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Kernel Wealth Review

We review Kernel Wealth, the personal finance platform and index fund manager offering low fees and a growing range of products, including a wide selection of seventeen local and international funds, a Notice Saver savings account and the Kernel KiwiSaver Plan.
Updated 8 July 2023

Summary of Kernel Wealth ('Kernel')

Kernel launched in late 2019. Their Invest offering consists of seventeen index funds with specific investment profiles:
  1. The Kernel High Growth fund invests 98%+ of its money into growth assets, such as shares and listed property.
  2. The Kernel Balanced fund which invests its money at around 60% equities and 40% fixed interest.
  3. The Kernel Cash Plus fund which invests into cash and cash equivalents, and interest-generating assets.
  4. The Kernel Global 100 fund invests in 100 blue-chip companies across major equity markets. Examples include Apple, Nike, Amazon, Nestle and Microsoft.
  5. The Kernel Global 100 Hedged fund which is a hedged version of the above fund.
  6. The Kernel S&P Global Dividend Aristocrats fund invests in global companies with a record of maintaining a high dividend over a sustained period. Examples include Subaru, CBA (owner of the ASB) and AT&T.
  7. The Kernel Global Clean Energy fund invests in clean energy-related businesses worldwide, including wind, solar, hydro generators, and renewable manufacturers.
  8. The Kernel S&P Kensho Moonshots Innovation fund invests in innovative US-listed companies that challenge or disrupt industries, such as CRISPR, Dropbox, ChargePoint and more.
  9. The Kernel S&P Kensho Electric Vehicle Innovation fund invests in a diversified mix of global companies involved in the electric vehicles sector and the companies supporting it, such as those specialising in energy storage systems, clean fuel technology, charging infrastructure and more.
  10. The Kernel NZ 20 fund invests in twenty of NZ’s largest companies (i.e. Spark, Fisher & Paykel Healthcare, etc.).
  11. The Kernel NZ Small & Mid Cap Opportunities invests in a broad range of smaller companies listed on the NZX, outside of the Kernel NZ 20 fund. It invests in 35+ companies valued at between $100 million and $1 billion.
  12. The Kernel NZ Commercial Property fund invests in several commercial property companies (Goodman, Kiwi Precinct)., and which includes investments in office buildings, industrial estates and shopping malls.
  13. The Kernel NZ 50 ESG Tilted fund invests in the S&P/NZX 50 companies and tilts their weightings in the fund based on their sustainability factors.
  14. The Kernel Global Infrastructure fund invests in utilities, storage and telecommunications infrastructure. Examples include gas companies, energy producers, airports and water companies.
  15. The Kernel Hedged Global Infrastructure fund which is a hedged version of the above fund.
  16. The Kernel Global Green Property fund invests in global companies owning and operating sustainable real estate.
  17. The Kernel S&P 500 fund invests in the 500 largest companies listed on stock exchanges in the United States. This fund is hedged against currency fluctuations.

Beyond the above funds, Kernel also offers:

1. The Kernel Save offering consists of one high-interest savings account:
  • Kernel’s Notice Saver savings account offers a 5.25% p.a. interest rate (as at 14 April 2023 before tax and subject to change).
  • Access your money with 34 days’ notice, with no paperwork or withdrawal fees
  • No minimums, fees or limits
  • Your money is held securely with a RBNZ registered bank
  • More details: Read more about Kernel Save

2. The Kernel KiwiSaver Plan, which gives you the option to invest in their diversified funds – High Growth, Cash Plus and Balanced Funds – or choose to mix and match between the Kernel funds to construct your portfolio. Here are the details in a nutshell:
  1. Low fees: No annual membership fee, with an annual management fee of 0.25% p.a. for core funds, and 0.45% p.a. for thematic funds. Thematic funds include the Global Clean Energy Fund plus two Kensho funds, everything else are considered core funds. According to recent Morningstar reporting, most investor money is invested in Kernel's core funds.
  2. Custom portfolio vs diversified funds: Depending on your preference, one of the High Growth, Cash Plus or Balanced Funds might be all you need. But if you would like to choose the exact make up of your KiwiSaver balance you can mix and match as you please. A great way to add a sustainability lens or technology tilt to your investments.
  3. High Growth Fund is invested in 98%+ equities: Compared to other growth or aggressive funds already in the market that hold 20-25% in non-growth assets such as bonds and/or cash, the Kernel High Growth Fund holds a higher allocation to growth assets.
  4. Tax advantage: All Kernel funds are registered as PIEs, which means you pay the tax later and only to a maximum rate of 28%. All Kernel funds replicate an index directly, minimising withholding tax leakage.
  5. More details: Our Kernel KiwiSaver Plan Review explains the offering in detail.

