BlackRock out as ANZ streamlines, defuses international offering

Vanguard has picked up about NZ$150 million (A$143 million) in a new global equities mandate as the game of passive pass-the-parcel plays on in the NZ bank-owned KiwiSaver market.

The latest index switch has seen ANZ swap out BlackRock for Vanguard as underlying manager for its KiwiSaver default fund international shares allocation.

As reported previously, BT/Westpac recently dumped an Australian-domiciled Vanguard global equities fund in favour of a locally-housed AMP Capital passive fund (which itself transitions the underlying manager from State Street to UBS this month) for its KiwiSaver default option. The BT/Westpac move followed the Commonwealth Bank of Australia-owned ASB decision last year to shift its more than $1 billion global equities index investments from Vanguard to BlackRock across a fund range that includes the country’s largest stand-alone KiwiSaver scheme.

While all the global index equity manager transfers were prompted by last year’s brouhaha over potential KiwiSaver scheme exposures via passive products to banned cluster fund manufacturers, it is understood banks have used the opportunity to cut better prices, expand the exclusion list (quitting tobacco, for example) and improve the tax efficiency of their respective international share offerings.

In the case of ANZ, the bank has opted to launch a new locally-domiciled global equities index portfolio investment entity (PIE) fund under its own brand – its first new product in three years – with Vanguard as underlying manager. Previously, the ANZ Default KiwiSaver conservative fund (the only product affected by the change) gained its global equities allocation through the Australian-domiciled BlackRock Wholesale Indexed International Equity Fund. Auto-enrolled KiwiSaver members allocated to ANZ (one of the nine default providers) are invested in the conservative fund.

The remaining ANZ KiwiSaver and other funds invest in global shares via a bank-run active multi-manager product that lists Franklin Equity Group, MFS, LSV Asset Management and Vontobel as underlying managers.

According to an ANZ spokesperson, the active international hare fund was not exposed to any of the controversial weapons or tobacco manufacturers now removed from its index offering.

With a target global equities exposure of 12 per cent the more than $1 billion ANZ Default conservative fund would have an implied investment of about $120 million in the new Vanguard-run product.

Craig Mulholland, ANZ (NZ) Wealth managing director, said the newly-launched ANZ Wholesale International Share Index Fund, reporting $146.9 million under management, had also secured a “two external wholesale clients” to date.

“There’s strong interest across the wholesale market for an offering like this,” Mulholland said.

In a statement last week, he said ANZ – the country’s biggest investment manager with about $23 billion under management, including more than $10 billion across its three KiwiSaver schemes – had the scale to “design and manage our own standalone funds rather than having to rely on others”.

“In addition, the ANZ fund, based here in New Zealand, is more tax effective than an overseas based fund for our KiwiSaver members which will help to improve their investment returns,” Mulholland said in the release.

According to industry sources, NZ-domiciled PIE funds can gain around a 30 basis point tax advantage compared to offshore-registered products.

The ANZ spokesperson said while the new global shares index fund would be “cost neutral” for the affected KiwiSaver members, any performance uplift due to the tax efficiencies would be reflected in the unit price.

ANZ also uses Vanguard as underlying manager for some of its international fixed income exposure across all the bank’s KiwiSaver funds, including for global credit.

The ANZ spokesperson said the controversial weapons and tobacco exclusions apply across its fixed income portfolios as well as equities.

Last month the challenger KiwiSaver scheme, the $100 million plus Simplicity, dropped its exposure to the Vanguard international credit fund after being unable to develop a version that screened out securities of controversial weapons firms and the like. Simplicity invested direct into the Australian-domiciled Vanguard international credit vehicle while ANZ operates a separate mandate in the asset class with the global passive fund behemoth.

– David Chaplin, Investment News NZ