The recent New Zealand Herald article (Cautious banks win - but investors are losing, published Saturday 2 November 2013) highlights the need for all KiwiSaver providers to offer clear information to fund members. It illustrates the fact that while periodic disclosures are intended to provide greater transparency even experienced investment professionals can get it wrong on occasion, which in turn highlights the challenge for consumers to understand how their retirement savings are invested.
The article incorrectly referred to the investment management fees disclosed in periodic disclosure statements as not including the fee a KiwiSaver provider may pay to underlying investment managers. This incorrect statement has now been retracted, however it is important we highlight this correction and it is understood by KiwiSaver members if we are to continue to strengthen confidence and participation in the system that can lead to a better retirement for everyone.
The article calls out the practice of KiwiSaver providers using the same personnel to manage investments without consideration of the variances in the type of fund being managed or in other words the risk of not having the right people for the job
In our view, it is the people who make the decisions on strategy, asset allocation and investment manager selection that fund members need to be aware of - these factors are the most important decisions for the future fund performance.
At Mercer, we use a multi-manager investment approach, which means fund members’ savings are not locked in to being invested with one manager. This model allows for a diversification of investment styles and strategies which are aimed at delivering more consistent returns through the different cycles which markets go through.
We constantly monitor the performance of investment managers; through close observation of the results they deliver we can select those we consider to be the best for a particular type of investment. Additionally, by spreading the investments held across markets and diversifying them across investment types, the Mercer model means we can reduce the risks faced by fund members because it means people don’t have all their eggs in one basket.
The inclusion in periodic disclosure statements of details of key personnel involved in the the governance of funds is critical information to provide to KiwiSaver members to improve transparency on how their investments are managed and it should not be overlooked.
Increased disclosure is, without a doubt, a positive step in New Zealand’s retirement savings system, but the next step may be for KiwiSaver providers to step up and help educate KiwiSaver members on what all the disclosure means, what’s important, and what will influence their retirement savings.
Managing Director, Mercer (New Zealand)
Mercer is a global leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset – their people. Mercer’s 20,000 employees are based in 43 countries and the firm operates in over 140 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital. With 55,000 employees worldwide and annual revenue exceeding $12 billion, Marsh & McLennan Companies is also the parent company of Marsh, a global leader in insurance broking and risk management; Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a global leader in management consulting. Follow Mercer on Twitter @Mercer_NZ