Must-Know Specs:
  1. Kernel charges some of the lowest fees in New Zealand. It has two fee buckets - 0.25% p.a. for core funds, and 0.45% p.a. for thematic funds. The Thematic funds cover the Global Clean Energy fund and both the Kensho funds. The rest are considered core funds. The majority of investor money, per recent Morningstar reporting, is invested into Kernel's core funds.

Our View: 
  1. The founding team worked for many years at the NZX but launched Kernel to meet a demand for fee-competitive index funds. Since launching they have added KiwiSaver and savings offerings to their product suite. With annual management fees around half of other investment platforms and online fund managers, Kernel presents a challenge to established funds. By November 2022, Kernel had grown to manage over $350m of investor funds.
  2. We expect the platform to launch new funds, products and features progressively and will update this guide as these changes go live. Since our first version of this review, Kernel has added eleven funds over two years, plus the Kernel KiwiSaver Plan and a high-interest savings account at different stages.
  3. We are not a fan of high managed fund fees – some institutions charge as much as 3% on your investment every year to look after your savings while you take all the risk on what they invest in. In the last couple of years, index funds have become available to the average Kiwi investor, and Kernel is a welcome low-cost online index fund manager offering an wide choice of funds. It also focuses on investor education to help foster long-term decision making.

Our Review 
In this guide, we outline what Kernel is. Specifically, the funds and products they offer to New Zealand-based investors, what index funds are and how they're different to other funds, as well as looking at alternatives and the level of fees involved.  
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 Kernel's funds as an investment opportunity.

Related guides:
  • ​Want to know how to trade or invest in the NZX? Our NZX in a Nutshell guide explains what you need to know.
  • Looking for an investing platform that offers other funds? Our reviews of InvestNow and Flint Wealth have you covered.

The Specs of Kernel

  • Kernel is a private New Zealand-owned company launched in mid-2019 and based in Auckland. 
  • Kernel only sells its own funds, unlike platforms such as Sharesies or InvestNow which offer third-party funds. All underlying investments are held by an independent custodian, meaning your money is protected should anything happen to Kernel.
  • Kernel offers the Kernel KiwiSaver Plan, with options for those with short, medium and long-term time horizons. With the choice to DIY it or select a well-diversified fund.
  • Investing in any Kernel fund means you are investing in the New Zealand and/or overseas sharemarket. Each fund invests in specific shares based on the investment profile and index they track. For example, the NZ Commercial Property Fund invests only in New Zealand listed property shares.
  • You can invest in Kernel funds via its online platform or by working with selected financial advisors. You can also deposit into Kernel Save or transfer your KiwiSaver to the Kernel KiwiSaver Plan using the online platform.
  • In addition to its Cash Plus fund, Kernel also offers savings accounts, with an on-call Notice Saver product. The current interest rate and terms of access is found here. Investor money is held by Kernel as the registered custodian with a registered New Zealand bank. There are no fees - the interest rate you're paid is what you receive (less tax).

Who is Kernel Suited to?

Best For:
  • Kernel accepts individual, joint, kids, company and trust accounts.
  • Short-term investors looking for savings account or fund options to generate a return within 0-3 years.
  • Medium – term investors looking to invest their portfolio is a balanced portfolio (The Kernel Balanced Fund offers an asset allocation of 60% shares, 40% cash and bonds).
  • Long-term focused investors looking for stability and growth that is passive with low management fees. With seventeen funds to choose from, the funds appeal to those looking for high growth, moderate and/or thematic investments.
  • Investors looking for index funds without a sector preference. Both the NZ 20 and NZ Small & Mid Cap Opportunities invest in 20 and 35+ New Zealand companies, respectively. These range from A2 Milk to Fisher & Paykel Healthcare and Fletcher Building, meaning there is no over-exposure to one industry. The S&P 500 fund offers global exposure, while aggressive investors may want to consider the High Growth Fund.
  • Ethical investors - Kernel's funds have some of the lowest ESG fees in the market, with exposure to the NZX if a local investment is preferred. Kernel has also worked closely with S&P to launch some of NZ’s first ESG focused indices, including the NZX 50 Portfolio ESG Tilted Index.
  • Ultimately, with any Kernel fund, investments anticipate New Zealand, overseas and sector-specific markets rising over time while being diversified enough to avoid losing money if one or two shares flounder. In saying this, Kernel offers a few specific-sector funds, including the the NZ Commercial Property fund, Global Green Property fund, Global Infrastructure Fund (plus a hedged version) and more.

