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. Despite offering low fees and managed fund-beating returns, little is known about index funds and even less invested in them by Kiwi investors.
 
Smartshares is one such index fund investment platform, offering 23 different index funds, or ETFs, investing locally, in Australia and around the world in shares.

Our Review 
In this guide, we outline what Smartshares is, what funds and shares 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 Smartshares as an investment option.

This Guide covers:

• ​The Specs of Smartshares
• Who is SmartShares Suited to?
• 10 Things to Know
• Our Conclusion​

• NZX, the New Zealand Stock Exchange owns Smartshares. Smartshares issues ETFs under a number of different names based on where and what they invest in. For example, New Zealand ETFs include the “NZ Top 50 (FNZ)”, “NZ Top 10 (TNZ)”, “NZ MID CAP (MDZ)” and “NZ Bond (NZB)”. These different funds invest in New Zealand companies of various sizes – for example, the NZ Top 10 (TNZ) ETF would include the 10 largest companies on the New Zealand sharemarket.
• Smartshares also offers ETFs and index funds of overseas sharemarkets to New Zealand investors. These ETFs cover Australia, Europe, Asia Pacific, the USA, emerging markets and world markets. The most popular overseas ETF is the “US500 (USF)” which invests in the top 500 companies on American stock exchange. These are companies you know, like Coca-Cola, Walmart, Nike and Netflix.
• SmartShares is not an investment service provider like Simplicity or Sharesies, it’s a retailer of ETFs only. Smartshares operates for the purpose of issuing ETFs for the New Zealand stock exchange and selling overseas ETFs.
• Unlike Sharesies or Simplicity, a Smartshares investor won’t be able to log into their Smartshares account and track their specific investment. Smartshares a simply shares on the NZX that invest in a lot more companies according to their structure. Because of the low cost in doing this, the annual fee ranges from around 0.3% to 0.6% of the Smartshare price and paid directly to the administrator. Different funds have different fund charges, which we outline below. 

So, if I buy a Smartshare, am I buying a share on the sharemarket?
The answer to this is yes. A Smartshare is a share investing in other shares. But it’s a share by nature. Your investment in Smartshares is as diversified as the number of companies included in the ETFs.

What Smartshares are offered, and what’s the difference?
Smartshares offers 23 Exchange Traded Funds to choose from with their own specific New Zealand and/or international holdings. Together, the 23 ETFs offered invest across New Zealand, Australia and a broad range of global stock exchanges. 

What do the different Smartshares invest in?
Smartshares offers a number of different ETFs. They are grouped into six categories - SmartLARGE, SmartMEDIUM, SmartSMALL, SmartINCOME, SmartDIVIDEND and SmartSECTOR, which are explained in more detail below. 

SmartLARGE
These funds invest in some of the biggest companies listed in New Zealand and offshore.

1. NZ TOP 50 (FNZ) - Annual fund fee: 0.50%. This fund invests in the 50 largest companies on the New Zealand sharemarket (for example, Spark, Auckland Airport and Fletcher Building).
2. NZ TOP 10 (TNZ) - Annual fund fee: 0.60%. This fund invests in the 10 largest listed New Zealand companies (for example, Fletcher Building, Sky City and Trade Me)
3. AUS TOP 20 (OZY) - Annual fund fee: 0.60%. This fund invests in the 20 largest listed Australian companies (for example, Westpac, Commonwealth Bank and Telstra)
4. US 500 (USF) - Annual fund fee: 0.34%. This fund invests in the American S&P 500 index, which is America's largest 500 listed companies (for example, Apple, Alphabet and Coca-Cola)
5. EUROPE (EUF) - Annual fund fee: 0.55%. This fund invests in Europe's largest companies listed all over the EU and the UK, including Nestle, British American Tobacco and HSBC. 
6. ASIA PACIFIC (APA) - Annual fund fee: 0.55%. This fund invests in Asia and Australia's largest companies, including Samsung, Westpac and AIA Group. 
7. EMERGING MARKETS (EMF) - Annual fund fee: 0.59%. This fund invests in companies in emerging countries such as  China, Brazil, Taiwan and South Africa.
8. TOTAL WORLD (TWF) - Annual fund fee: 0.56%. This fund invests in large American and global companies, such as Apple, Alphabet and Amazon.
9. US LARGE VALUE (USV) - Annual fund fee: 0.51%. This fund invests in large American companies - the more market value, the higher the percentage of investment. 
10. US LARGE GROWTH (USG) - Annual fund fee: 0.51%. This fund invests in growth shares in America, often shares with low dividends and potential for higher future profits. 

SmartMEDIUM
These funds invest in medium-sized companies, either in New Zealand, Australia or the USA. 

1. NZ MID CAP (MDZ) - Annual fund fee: 0.60%. This fund invests in mid-sized New Zealand companies such as A2 Milk, Air New Zealand and Chorus.  
2. AUS MID CAP (MZY) - Annual fund fee: 0.75%. This fund invests in mid-sized Australian companies such as Seek, Bluescope Steel and Bank of Queensland.  
3. US MID CAP (USM) - Annual fund fee: 0.51%. This fund invests in mid-sized American companies. 

SmartSMALL
This fund invests in small American companies listed on the stock exchange. 

1. US SMALL CAP (USS) - Annual fund fee: 0.51%. This fund invests in small-sized American companies.

 
SmartINCOME
These funds invest in safe debt with trusted government and companies in good financial health, both in New Zealand and globally. 

1. NZ BOND (NZB) - Annual fund fee: 0.54%. This fund invests in New Zealand issued corporate and government bonds, i.e. investments which give a fixed percentage of interest. 
2. NZ CASH (NZC) - Annual fund fee: 0.33%. This fund invests in term bank deposits within New Zealand.
3. GLOBAL BOND (GBF) - Annual fund fee: 0.54%. This fund invests in corporate and government bonds globally. 

