Amanah KiwiSaver Scheme Review

Updated 26 January 2021

Summary of Amanah KiwiSaver

Amanah KiwiSaver offers one fund, a growth-focused and high-fee option that invests over 90% of its current assets in foreign sharemarkets.
It's the only KiwiSaver fund that is compliant with Sharia law, and prohibits the investment in companies that deal in pork, interest earning, alcohol and a number of other forbidden activities.
The fees are some of the highest in KiwiSaver. Specifically, the fund charges three fees - a management fee (1.62% of funds held), an administration fee (0.39%) and an annual membership fee (around $32). Amanah states in its Product Disclosure Statement that it has the right also to charge a performance fee (if the fund exceeds expectations). A performance fee is standard for funds which are actively managed.
Switching to Amanah is free, and there are no joining fees or exit fees if you take your money to another fund.
Performance: Our KiwiSaver Three-Year Returns Calculator and Comparison shows the latest three-year returns in dollar terms, so you can see which funds over-performed and under-performed compared to above average across all KiwiSaver funds (listed as Balanced, Moderate or Growth). This tool is updated monthly, so you can see the latest results.

Read this First: Fees, Performance and Understanding What's Best For Your Situation
A lot of media attention focuses on KiwiSaver fees, but this is only one thing to consider when picking the most suitable provider and fund for your retirement needs. Being comfortable with what you're investing in is the most important aspect of saving for your retirement. Fees are important, but should not be the deciding factor in your decision-making.

Our Review
In this guide, we outline what the Amanah KiwiSaver scheme offers by way of its growth fund, as well as how Amanah is different from other funds.

Please note: MoneyHub is not a Financial Adviser, and this guide has been published to explain the investment fundamentals and outline the pros and cons of Amanah KiwiSaver as a KiwiSaver investment option.

This Guide covers:

Amanah KiwiSaver Fees

Amanah's fees are charged in three ways:

Annual management fee - 1.62%
Annual administration fee - 0.45%
Annual membership fee - $32.40

We have prepared a summary of annual fees charged on a range of KiwiSaver balances.

KiwiSaver Balance (at month-end)	Monthly Fee
$5,000	$135.90
$25,000	$549.90
$100,000	$2,102.40

The specs of the Amanah KiwiSaver Fund, and where your money is invested

-Unlike most other KiwiSaver schemes which offer a range of funds of varying risks, Amanah only offers one fund, which is focused on growth and long-term returns. To understand where your money is going, we explore the fund's composition in detail below.

Amanah Growth Fund.

Risk factor: 7
Annual Return to 31 March 2019 (net of tax and fees): 14.54%
Minimum suggested investment timeframe: 5 years

Investment Composition:

Cash and cash equivalents 3%
International equities 97%

We say: The Growth fun is super aggressive, with 97% of funds invested in trades stocks in major companies. The focus is on overseas companies, with significant holdings currently in Apple, Alphabet (Google), Nike, O'Reilly Automotive, Eli Lilly, Akamai Technologies and Microsoft. 10 investments currently make up over 40% of the fund. The target investment split between equities and cash investments is 80/20, but Amanah has taken a bullish position by putting KiwiSaver funds into major blue-chip and other growing companies. The higher the proportion of equity investments, the more aggressive the fund and the expectation of a higher return. As with any fund, past performances do not indicate future results, but generally the characteristics of how each fund behaves remain the same.

FMA issues and returns

Of some concern is the Growth fund's average 5-year return of around 5% p.a., which is well short of its competitors.
Since 2016, Amanah has been in a dispute with the Financial Markets Authority (FMA) about how it makes its investment decisions.
Amanah sued the FMA in 2018, arguing its actions had caused operational difficulties with relation to running the fund.

Who is Amanah KiwiSaver Suited To?

With its strategic Islamic ethical investment policy, Amanah is suitable for Muslim KiwiSaver members as well as non-Muslims. But, there are drawbacks, as we outline below.

Standout Features:

The scheme has pledged to be an ethical investor and in accordance with Islamic practice and beliefs, and is the only fund to offer such a policy within KiwiSaver.

Be aware:

The scheme only has one fund, meaning you won't be able to switch to another fund within Amanah should you want to. This is especially important for anyone nearing retirement or planning to make a first-home withdrawal in the near future.
The fees charged to 31 March 2019 was the highest of any other KiwiSaver fund.
As with any investment, markets go up and down. The Dotcom bubble in the early 2000s sank global sharemarkets, as did the 2008 Global Financial Crisis. While many global sharemarkets are now at record highs, this is no guarantee of future earnings.
The fund has had a turbulent history, and more years of data is needed to be able to make proper comparisons with other funds.

The Bottom Line

Overall, Amanah KiwiSaver delivers on all it promises to be an ethical fund, and is strictly bound by its commitment.
The fund charged investors over 2% in fees for the year ended 31 March 2019, the highest of all KiwiSaver fees.
There are no joining fees, no exit fees, but there are performance fees which can be charged as the discretion of the fund manager.
The growth fund is an active fund, and unlike Simplicity, for example, does not follow or recreate a benchmark of a sharemarket index. Amanah's investment managers will regularly pick undervalued equities, anticipating that their share price will go up in the short to medium term. This has more risk but also has the potential for greater returns.
Depending on your KiwiSaver balance, other funds on other platforms will likely have cheaper management fees, with an example presented in the table below.
No two funds are directly comparable, so it's essential to shop around and compare fund objectives as well as fund fees if you're serious about having the biggest KiwiSaver nest-egg possible.
In terms of risk, each fund has a risk number (1 = lowest, 7 = highest), and Amanah is rated a 7 indicating its aggressive investing nature.