Not suitable for:
  • ​Investors looking to make individual investments in specific companies, or investors seeking short-term buying and selling. Index funds are not 'trading' products by nature.

Standout Features:
  • New Zealand’s lowest management fees, fixed at 0.25% p.a. (core funds), beating many funds from InvestNow, Simplicity and Smartshares.
  • Kernel exclusively offers investments in the NZX 20 index, which has outperformed the NZX 10 and NZX 50 index over the last ten years. While this is no indication of future performance, it does suggest Kernel is looking beyond traditional funds and launching opportunities that other investment companies don’t offer.
  • Kernel’s NZ Small & Mid Cap Opportunities fund is the only index fund to invest outside of the top 50 largest NZ listed companies.
  • The NZ 50 ESG Tilted fund has an annual fee of 0.25% which makes it one of the cheapest ethical funds available.
  • Tax-efficient exposure to global markets is standard with Kernel. Kernel is one of the only index fund providers in New Zealand that doesn’t suffer from material tax leakage on international investments, which could benefit investors by up to 0.50% p.a. depending on the fund.
  • Kernel’s High Growth Fund, offers a 98%+ allocation to equities, and is one of the few in the market to do so and with the lowest fees.
  • Overall, there are seventeen funds to invest in, and each offer a unique sector, theme or market focus. Most investors, we understand, invest in more than one fund to diversify their holding.
  • The minimum investment is $1 and there are no monthly platform fees for any investors with a portfolio balance under $25,000.
  • Investors can use Kernel Save and/or the Kernel KiwiSaver plan with no monthly platform fee.
  • There’s no joining fee, meaning every dollar you invest goes directly to your Kernel fund(s). 
  • There are no transaction fees, meaning you don’t get charged every time you buy and sell units in a fund.

Want to know how to trade or invest in the NZX? Our NZX in a Nutshell guide explains what you need to know.

The Competition – Kernel vs SmartShares, InvestNow and Sharesies

InvestNow, Sharesies and Smartshares are just some of the options for index fund investing. The calculations confirm that it’s hard to beat Kernel when it comes to management fees. In fact, other than one Simplicity fund (discussed below), Kernel appears to offer some of the lowest management fees for investments of any amount.

Simplicity's 0.10% p.a. Management Fee Alternative - NZ Share or Bonds Fund
  1. Simplicity offers four index-based funds, but it’s the NZ Share fund which provides a similar fund for a cheaper price.
  2. It invests in the top 39 New Zealand companies, charging a super low 0.10% p.a. management fee.
  3. However, the minimum investment in Simplicity’s NZ Share fund is $1,000. If you’re looking for an NZ-orientated index fund and have $1,000 to invest, the NZ Share fund may be of interest.
  4. Other funds offered by InvestNow, Flint Wealth and Smartshares are also worth considering as all platforms, alongside Kernel, have a commitment to low-fees.
  5. Smartshares ETFs are Listed PIEs, not Multi-Rate PIEs. This means they are taxed at a flat 28%, not at your PIR rate. This makes them unsuitable for lower tax rate investors, especially kids.

What Others Are Saying

The below articles are more public relations-focused than a critical review, but we have included them to introduce the team behind Kernel and what their intentions are. Recent articles, TV and radio appearances include Newshub, Stuff and Interest.co.nz.
The Bottom Line
  • We believe Kernel is most suitable for short-term investors looking for a better return than what they can achieve on a savings account – thanks to their new Cash Plus fund and Notice Saver saving account.
  • Kernel is also most suitable for serious, long-term investors with any amount to invest. With no platform fees (when investing under $25,000), low 0.25% p.a. management fees for core funds, there’s a lot to like about Kernel. When the $25,000 threshold is met, the ongoing platform fee is not too significant ($60/year).
  • There's diversity with seventeen funds, and Kernel continues to innovate with new fund launches, recently launching the Kernel Cash Plus, Balanced and Hedged Global 100 Funds.
  • Amongst its peers, strong alternatives exist. InvestNow, for example, offers a greater range of funds, and no monthly membership fee. However, Kernel funds are exclusive to the Kernel platform (and selected financial advisors).
  • Kernel may not appeal to everyone - if you’re fresh into investing and want diversity, Kernel arguably lacks options when compared to InvestNow, Flint Wealth, Sharesies or Smartshares.
  • However, Kernel offers low-cost index funds with a focus on innovation and long-term returns. The funds are explained in detail so that potential investors know exactly what they are investing in. Because they are index funds, they follow their investment mandate and won’t deviate in.
Limitations
  • You can opt to have dividends your fund(s) receive reinvested, meaning more cash is invested on your behalf If you are an active saver/investor and want a fund manager to continuously pick shares, Kernel doesn’t offer that type of investment option.

