Over the past 5 years, Simplicity’s passive investing approach has made it a good choice for many investors as its returns continuously perform above the average KiwiSaver funds in the respective categories.
However, there’s a lot more to selecting a KiwiSaver scheme 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 Simplicity KiwiSaver Scheme’s own website, fund updates, and the product disclosure statement published as of August 2023.
A short summary review of the KiwiSaver provider
Updated: 10th August 2023
Reviewed by: Daniel O’Brien
Simplicity Scheme review
The Simplicity Scheme is a not-for-profit KiwiSaver provider.
They offer six KiwiSaver funds, ranging from a lower-risk conservative fund to a higher-risk growth fund. Simplicity believes in taking a passive investment approach and maintaining low costs. This
means they take a buy and hold strategy. This means their funds have minimal re-balancing in order to reduce what it believes is unnecessary activity and costs.
Its investing approach consists of tracking an index fund where possible. This means that they do not try to predict market movements and benefit from very low costs, aiming to return investors more money long-term. Simplicity adopts an ethical focus and avoids investments in companies with significant involvement in activities such as fossil fuels, alcohol, tobacco, gambling, and firearms.
Simplicity charges the same 0.29% annual fund fee for all of its funds. It is free to switch between different funds within the scheme. Simplicity donates 15% of its fees to the Simplicity Charitable Trust, which donates to New Zealand charities.
In general, the returns of Simplicity funds in the last 5 years have been in line with the average KiwiSaver returns.
Changes within the Simplicity Scheme
In Dec 2021, Simplicity removed the annual membership fee from all its managed KiwiSaver options.
Simplicity was granted default provider status in 2021 as part of a larger overhaul of the Default KiwiSaver scheme by MBIE.
In closing
Based on past performance alone, over the past 5 years, Simplicity’s passive investing approach has led it to continuously perform above the average KiwiSaver investment options after fees and taxes.
*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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Simplicity is the manager of the Scheme. They are 100% owned by the Simplicity Charitable Trust. Simplicity’s aim is to make members better off by offering the lowest-cost Kiwi Saver option and operating it in the simplest, most transparent way possible.
They aim to:
They donate 15 per cent of the fees charged to the Simplicity Charitable Trust, which donates to New Zealand charities.
The Simplicity scheme manages assets worth over $2.6 billion and has a total of 100,601 members already signed up.
Sam Stubbs – Founder and Managing Director
Sam Stubbs was most recently the CEO Of Tower Investments, a KiwiSaver default provider. Before that he was Managing Director of Hanover Group, and spent 10 years working for Goldman Sachs in London and Hong Kong. He previously worked for Natwest Markets, Fay, Richwhite and IBM New Zealand. He has been a Board Member of the Financial Services Council, and a member of the Government Taskforce on Financial Services.
Sam has an MA (Hons) from the University of Auckland.
Andrew Lance – Chief Operating Officer
Andrew’s professional career in the bond market spanned over a decade in the City of London. However, in 1993, he relocated to New Zealand with his spouse to facilitate her foreign experience. During his tenure in the investment sector of New Zealand, he held numerous positions at different investment firms, including New Zealand Funds Management, TOWER Investments, Fisher Funds, and AMP Financial Services.
At AMP Financial Services, Andrew assumed the role of an investment specialist and was a crucial member of the project team tasked with transitioning AMP products to comply with the new FMC Act regulatory framework. His contribution was pivotal to the success of the project, and his expertise in the investment sector proved invaluable.
Matthew Houtman – Head of Private Markets
For the past 15 years, Matthew has been working with mid-market businesses in New Zealand. He is the Co-Founder and former Co-Managing Director of Pioneer Capital Partners. During his tenure, Pioneer raised three Private Equity funds and invested in 22 export-focused growth businesses.
Prior to co-founding Pioneer, Matthew served at UBS Investment Bank in both the Auckland and London offices. There, he provided clients with guidance on mergers and acquisitions, syndicated finance, bond issuance, IPOs, and overall corporate advisory.
Peter Wells – Head of Compliance, Risk and Legal
Peter has accumulated 18 years of professional experience in investment banking across various financial hubs in Asia. Following his return to New Zealand in 2016, he assumed roles at Public Trust and Trustees Executors before joining the Financial Markets Authority. During his three-year tenure at the latter organization, he specialized in regulatory oversight of licensed supervisors, investment managers, and custodians. Most recently, Peter served as a senior operational risk and compliance manager for ANZ Investments.
The Funds are trusts and are governed by a trust deed (Trust Deed) between Simplicity and Public Trust, the supervisor of the Scheme (Supervisor). The Scheme’s assets are held by Public Trust, the Supervisor and independent custodian of the Scheme, on behalf of investors. The Scheme is a predominantly passive KiwiSaver investment scheme. This means that Public Trust invests your money alongside other members’ money based on instructions. A managed investment scheme can give you access to investments that you may not be able to access as an individual.
The Chief Operating Officer (Andrew Lance) is the principal person responsible for all of the KiwiSaver and Investment Funds. The Co-Heads of investor services (Craig Simpson and Emma Ryan) are the backup, and then they also have a Business Analyst (Ryan Lambert) who supports the COO, MD and the Board.
In terms of reporting, Andrew Lance reports to the Managing Director (Sam Stubbs), and Craig Simpson and Emma Ryan report directly to Andrew Lance. Ryan Lambert currently has a dual reporting line to both C & Andrew Lance.
The investment objective for each Fund is for its performance to be ranked in the top 25% of its respective KiwiSaver category after tax and fees over the medium to long term.
