Kernel Wealth Review
We review Kernel Wealth, the index fund platform offering low fees and newly launched funds
Updated 26 April 2022
Summary of Kernel Wealth ('Kernel')
Kernel launched in late 2019 and offers thirteen index funds with specific investment profiles:
Must-know specs:
Our View:
Our Review
In this guide, we outline what Kernel is, what funds they offer to the Kiwi investor, 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.
Want to know how to trade or invest in the NZX? Our NZX in a Nutshell guide explains what you need to know.
Kernel launched in late 2019 and offers thirteen index funds with specific investment profiles:
- The S&P Global 100 fund which invests in 100 blue chip companies across major equity markets. Examples include Apple, Nike, Amazon, Nestle and Microsoft.
- The S&P Global Dividend Aristocrats fund which invests in global companies that have a record of maintaining a high dividend over a sustained period of time. Examples include Subaru, CBA (owner of the ASB) and AT&T.
- The Global Clean Energy fund, which invests in clean energy related businesses from around the world including wind, solar, hydro generators, and renewable manufacturers.
- The S&P Kensho Moonshots Innovation fund which invests in innovative US-listed companies that challenge or disrupt industries, such as Virgin Galactic Holdings, iRobot, Lyft and more.
- The S&P Kensho Electric Vehicle Innovation fund which 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.
- The NZ 20 fund invests in twenty of NZ’s largest companies (i.e. A2 Milk, Fisher & Paykel Healthcare, etc.).
- The NZ Small & Mid Cap Opportunities which invests in 35+ companies valued at between $100 million and $1 billion.
- The NZ Commercial Property fund invests in several commercial property companies (Goodman, Kiwi Precinct), and
- The NZ 50 ESG Tilted fund which invest in S&P/NZX 50 companies that meet according to sustainability factors.
- The Global Infrastructure fund which invests in utilities, storage and telecommunications infrastructure. Examples include gas companies, energy producers, airports and water companies.
- The Global Green Property fund invests in global companies owning and operating sustainable real estate.
- The S&P 500 fund which invests in the 500 largest companies listed on stock exchanges in the United States.
- The High Growth fund which invests 98% of its money into growth assets, such as shares and listed property.
Must-know specs:
- 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 majority of investor money, per recent Morningstar reporting, is invested into Kernel's core funds.
- Investors pay $0/month to access the platform (for investments, in total, up to $25,000) and then $5/month if and when their portfolio is larger than $25,000.
- Investors can buy into funds direct, or via a financial adviser. The ongoing fees are the same.
- The minimum investment is $1 per fund
- Recent returns can be found for each fund - NZ 20, NZ Property, Global 100, Global Infrastructure, Global Dividend Aristocrats, Kensho Moonshots Innovation and Kensho Electric Vehicle Innovation, NZ ESG Tilted Fund, S&P Global Clean Energy Fund, Global Green Property Fund, S&P 500 Fund and High Growth Fund.
Our View:
- The founding team worked for many years at the NZX but launched Kernel to meet a demand for fee-competitive index funds. With annual management fees around half of other platforms and online fund managers, Kernel presents a challenge to established funds. By April 2022, Kernel had grown to manage over $250m of investor funds.
- We expect the platform to launch new funds and features progressively, and will update this guide as these changes go live. Since our first version of this review, Kernel has added ten funds over two years at different stages.
- 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 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, what funds they offer to the Kiwi investor, what index funds are and how they're different to other funds, as well as looking at alternatives and the level of fees involved.
- The Specs of Kernel
- Who is Kernel Suited to?
- What Others Are Saying About Kernel
- 10 Things to Know About Kernel
- Our Conclusion
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.
Want to know how to trade or invest in the NZX? Our NZX in a Nutshell guide explains what you need to know.
The Specs of Kernel
- Kernel is a private 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.
- 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.
- 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:
Not suitable for:
Standout Features:
Want to know how to trade or invest in the NZX? Our NZX in a Nutshell guide explains what you need to know.
- Long-term focused investors looking for stability and growth that is passive with low management fees.
- 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.
- 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 one specific-sector fund, the NZ Commercial Property fund, which invests in listed real estate investment trusts.
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 (if you’re investing over $25,000) fixed at 0.25% p.a., 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.
- Low-cost fees and tax-efficient exposure to global markets via the S&P 500, global infrastructure and Global 100 funds.
- Overall, there are thirteen 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 until the portfolio is above $25,000.
- There’s no joining fee, meaning every dollar you invest goes directly to your Kernel fund(s).
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. For any investment over $25,000, 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
Simplicity's 0.10% p.a. Management Fee Alternative
- Simplicity offers four index-based funds, but it’s the NZ Share fund which provides a similar fund for a cheaper price.
- It invests in the top 49 New Zealand companies, charging a super low 0.10% p.a. management fee. In some sense, it’s similar to Kernel’s NZ Small & Mid Cap Opportunities and NZ 20 funds, yet with 40% of the management fee (0.10% vs 0.25% p.a.).
- 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.
- Other funds offered by InvestNow, Flint Wealth and Smartshares are also worth considering as all platforms, alongside Kernel, have a commitment to low-fees.
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 serious, long-term investors with any amount to invest. With no platform fees (until you have over $25,000 invested), low 0.25% p.a. management fees for 'non-themetic' funds, there’s a lot to like about Kernel. When the $25,000 threshold is met, the ongoing costs are not too significant ($60/year, or 0.24% p.a.) and, of course, this drops as a percentage the more that is invested.
- There's diversity with thirteen funds, and Kernel continues to innovate with new fund launches, with the S&P 500 and High Growth Funds going live in April 2022.
- 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
- Kernel’s funds, like most index funds, are not for the short term. While investors are free to buy and sell without fees as frequently as they like, to get the most out of index funds, you’re realistically looking at a 5-10 year investment plan to maximise the return.
- And, if you are an active or aggressive saver/investor and want a fund manager to continuously pick shares or other securities for short/medium-term investment, Kernel doesn’t offer that type of investment option.
10 Things to Know About Kernel
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You don’t need to buy Kernel funds directly; they partner with a few financial advisers who can offer adviceIf 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.
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Kernel offers New Zealand, overseas and sector-specific investment diversificationAn 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.
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Kernel’s funds are PIE fundsKernel’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%).
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You can make automatic contributionsIf you wish to make regular investments to achieve saving goals, Kernel offers this functionality. You can read more about regular investing here.
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The composition and performance of Kernel funds are 100% transparentKernel 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.
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Dividends your fund(s) receive are reinvested, meaning more cash is invested on your behalfMany 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.
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Kernel offers a proven investment model by investing in index fundsIndex funds historically outperform managed funds. According to Fortune Magazine, the S&P 500 (an American sharemarket index) outperformed more than 82% 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.
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Kernel is a challenger index fund platform…and there are many out thereInvestors 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.
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Kernel is a digital servivceThis is consistent with the likes of Sharesies and InvestNow, which also exclusively offer email only and/or online chat. Although the Kernel phone number is a little hard to find, they are welcoming of investor queries.
Kernel also 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. |
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Signing up isn't complicated, and you can deposit money into a Kernel ‘wallet’ until you’re ready to investOnce 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.
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Our Conclusion
- We like Kernel’s intentions to charge below-market management fees and $0 platform fees until you reach $25,000.
- Kernel offers New Zealand, overseas and sector-specifc investment diversity by way of its fund compositions. As more funds are added, the options for investors will grow.
- Kernel delivers thirteen funds designed to deliver positive returns over a 5 to 10-year period.
