Nikko AM KiwiSaver Scheme Review
Our guide to the Nikko AM KiwiSaver scheme looks at the fund choices, fees and options available to KiwiSaver members
Updated 12 February 2021
Summary of Nikko AM KiwiSaver
Our Review
In this guide, we outline what the Nikko AM KiwiSaver scheme is, it's pros, cons, alternatives and fees. This Guide covers:
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 Nikko AM as a KiwiSaver investment option.
- Funds: Nikko AM offers KiwiSaver members the choice of eight funds, with around $40 million under management as at 31 January 2021. It's one of the smallest KiwiSaver schemes, having launched in 2018. The funds are grouped into three categories:
- Growth (three funds which focus on investing in shares),
- Income (two funds which invest in bank deposits and bonds)
- Diversified (three funds; conservative, balanced and growth-orientated) and
- A leading feature is that you don't need to pick just one fund - Nikko AM allows you to create your own portfolio of investments by choosing any combination of their funds. This means you can allocate 20% to one fund, 60% to another and 10% for two others etc.
- 100% Active Management: All of the funds are actively managed by a fund manager, with fund managers actively managing their portfolio of investments to achieve long term capital growth. The costs associated with an active fund means that fund fees will be higher, relative to index-tracking schemes like Simplicity.
- Performance: Because Nikko AM launched all of their funds in 2018, we believe that it is too early to make any comment on the scheme's performance. However, the newly launched Nikko AM KiwiSaver Scheme ARK Disruptive Innovation Fund appears in our Favourite KiwiSaver Funds.
- Fees:
- There is an annual account fee of $30 for being a Nikko AM KiwiSaver member, which is standard for most KiwiSaver schemes.
- There is a management and administration fee of 0.45% to 1.25% p.a. of your KiwiSaver balance per year, depending on your fund.
Our Review
In this guide, we outline what the Nikko AM KiwiSaver scheme is, it's pros, cons, alternatives and fees. This Guide covers:
- Nikko AM KiwiSaver Funds Summary
- Nikko AM KiwiSaver in the News
- Who is Nikko AM KiwiSaver Suited to?
- 8 Things To Know About Nikko AM KiwiSaver
- 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 Nikko AM as a KiwiSaver investment option.
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.
- We believe that being comfortable with what you're investing in is the most important aspect of saving for your retirement, not the fee you'll pay.
- While we don't focus on the latest returns, we encourage readers to make their own comparisons.
- Ultimately, deciding upon whether Nikko AM is right for you will most likely come down to your interpretation of the fund performances in the medium term, their investment strategy and their fees.
Nikko AM KiwiSaver Funds Summary
- The scheme is managed by Nikko Asset Management New Zealand Limited, which is part of the Japanese giant Nikko Asset Management which manages around US$250 billion of investments.
- In New Zealand Nikko AM managers around $5 billion of investments, but despite this, it lacks brand awareness and only launched its KiwiSaver scheme in 2018.
- Quarterly fund performance reports are available on the Nikko AM website.
- Each of the eight funds has a unique risk factor (1 = lowest, 7 = highest), which is driven by its distinct investment profile.
- Fees, returns, risks and the suggested investment timeframe differ between funds.
- The eight funds fall into four different categories, which focus on a particular asset class and risk level. We will update this section when fund performance is greater than 24 months, and the funds themselves increase in size. Until then, please refer to the fund summary documents published on the Nikko AM website.
Equities:
- Core Equity Fund (invests in Australasian equities)
- Global Shares Fund (invests in international equities)
- ARK Disruptive Innovation Fund - this fund was recently introduced as an opportunity to invest in the ARKK Innovation ETF. Relatively unknown in New Zealand, the ETF is well-regarded (see this article on Fool.com) and ARK Investment Management has a track record is stock picks.
Income:
- NZ Cash Fund (invests in cash deposits held in banks)
- NZ Corporate Bond Fund (invests in corporate bonds)
Diversified (all of the funds below invest into Nikko AM's wholesale funds):
- Conservative Fund
- Balanced Fund
- Growth Fund
Nikko AM KiwiSaver in the News
Recent media reports highlight the following:
- Nikko Asset Management secured the most finalist nominations in the (2019) Morningstar Fund Manager of the Year Awards.
- It is a finalist in all the sector awards (domestic equities, global equities and fixed interest) as well as for the overall award, which it won last year. The only nomination it missed out on was for KiwiSaver (this is because Nikko AM did not offer KiwiSaver at the time).
- Giant Asian fund manager Nikko Asset Management launched a roboadvice service, heralding the beginning of a new age in money management.