 
SMARTDIVIDEND
These funds invest in profitable companies that pay the highest dividends in their market (Australia and New Zealand). 

1. AUS DIVIDEND (ASD) - Annual fund fee: 0.54%. This fund invests in Australia's top 50 dividend paying companies, such as Rio Tinto, Wesfarmers and Westpac. Such companies are highly profitable and return dividends as a priority over growth. 
2. NZ DIVIDEND (DIV) - Annual fund fee: 0.54%. This fund invests in New Zealand's top 25 dividend paying companies, such as Meridian Energy, Spark and Contact Energy. Such companies are highly profitable and return dividends as a priority over growth. 

 
SMARTSECTOR
These funds invest in Australian and New Zealand commercial property.

1. AUS PROPERTY (ASP) - Annual fund fee: 0.54%. This fund invests in Australian companies that own commercial property. 
2. AUS RESOURCES (ASR) - Annual fund fee: 0.54%. This fund invests in Australian companies operating in the energy sector or the metals and mining industry. Companies include BHP, Rio Tinto and Santos. 
3. AUS FINANCIALS (ASF) - Annual fund fee: 0.54%. This fund invests primarily in shares in Australian banks and insurance companies. 
4. NZ PROPERTY (NPF) - Annual fund fee: 0.54%. This fund invests in New Zealand companies that own commercial property, including Goodman Property, Kiwi Property and Precinct Property. 

 
Hedging
The Smartshares international equity funds are actually unhedged; this means investors will also have currency movements driving investor returns. The Global Bond Fund (GBF) is 100% hedged. This means that if the NZ Dollar rises against any overseas currency, the value of the overseas investment is not diminished due to the hedging and therefore eliminating exchange rate movement as an investment risk. 
 
The minimum Initial Investment: $500 for each Smartshare, but you can own a fractional number of any Smartshares (i.e. a $500 investment would buy you 201.69 NZ TOP 50 Smartshares at a unit price of $2.479).
 
Investment Products include:
Cash (i.e. bank deposits in New Zealand banks)
New Zealand Fixed Income (i.e. investments in government bonds or company debt)
New Zealand Shares (i.e. shares in Spark, Fletcher Building and Air New Zealand)
Australian Shares
International Fixed Income bonds and deposits
International Shares

Best For: Long-term investors looking for stability and growth that is passive with low management fees. With Smartshares, you buy anticipating local and/or global markets to rise over time while being diversified enough to avoid losing money if one or two shares flounder.
Not suitable for: Investors looking to make individual investments in specific companies, or investors looking for short-term buying and selling. Index funds don’t move that much in the short term.
 
Standout Features:

1. New Zealand’s largest range of ETFs, with management fees from just 0.33-0.75%
2. There is a one-off $30 establishment fee, which enables investment in one or as many different shares as you wish. Subsequent investments have no fee applied.
3. There is no annual fee to hold Smartshares (Simplicity and Sharesies both charge $30/year on top of their fund management fees - the $30 Smartshares establishment fee is a one-off).
4. There’s no joining fee, meaning every dollar you invest goes directly to your Smartshare holding.
5. The diverse number of funds means you can focus on particular industry sectors in specific countries, such as Australian property, New Zealand property and global emerging markets.

But be aware:

1. But, investment allocation can be painfully slow meaning you have uncertainty over purchase price - it can take up to 43 days between buying SmartShares and having them allocated to your account. This is unhelpful for people wanting to have certainty or purchase price or move quickly on a market movement. We detail the mechanics of this in the Conclusion section. 
2. Certain funds will make investments in companies trading in weapons, tobacco, nuclear and other “unethical” business. As of now, there are no "socially responsible" funds offered by Smartshares. 
3. As with any investment, markets go up and down. The Dotcom bubble in the early 2000s sank global indexes, as did the 2008 Global Financial Crisis. All indexes are now at record highs, but this is no guarantee of future earnings.

Claims made by SmartShares
​
“With one simple purchase you get an investment in a range of securities, such as listed companies or government bonds, spreading your risk more broadly”.

Is it True?
Yes. Each fund invests in a specific group of securities, but there are enough investments to diversify your money so you’re not exposed too badly if one company doesn’t perform.
 
“The funds keep costs down because in most cases Smartshares does not need to make active investment decisions, which may require spending on research and analytical expertise”.

Is it True?
Yes, the nature of ETFs is passive, and no research and judgement is ever needed to make the investments. Smartshares invests exactly in what it says it will, and this doesn’t change.
 
“The funds enable you to build a global portfolio in NZD, without having to worry about the complexity of managing foreign currencies or overseas tax. Distributions are paid in NZD and automatically reinvested for you, unless you choose to receive them in cash”.

Is it True?
Yes. You only invest using New Zealand dollars – Smartshares does the work converting your money into local and international investments. Whatever dividends you receive will be invested into new units in your Smartshare, but you can choose to have the dividends paid in cash to your bank account.

Smartshares, Simplicity and Sharesies are just some of the options for index fund investing. You can invest in local and foreign ETFs directly via major international players such as Vanguard, but for this review we only cover New Zealand-based index fund investment schemes outside of KiwiSaver.

Simplicity offers four index-based funds, with fees fixed at $30/year + 0.31% of funds invested. The funds include a proportion of investments in cash and bonds, so they’re not 100% in shares.

​Superlife is a KiwiSaver scheme provider that offers the same funds as Smartshares – both brands are owned by the NZX. So, if you like Smartshares as a non-KiwiSaver investment, it could be suitable if you’re also in KiwiSaver. The latest data of its range of funds puts the annual management fee at 0.80 - 0.84% on a $10,000 investment.