10 Things to Know About Kernel

​You don’t need to buy Kernel funds directly; they partner with a few financial advisers who can offer advice

If you prefer to talk to someone about an making investment, we suggest getting in touch with Kernel to find an adviser in your area. Currently there is no published list of advisers who offer Kernel products.​

Kernel offers New Zealand, overseas and sector-specific investment diversification

An investment in one any of the Kernel funds goes into a number of companies, so if one doesn’t perform as expected, the strength of other companies will balance out low-performing investments. For example, the NZ 20 fund invests in the twenty largest New Zealand listed companies, so you are well-diversified relative to a ‘top 10’ NZX fund.​

Our View: The Kernel KiwiSaver is suitable for short, medium and long-term investors. Offering well-diversified funds including the High Growth, Cash Plus and Balanced Funds, investors can pick between these three or opt to construct their own portfolio from a mix of the other Kernel funds.

Kernel’s funds are PIE funds

Kernel’s investment funds are PIE funds (like KiwiSaver funds). This means any investor will pay income tax according to their Prescribed Investor Rate (which is either 10.5%, 17.5% or 28%).​ That can add up over time, especially when investing for kids.

Kernel offers a high-interest saving account
With an interest rate of 5.25% p.a. (as at 14 April 2023, and stated before tax), and free to use, Kernel’s Notice Saver account offers Kiwis a way to grow their short term savings. Access your money with 34 days’ notice and no paperwork or withdrawal fees.

You can make automatic contributions

If you wish to make regular investments to achieve saving goals, Kernel offers this functionality.​ You can read more about regular investing here.

The composition and performance of Kernel funds are 100% transparent

Kernel exhaustively lists what investments comprise each fund, as well as the percentage weightings. Kernel also reports return on investments in plain English, with data ranging from 3 months to five years.​

You can opt to have dividends your fund(s) receive reinvested, meaning more cash is invested on your behalf

Many of the investments held in Kernel funds pay regular dividends. These cash payments represent the profits from companies returning it to the shareholders, i.e. you. When you create a Kernel account, you will be asked to select whether you want distributions from your investment funds to be automatically reinvested or paid out as cash to your wallet.

Kernel offers a proven investment model by investing in index funds

Index funds historically outperform managed funds. According to SPIVA, the S&P 500 (an American sharemarket index) outperformed more than 89% of all active funds over a 15-year period. Given the low fees an index fund charges and the reliability in outperforming active funds, it's a relatively conservative approach to investment for your retirement.

​Kernel is a challenger personal finance platform - and there are many out there

​Investors can find an array of index funds via other platforms such as InvestNow, Sharesies and Smartshares, and even Simplicity’s investment funds. The fees vary, but Kernel arguably charges on the lower-end for annual management fees and has a greater emphasis on long-term wealth building.

Kernel is a digital servivce

This is consistent with the likes of Sharesies and InvestNow, which exclusively offer email only and/or online chat. Although Kernel is also available on 0800, and they are very welcoming of investor queries. Kernel doesn’t offer financial advice, so they will be unable to assist you in guiding you to which fund is most appropriate for your needs.

Signing up isn't complicated, and you can deposit money into a Kernel ‘wallet’ until you’re ready to save or invest

Once your account is approved, you can select the fund or funds you want to invest in and confirm the contribution you’d like to make. To register for a Kernel account, you’ll need your IRD number, NZ drivers license or passport and bank account details.

Looking to switch your KiwiSaver to Kernel?
  • Transferring your KiwiSaver balance to Kernel is easy, and takes 2 minutes.
  • Once you have set up and verified your account, you can select to transfer your KiwiSaver balance over to Kernel, in one click.

Our Conclusion

  • We like Kernel’s intentions to charge below-market management fees and $0 platform fees until you reach $25,000. They charge no transaction or foreign exchange fees, and are one of the most tax efficient fund managers in New Zealand. This makes them arguably the lowest total cost investment solutions.
  • Kernel offers seventeen local, international, thematic and sector-specifc funds. As more funds are added, the options for investors will grow.
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