Fund Fee Comparison: How Amanah KiwiSaver's Growth Fund compares alongside Simplicity and SuperLife
(KiwiSaver balances between $5,000 and $40,000)

Balance	Amanah KiwiSaver Annual Fee	Simplicity Annual Fee	SuperLife Annual Fee
$5,000	136 (2.70%)	$36 (0.72%)	$61 (1.21%)
$15,000	$343 (2.30%)	$67 (0.50%)	$122 (0.81%)
$40,000	$860 (2.12%)	$144 (0.37%)	$274 (0.69%)

Amanah Annual fee: 2.07% of total investment plus a $32.40 membership fee
Simplicity Annual Fee: 0.31% of total investment plus a $20 membership fee
SuperLife Annual Fee: 0.61% of total investment (SuperLife AgeSteps fund, 30-49 year old members) plus a $30 membership fee

7 things to know about Amanah KiwiSaver

Amanah is New Zealand's only Sharia-law compliant fund manager, and offers both KiwiSaver and non-KiwiSaver options

Being Islamic-focused, Amanah's ethical investment mandate prohibits investment in businesses that source significant income (> 5% of their total income) from the following business activities:

Defence/Weapons
Gambling
Alcohol
Tobacco
Adult entertainment
Pork
Dealing in interest

This means Amanah won't invest in blue-chip companies like McDonald's, or beverage companies, among others. To learn more, Amanah helpfully presents its non-KiwiSaver documents all in one place. It also lists the investments (i.e. names of the companies) the fund holds positions in.

It doesn't matter what your employer's default KiwiSaver provider or fund is - you can select Amanah's growth fund as the fund you want

Because Amanah is relatively unknown and quite small, most employers won't have heard of it, and even fewer will have considered it as a default provider contender. But none of that matters - any KiwiSaver member has the right to pick any one of the 25+ providers and the fund they want. So while Amanah doesn't have the branding of bigger players, you're 100% entitled to pick it as your provider.

There is no minimum investment and it's easy to take contribution holidays

As an Amanah KiwiSaver member, you'll pay the monthly membership fee. This gives you the freedom to invest as you like. And if you want to contribute to your fund at a level above your fixed salary contribution, you can do this by contacting the client services team.

Dividends your fund(s) receive are reinvested, meaning more cash is invested on your behalf

The dividends received from the Amanah growth fund are re-invest in shares, which may themselves in-turn pay dividends. These cash payments represent the profits from companies returning it to the shareholders, i.e. you. When a company declares a dividend, your fund will receive money. It is re-invested into more shares, growing the value of your fund. Despite being a cash payment, and as is the case with ALL KiwiSaver funds, there is no option to take this money as cash until you turn 65.

Amanah KiwiSaver offers an actively managed growth fund with the aim of picking market-beating investments

The investment managers, according to the product disclosure statement, the fund's objective is to "increase the rate of average annual return to scheme members over the long-term, while strictly complying with the restrictions of the Scheme’s Ethical Mandate". This isn't very specific, but what it means is the fund is looking for long-term results while keeping to its promise to be an ethical investor.

However, an actively managed growth fund is not without its risks, and Amanah discloses that their active investment management approach "may lead us to choose investments which underperform, or may result in us misjudging market movements". Ultimately, as with any fund that invests the majority of its money in the sharemarket, there are significant risks.

Signing or switching to Amanah isn't complicated, but you can only pick one fund

Signing up to the Amanah KiwiSaver growth fund is easy, but if you decide that it's not for you, Amanah doesn't offer any other funds you can switch to. This means you would need to change schemes.

If you're not sure of what to invest in and want to have a range of options to pick from, look at Sorted's FundFinder tool which includes the Amanah growth fund, and all other KiwiSaver's funds for comparison.

Amanah KiwiSaver does not specifically invest in New Zealand companies

While the growth fund targets to invest at least 80% of its money in shares, there is no specific investment in New Zealand companies, and what we have seen is that the overseas equities, predominantly in America, are preferred. This, however, is subject to change based on the investment decisions of the fund managers.

Our Conclusion

We like that Amanah KiwiSaver offers New Zealand's only Shariah-compliant fund which allows Muslim and non-Muslims alike to invest in ethical companies beyond the standard offering.
Fees are high - at over 2% p.a, Amanah commanded the highest fees of any fund as at 31 March 2019.
Investors are limited to one fund, so should markets turn and you want to switch to a more conservative cash fund, you would need to switch schemes altogether.
With Amanah, investors are getting exposure to global ethical and Sharia-compliant companies, which is the fund's unique selling point.
We continue to watch Amanah closely as it resettles itself as a KiwiSaver option to Muslims and non-Muslims alike.

Do you have an experience with Amanah KiwiSaver you would like to share with our readers? Email our research team who would be delighted to hear from you.