- Nikko, despite looking after more than $5 billion investor money in New Zealand, is little known to the public, with only around 15 per cent of Kiwis claiming to know the brand in a recent survey.
- Nikko Asset Management has added the high-flying Ark Disruptive Innovation Fund as a standalone option in its KiwiSaver scheme.
- The global Nikko business took a 15 per cent share of Ark in 2017, cementing an established Asia-Pacific distribution agreement between the two firms.
- Ark offers a range of ETFs, unlisted managed funds as well as bespoke institutional portfolios targeting technology-led ‘disruptive’ themes such as fintech, genomics and 3-D printing.
Who is the Nikko AM KiwiSaver Scheme Suited To?
We will update this section in 2020 when we see two years of returns and growth of members. Because the scheme is so small, we can't provide any useful commentary other than repeat what the funds are.
For such a tiny scheme, having eight funds may seem excessive, but we take the view that each fund has its own unique investment strategy that will find its own audience. With only $10 million invested, it has a long way to go.
In our view, we believe the Global Shares Fund, Core Equity Fund, Balanced Fund and Growth Fund have the potential to compete alongside other actively managed growth funds offered by Milford, Fisher Funds, Booster, Summer and Generate.
Standout Features:
Pros
Cons
Be aware:
For such a tiny scheme, having eight funds may seem excessive, but we take the view that each fund has its own unique investment strategy that will find its own audience. With only $10 million invested, it has a long way to go.
In our view, we believe the Global Shares Fund, Core Equity Fund, Balanced Fund and Growth Fund have the potential to compete alongside other actively managed growth funds offered by Milford, Fisher Funds, Booster, Summer and Generate.
Standout Features:
- Nikko AM lets investors create their own portfolio of investments by choosing any combination of any of the Nikko AM KiwiSaver funds.
- Nikko AM KiwiSaver recently introduced an opportunity to invest in the ARKK Innovation ETF. Relatively unknown in New Zealand, the ETF is well-regarded (see this article on Fool.com) and ARK Investment Management has a track record is stock picks. The underlying fund, ARKK, reported 100%+ returns for the 12 months to 31 January 2021 (per this ETF chart), which are market-leading. Of course, past performance is no guarantee of future returns. Nikko AM's KiwiSaver fund has only operated since late 2020, meaning limited data is available.
Pros
- Eight funds that offer a sliding scale of risk and return, clearly defined in investor statements.
- Investments are diversified and include cash deposits, NZ government bonds and NZ corporate bonds, New Zealand shares and global equities.
- Up to date fund performance data, with clear reports and via Nikko AM's website.
Cons
- There is no life/age program option, which moves your money into more conservative (i.e. less risky) funds as you get older as a way to protect your KiwiSaver balance, is offered. However, the option to select several funds allows you to do this, but you'll have to do it manually. For example, as you age, if you want to protect more of your KiwiSaver balance, you could put a portion of your KiwiSaver balance into the NZ Cash Fund.
Be aware:
- 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.
- Nikko AM has an environmental, social and governance (“ESG”) policy, but it's not as definite as other KiwiSaver schemes. Instead, Nikko AM states that it "only invests in companies that the team has thoroughly researched and debated" but then states that the "impact of ESG factors altering investment decisions is subjective". We asked Nikko AM to elaborate further, and their response appears below:
- "We are a signatory to the United Nations' Principles for Responsible Investment, by which we incorporate environmental, social and governance (ESG) issues into investment decisions. We believe that considering these factors is an essential part of good investment decision making for better investment returns and improved risk management.
- This also enables us to determine, on a case by case basis, whether any necessary changes to an enterprise’s practices can be better achieved by engaging with them or refusing to invest in them.
- It’s important to note that ESG is separate to ‘ethical’ or ‘socially responsible’ investment criteria which is where companies are specifically excluded or included in portfolios due to personal preferences that are not necessarily related to financial outcomes (e.g. a fund may exclude casinos or alcohol producers).
- Due to the wide variety of personal preferences and opinions on what should or should not be excluded, our retail funds do not have any specific restrictions apart from banning cluster munitions and landmines (as required by law)".
8 Must-Know Nikko AM KiwiSaver Scheme Facts
Nikko AM KiwiSaver is new and the smallest KiwiSaver scheme aroundThe Nikko AM KiwiSaver funds launched in 2018, and right now total around $40 million in funds under management which represents a tiny fraction of one percent of the total KiwiSaver investments. It's too early to see if KiwiSaver members will embrace the fund manager given the choice in the market, but the launch of ARK Disruptive Innovation Fund indicates Nikko AM is serious about offering market-leading investment options.
