Investing in managed funds such as KiwiSaver is a great way to save for retirement. For investors with small amounts or who wish to make regular, small contributions, managed funds offer a cost-effective, simple solution with diversification to help reduce investment risk. One of the disadvantages of managed funds is the lack of transparency around exactly what your money is invested in. Fund managers don’t like giving away the full details of their investment strategy because, in a competitive market, that is how they get their edge. The performance of any fund will be determined by the mix of investments it contains, and giving away those details would be like Coca Cola giving away its secret recipe. For investors with a social conscience this is an issue, as we saw in 2016 when it came to light that many KiwiSaver funds were investing in companies that make cluster bombs, mines and nuclear weapons. The outcry that ensued prompted most KiwiSaver providers to take a good look at their investments and make changes.
A report just released by the Responsible Investment Association Australasia (RIAA) on New Zealand funds shows that since 2015, the value of funds managed with a responsible investment approach has increased from $79 billion to $183.4 billion. While the initial impetus for this came from investors wanting to avoid investments in armaments, the RIAA has found there is a growing social conscience around other issues such as climate change, human rights, corporate culture, diversity and a host of others. The good thing is that investing responsibly doesn’t mean loss of investment return and in fact, the RIAA notes that ‘a responsible investment approach delivers better investment outcomes’. Before investing in any managed fund, check their policy on responsible investment to keep the pressure on. It’s a win-win approach.