investment option for members
AMP Capital has a process where it takes ESG (Environmental, Social, and Governance) considerations to better manage risk and is planning to continue doing so. Ruscoe said that the change of management enables them to have more flexibility to support key environmental and social areas to create positive change.
He said that as with their current investment management approach, AMP Scheme is not goin to invest in companies that are involved in the manufacture of cluster munitions, anti-personnel mines, chemical weapons, nuclear explosive devices, civilian firearm stocks, or tobacco.
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