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No matter what your employer's preferred KiwiSaver provider or fund is, you are entitled to select Nikko AM as your KiwiSaver schemeYour employer may offer another KiwiSaver provider as their preferred provider, but you are free to choose Nikko AM KiwiSaver as your provider if you feel it's right for you. You don't have to be a client of Nikko either - the scheme is available to everyone.
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Nikko AM has a range of fees, with growth-orientated funds costing the mostNo matter how many funds you invest in, as a Nikko AM KiwiSaver member, you'll pay two fees:
If you want to contribute to your fund at a level above your fixed salary contribution, you can do this via the online banking or manually by contacting the client services team. If you stop contributing, you will still pay both fees. |
Dividends your fund receives are reinvested, meaning more cash is invested on your behalfMany of the Nikko AM KiwiSaver funds invest in shares, and many will 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, and 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.
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All of Nikko AM's KiwiSaver funds are actively managed, with pre-defined investment objectivesAll Nikko AM KiwiSaver funds invest into existing Nikko AM wholesale funds which state their performance targets in the Product Disclosure Statement. Nikko AM is very specific for each fund, stating that the aim is to beat a particular index. For example, in the case of the Core Equity Fund, the investment objective is to "outperform the NZX50 by 3% over three years".
All Nikko AM funds are actively managed, and each fund has its own key personnel, tasked with the responsibility of portfolio management and analysis. Nikko AM will then select specific investments it sees as undervalued, anticipating that in time, the value of the investment will grow and ultimately make a profit for the fund. How does this work in practice?
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​Signing up to Nikko AM isn't complicated, and you are not limited to only one fundSigning up to the Nikko AM scheme is easy, and you can create your own portfolio of investments by choosing any combination of the funds. This means you can allocate 20% of your money to one fund, 40% to another, and 10% to another two, giving you diversity. But if this doesn't interest you, Nikko AM sets out its ten funds within four categories.
Generally, if you want to grow your KiwiSaver fund for the long-term, and unless you're risk-averse, the Fixed Income funds or the Diversified Conservative fund aren't likely to make you high returns. Share investments are limited to a 0% to 30% target, meaning that at least 70% of the money sits in bank accounts, low-interest bonds and other fixed-interest. If you are in this fund and would prefer a more aggressive fund, you have the option to switch free of charge to another Nikko AM fund, or any other KiwiSaver fund operated by another scheme. You can also opt-out of KiwiSaver altogether if you do not wish to participate. |
The performance data is easy to follow, and updated regularlyFund performance details are published on the Nikko AM website every three months. Unit prices, which track the performance, are updated daily. Unlike many other KiwiSaver schemes, Nikko AM doesn't offer online portfolio tracking, which limits the amount of information you'll see between quarters.
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Nikko offers a fund dedicated to investing in New Zealand sharesRelatively rare within KiwiSaver, Nikko AM is one of the few schemes which offer investors to pick a fund that only invests in New Zealand listed companies. The Core Equity Fund states it invests in both Australian and New Zealand shares, but recent holdings suggest the investment managers preferred local companies. Investments included A2 Milk, Contact Energy, Spark, Fisher & Paykel Healthcare, Fletcher Building, Auckland Airport, Infratil, Z Energy, Summerset and Mainfreight.
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Our Conclusion​
- Nikko AM offers a wide array of funds to pick from despite its small size and tiny total funds under management.
- The flagship Nikko AM KiwiSaver Scheme ARK Disruptive Innovation Fund launched in late 2020 and provides an opportunity to invest in the ARKK Innovation ETF. Relatively unknown in New Zealand, the ETF is well-regarded (see this article on Fool.com) and ARK Investment Management has a track record is stock picks.
- Fees range from a reasonable 0.45% for the Cash Fund to ~1%+ for anything growth-focused.
- The active management means particular shares will be bought, at the discretion of the fund manager, so there is a risk of negative returns if the investment doesn't perform.
- With every fund offered, the higher the weighting of growth assets vs income assets, the higher the annual management fee. This is expected to be offset by the long-term performance of the fund.
- The portfolio allocation flexibility means you don't need to select one Nikko AM fund - you can be in a combination of up to eight, weighted on your preferences. This means if investors are interested in the ARK Innovation fund, they can also have exposure to the Growth Fund and Global Shares Fund (as examples only - this does not constitute any recommendation or advice).
Do you have experience with Nikko AM's KiwiSaver scheme that you would like to share with our readers? Email our research team who would be delighted to hear from you.
How does Nikko AM compare with other options?
How does Nikko AM compare with other options?
- Read our Favourite KiwiSaver Funds guide to find out more.
- Worried about not having enough money when you retire? Don't retire poor - read our Retirement in a Nutshell guide (warning: it's brutally honest).