In general, Lifestages funds have performed below the average KiwiSaver fund over the last 5 years for their respective categories. So it may not have been a good KiwiSaver choice for many of its investors.
However, 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 Lifestages Kiwisaver Scheme’s own website, fund updates, and the product disclosure statement published in June 2023. List of references are at the bottom of this page.
Updated: 4th July 2023
Reviewed by: Raymond Hu
Lifestages KiwiSaver Scheme review
The Lifestages KiwiSaver Scheme is an operating division of Funds Administration New Zealand Limited, a subsidiary of SBS Bank.
They offer two KiwiSaver Funds: the Lifestages High Growth Fund, and Lifestages Income Fund. They also offer the Lifestages Auto option, which invests in combinations of the two funds in accordance with your age. There are five age-driven brackets that offer you the option to invest in ‘life stages’.
Lifestages uses an active investment approach to capitalize on opportunities while responding to the unexpected in a responsible and eco-friendly manner. The Lifestages Auto Funds divide your contributions and balance between High Growth and Income funds depending on your age. The scheme emphasizes investing in companies with lower carbon intensity and avoiding controversial and harmful practices.
Lifestages charges a maximum of 2% annual membership fee with annual management fees that range between 0.87%-1.15%. It is free to switch between different funds within the scheme and there are no joining or exit fees if you decide to switch providers. The provider does not charge any performance fees for any of its funds.
In closing
Based on their performance over the past five years, Lifestages has performed below the average KiwiSaver fund after fees and taxes. However, as of the past 6 months, Lifestages has experienced positive turnarounds across all schemes.
*Past performance is not necessarily indicative of future performance.
*List is of the highest 5-year returns A-rated funds as per our Investment Selection Process.
*All returns are after fees and tax (28% PIR) as of the quarter ended 30th June 2024.
*Source: National Capital Research August 2024
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Lifestages is an operating division of Funds Administration New Zealand Limited (FANZ), a subsidiary of SBS Bank (SBS Bank has been working with New Zealanders since 1869 and is a registered bank).
As of December 2021, FANZ managed over $1.5 billion for more than 22,000 New Zealanders through providing private wealth services, the Lifestages KiwiSaver Scheme and the Lifestages Investment Funds.
The Lifestages KiwiSaver Scheme manages two funds and has a total of over $510 million Assets Under Management (AUM) and 19,850 KiwiSaver clients.
Mike Skilling – Chairman
Michael joined the board in May 2016 and has been a member of the board of SBS Bank since 2014. He is also a director of Staples Rodway Asset Management Limited, a subsidiary company of Funds Administration New Zealand Limited.
He has in-depth experience in retail, private, rural and business banking together with insurance, managed funds and finance companies. In previous roles, he has led both the Agribusiness and Business Banking arms of BNZ including Small Business, Medium/Large Business, International Trade, Property, Plant and Machinery Finance and Private Banking.
Michael is a director of several other Boards – including farming enterprises, a pre-school business, a mortgage broker and a finance company. He was a founding director of The ICEHOUSE and a Trustee for eight years. He has been a judge of the Auckland Business Awards and the Indian Business Awards.
He is a Senior Fellow of the Financial Services Institute of Australasia (FINSIA) and a Chartered Member of the New Zealand Institute of Directors.
Morne Redgard – Chief Executive Officer
Morne have over 15 years experience in the wealth management sector, Before taking the role of CEO at SBS Bank and Lifestages KiwiSaver, he was the Chief Customer Officer at Kiwi Wealth
Greg Mulvey – Director
Greg joined the board in May 2005 and has been a member of the board of SBS Bank since 2004.
Greg is a qualified accountant with over 40 years’ experience in the corporate sector including 30 years as general manager of the Invercargill Licensing Trust and a former director of DB South Island Brewery Limited. Greg is a former long serving Trustee of the Southland Indoor Leisure Centre Trust and is a Trustee of the Rwenzori Special Needs Trust.
Greg is a fellow of both the New Zealand Institute of Chartered Accountants and the New Zealand Institute of Management.
Derek Young – Chief Operating Officer
Derek joined the board in May 2004.
Derek has over 30 years’ experience in the financial services industry and has extensive investment management experience.
Prior to joining Funds Administration New Zealand Limited, Derek was a General Manager for ING as well as being responsible for the operations of ANZ Life New Zealand.
Derek has worked for leading funds management organisations such as TOWER, ANZ, and Armstrong Jones/ING in senior management roles.
Derek is a member of INFINZ.
Responsible investment is used in the construction of the investments and selection of the underlying managers. Lifestages do this by integrating an assessment of sustainable practices with the use of exclusionary screens as a way to filter investments, funds and fund managers. An exclusionary screen enables them to exclude investment exposure to such things as controversial weapons, nuclear weapons, tobacco and gambling. External research is accessed to help identify sustainable funds and fund managers, as well as site reviews.