For the Conservative Fund, its category is funds with an average allocation to income assets such as bonds, of around 80%. For the Growth Fund, its category is funds with an average of around 75% allocated to growth assets such as shares. For the Guaranteed Income Fund and the Balanced Fund, their category is funds with a fairly even split between income and growth assets. The Moderate Fund and the Balanced Fund benchmark asset allocation is 44% income, 56% growth.
Simplicity believes their return objectives will be achieved by maintaining a consistent asset allocation through market cycles. They do not believe in frequent re-balancing of asset allocations, which can cause unnecessary activity (and associated costs) and can be overly emotionally driven in times of market volatility. In their opinion this approach has not shown that it can add value to investors.
The asset allocation of each Fund is set by determining the average strategic asset allocation to each asset class by the main KiwiSaver providers for each risk category; conservative, balanced and growth. This data is released every quarter as part of each provider’s regulatory disclosure.
While they use the averages as a basis for their asset allocation, Simplicity do not believe their investors need to hold the levels of liquidity that the average manager holds. Simplicity are a long term investor and believe they should collect the additional return from holding long-term bonds. Their approach is therefore to allocate the average cash weighting over and above what is required for cashflow management (around 2%) into highly rated New Zealand corporate bonds.
Where the average allocations amongst Simplicity’s peers includes unlisted investments, or those not accessible via public markets (e.g. direct property, private equity, hedge funds), they will allocate the same amount into their listed equivalents i.e. shares or bonds. Liquidity and low costs of investing are paramount to their investors’ wellbeing.
The average strategic asset allocations are checked quarterly when the data is released. If you change KiwiSaver to Simplicity, you can keep track of your performance through your KiwiSaver login details via their website.
All KiwiSaver 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 providers are compliant with their obligations. Additionally, KiwiSaver Trustees also have a responsibility as front-line supervisors for monitoring the management and administration of these schemes. Essentially, there are a couple of failsafe systems in place to allow people joining KiwiSaver to have peace of mind.
A supervisor is a licensed entity independent of a scheme provider that supervises the provider’s management of the scheme. KiwiSaver schemes are trusts, and (except for restricted 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.
Simplicity’s supervisor is Public Trust. Corporate Trustee Services are part of Public Trust and are a leading specialist corporate trustee company in New Zealand, with more than NZ$90 billion under trusteeship and supervision. They are New Zealand’s sole Crown-owned trustee company.
A custodian plays a key role in protecting your KiwiSaver investment. 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.
Simplicity’s custodian is Simplicity Nominees Limited, which is a Subsidiary of Public Trust that holds the assets of the Scheme on trust.
Each of the Funds has a strategic asset allocation to the major asset classes i.e. shares (including listed property) and fixed interest (bonds).
Simplicity believes in socially responsible investment, and they also believe that markets are efficient.
So they have adopted a predominantly ‘passive’ index approach to investing. Simplicity do not actively pick or select securities, because they believe that using index funds and having very low costs will return investors more money over time.
Each asset class is represented by an index fund where possible. These funds are designed to track the investment return of a particular market index. For offshore investments, the scheme invests in funds managed by Vanguard Asset Management Limited (Vanguard), a subsidiary of the VanguardGroup, Inc.
If no suitable Vanguard index fund is available for a particular asset class (specifically New Zealand bonds and shares) they have established their own sector funds that hold a portfolio of securities, designed to provide the respective market return. Although these funds are not index funds, they invest as closely as practically possible to the market index, and minimise costs wherever practicable by keeping transaction and holding costs low.
By investing in index funds, Simplicity also maximises diversification, with over 3,000 different share and bond investments in each Fund.
The performance of each asset class is monitored against its respective benchmark on a daily basis.
Performance is reported to the Supervisor monthly. Investors will receive a quarterly fund update, with current information available through the Scheme’s website on a daily basis. Making accessing KiwiSaver performance easy for their clients.
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.
Conflicts of Interest may occur at multiple levels and Scheme members’ interests take priority at all times.
In order to avoid, mitigate and manage potential conflicts, Simplicity has adopted a Conflicts of Interest Policy. The key principle is that any potential conflicts of interest are avoided where possible. If that is not possible, then they are clearly disclosed by any person making decisions on behalf of Scheme members and mitigated to the extent possible.
A register of potential conflicts of interest is maintained by the chair of their Board of Directors. The chair must be notified of any changes to the register if and when they occur.
Continual disclosure of potential conflicts of interest is a contractual requirement for all members of staff or parties contracted to Simplicity.
Simplicity’s business is ultimately a social enterprise, thus investing responsibly is an important issue for us and our members. They specifically exclude investments in companies with significant involvement in the following activities:
Their investments also exclude companies that have contravened the principles of the UN Global Compact (www.unglobalcompact.org), under the following categories:
Simplicity believes in social responsibility and seeking areas where they can be constructive. They do this by being an active shareholder advocate and through the 15% of their fees that Simplicity Charitable Trust donate to charity. If that is something you value, you may consider the Simplicity KiwiSaver sign up.
Simplicity KiwiSaver Scheme Annual Report
Simplicity KiwiSaver Scheme Statement of Investment Policy and Objectives (SIPO)
Simplicity KiwiSaver Scheme Product Disclosure Statement (PDS)
Simplicity KiwiSaver Ethical Investing
Not-for-profit KiwiSaver provider says it can make Kiwis $65K better off | Stuff.co.nz
Simplicity drops membership fees for all products | Good Returns