They outsource most of the investment management to external fund managers. They follow a due diligence process for selecting the underlying managers within each fund, applying a combination of four primary filters. These are:
Exclusionary filter
Lifestages consider investment style and philosophy, representation, fund size, and liquidity.
Quantitative filters
They consider fees and expenses, quality of execution, diversification, consistency of risk exposure, tax efficiency, track record and performance since inception vs benchmark.
Qualitative filters
For all managers recommended, Lifestages undertake a qualitative review of information every year, focusing on items such as ownership structure/major shareholders, staff turnover, services provided, business strength and reporting.
The SIPO will be reviewed at least annually by Lifestages and the Supervisor. An ad hoc review of the overall SIPO and/or underlying fund managers/issuers may be triggered by any of the below events occurring. They review all investments on a quarterly basis. Performance is measured against appropriate benchmark indices. Where an underlying fund’s performance is consistent with its mandate and in line with broad style and/or asset class returns, and their investment filters have been observed, no further action will generally be taken. However, an investment/underlying fund may be flagged for ‘enhanced due diligence’, and subjected to a higher degree of scrutiny for any one or more of the following reasons:
Each quarter, Lifestages will review all recommended investments to ensure no fund has breached its own recommended limits.
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.
Lifestages’ custodian is T.E.A. Custodians Limited, a wholly owned subsidiary of Trustees Executors Limited. Before Trustees Executors was established in New Zealand in 1881, it was the practice for people to appoint a friend or acquaintance as their trustee when they drew up a will or trust deed. Naturally, the most able business people were called upon to be trustees.
Due to the rapid development of the Otago province at that time, prospective trustees often found that they had little time to attend to such affairs. During this time the practice of appointing a specialist trustee instead of a friend was already successfully established in Australia. Adopting the same practice, Trustees Executors were proud to establish the first of its kind in Dunedin.
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.
Lifestages’ supervisor is also Trustees Executors Limited.
Responsible Investment
Responsible investing principles are used in the selection of the Funds’ investments. External research is accessed to help identify sustainable investments. Lifestages integrates an assessment of sustainable practices with the use of exclusionary screens as a way to filter investments, funds, and fund managers.
Asset Allocation
The basic principles of asset class investing are based on the foundations provided by Modern Portfolio Theory (“MPT”), selecting investments in order to maximise their overall return. Lifestages achieves this by setting a Strategic Asset Allocation (“SAA”) for the Funds and the Lifestages Auto options.
Hedging
The primary purpose of international investment is diversification of markets rather than diversification of currencies. It is accepted that international market diversification will entail additional risk arising from foreign currency exposure.
The current policy is for international fixed interest exposure to be 100% hedged back to the NZD. This is generally achieved through investing in a NZD hedged underlying fund. The current policy for international equities (other than Australian equities) is for that asset class to be 50% hedged back to the NZD. This is generally achieved through investing in a combination of NZD hedged and unhedged underlying funds.
All other offshore assets are generally unhedged, although this can change in the future. This includes Australian equities, Emerging Markets equities, listed property and infrastructure assets.
Rebalancing
The purpose of rebalancing is to ensure the actual mix of assets in the Funds resembles the target investment mix (the SAA). Each asset class of the Funds has a range around the SAA agreed in the guidelines. Lifestages uses this range to take tactical positions.
Each Fund’s actual asset mix is monitored against its target regularly. Lifestages does not automatically rebalance back to the target. Frequent rebalancing incurs excessive transaction costs that Lifestages believes outweigh the benefit of rebalancing.
They use Fund cashflows to rebalance the Funds to their target. Where cashflows do not achieve the target, then assets are sold or bought accordingly. This is important as if the actual mix in the Fund does not reflect the target, then the actual investment risk of the Fund could be significantly greater or smaller than the target level of risk.
External Manager Selection
As part of Lifestages investment strategy, a key concern is to ensure Funds are adequately diversified. This may include the appointment of external fund managers, with built in risk constraints. Lifestages follows a due diligence process for selecting external managers. This includes external research and onsite visits.
Liquidity
Sufficient liquidity will be held to cover reasonably anticipated redemptions. If necessary, Lifestages have agreed with the Supervisor to borrow up to 5% of the market value of a Fund to cover settlement requirements relating to that Fund. Such borrowing is to be used solely to meet redemption requests and will be for a maximum period of 15 business days and in each instance the Supervisor will be advised of drawdowns occurring and when the amounts have been repaid. To date the funds have not borrowed, nor have any intention to.
Stress testing of the Funds is regularly undertaken. These tests will simulate how the underlying investments of each Fund will react to a series of unfavourable market scenarios.
Valuation
The purchase price of securities entering a Fund will include purchase brokerage and sale values will be after brokerage has been deducted.
For assets under outside management, periodic valuation will be based on latest market prices (for equities the last sale and for bonds the mid-price). Deposits with banks and building societies will be valued using current financial standards. In the case of securities whose latest market price or yield is more than 5 business days old at least two broker opinions will be sought and the average of these will be the price for valuation purposes.
The valuation formula will include a provision for tax, supervisor fees, management fees, an estimate of other ongoing fees, costs and expenses, any exceptional fees and estimated disposal costs to establish the true ‘cash’ value of the relevant Fund. For exiting and new members in a Fund this will be the basis of their exit and issue unit price respectively.
Derivatives
Derivatives may not be used to leverage any Fund, or if the effect is to increase the portfolio risk beyond what it would have been had the relevant Fund comprised only directly held securities. That is, there will be no gearing effect and any derivative positions will be backed by physically held positions at the time that the risk on any derivative arrangement commences. It is accepted that during the term of a derivative arrangement some mismatch may occur between the value of the derivative and the value of its underlying security or portfolio position. Derivatives may be used as a risk management tool where underlying investments create an overall portfolio exposure that they determine to be undesirable e.g. to hedge currency risk. It is envisaged that derivatives will not be used in the normal course of business. While derivatives may be used at our sole discretion, they will advise the Supervisor of any decision to do so, explaining the investment rationale and anticipated duration of the holding period of derivative contracts entered into.
Lifestages employs a proactive approach to investment management, carefully balancing returns, risk, and ecological sustainability. Our core values prioritize the creation of long-term value, accountability, and a comprehensive understanding of both global and local economies. Our commitment to responsible investment practices ensures that our clients can expect a robust and sustainable investment portfolio.
The Funds may undertake the following other activities in carrying out their investment strategy:
Securities Lending
Securities lending with reputable counterparties.
New Issues
Underwriting new issues of authorised debt and share issues (as applicable).
Borrowing
The Scheme is authorised to borrow up to 15% of its Gross Asset Value (as defined in the Trust Deed) to invest in Authorised Investments (as defined in the Trust Deed). Any borrowing must be considered necessary or desirable in the general interests of the members of the Scheme, or for the purposes of conducting the investment, management, or other operation of the Scheme pursuant to the Trust Deed.
Except as contemplated in the Liquidity Policy, borrowing will be for exceptional purposes only. Lifestages will make a written submission to their Supervisor setting out the reasons why the Scheme needs to borrow and a recommendation thereto. Any borrowing will only be undertaken in accordance with the Trust Deed. Currently, there is no intention to borrow.
Related Party Transactions
Transactions with related parties of Lifestages or their Supervisor are permitted, provided such transactions are permitted under the Trust Deed and the FMCA (where applicable) and the appropriate process under the FMCA has been followed.
SBS Bank is a related party. Currently, Lifestages Income Fund holds SBS Bank deposits.
In addition to daily monitoring, the FANZ Investment Committee formally review the performance of the Funds and the underlying investment managers quarterly. This review will compare the return of each Fund and each component of its portfolio against the relevant index over the quarter. There will also be a Fund review, at least annually, against its peers as determined by the FANZ Investment Committee, with input from the Supervisor where appropriate.
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.
In essence, SRI investing involves directing funds towards companies that actively contribute to societal well-being, grounded in a set of diverse criteria. The term “sustainable” signifies investments with a strong foundation in environmentally responsible, socially beneficial, and well-governed (ESG) practices. This label especially encompasses investments that exhibit adept management of carbon emissions and effectively address challenges related to climate change.
As per the Lifestages ESG document, across all Lifestages funds, including their KiwiSaver funds, investments into companies involved in the following activities are excluded:
As at the date of the SIPO linked below, the Fund (through its underlying managers) will only invest in the following security types:
a) Deposits, transferable obligations, or other debt obligations of or guaranteed by issuers with a maturity of no more than 365 days at time of purchase. Floating rate notes with a final maturity of more than 365 days are not authorised (irrespective of the frequency of rate setting).
b) Equities issued in any jurisdiction of companies listed and traded on a recognised stock exchange.
c) Derivative contracts, where the underlying risk relates to the equities referred to in (b). Eligible derivative contracts include interest rate futures, options, interest rate swaps, and credit default swaps. Options, swaps, and credit default swaps must be entered with a counterparty with a minimum long-term credit rating of AA- and a current industry standard (International Swaps and Derivatives Agency) agreement must be in place between the counterparty and us or the underlying manager. The market value of the exposure must be fully covered by cash or backed by liquid physical assets. Derivatives are to be measured on a notional face value basis and may not exceed 100% of the net market value of the relevant Fund’s investment portfolio. Investment in collateralised debt obligations and collateralised loan obligations are not permitted.
Where an entity or an issuer is rated, that rating shall be by an internationally approved rating agency such as Standard & Poor’s (or other rating agency acceptable to the Supervisor).
Lifestages KiwiSaver Scheme Annual Report 2023
Lifestages KiwiSaver Scheme Financial Statement 2023
Lifestages KiwiSaver Scheme Statement of Investment Policy and Objective (SIPO)
Lifestages KiwiSaver Scheme Other Material Information
Lifestages KiwiSaver Scheme Product Disclosure Statement (PDS)
Lifestages KiwiSaver Scheme Environmental, Social and Governance (“ESG”) Investing Principles
