Managers warn against more KiwiSaver regulation

Imposing more regulations on KiwiSaver funds could stifle the investment innovation, says Fidelity Life chief executive Milton Jennings.

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by Benn Bathgate

Financial Markets Authority chief executive Sean Hughes said there were gaps in the rules relating to KiwiSaver schemes.

He wants to see more co-operation between the country's regulators, and argues there is no prudential supervision for KiwiSaver schemes.

Prudential supervision assesses whether undue risks are being taken with investors' money.

Jennings concedes the Huljich KiwiSaver saga - where investors were misled about the performance of the Huljich Wealth Management KiwiSaver fund - "certainly exposed a gap".

But he said prudential supervision of KiwiSaver funds would be complicated."Do you go down to [assessing] single stocks? It's very hard."

He said higher-risk funds could be a casualty of increased regulation, such as Fidelity's Options fund, one of KiwiSaver's top performers.

"We had noises from the regulators saying it's too high risk for KiwiSaver... there's been volatility over the five year period, but it's probably the top performing fund, so do you want to stop that type of investment?"

Milford Asset Management's investment committee chairman Brian Gaynor said funds already outlined their investment stance in prospectuses.

"And you can see by the way directors are being prosecuted regarding prospectuses at the moment it's a very powerful document in terms of the law."

But he said there were two glaring gaps in KiwiSaver regulation that Hughes had not mentioned.

"The disclosure of fees is probably the weakest area, the second is probably consistency in how to measure and report returns and performances."

He called for the establishment of a KiwiSaver comparison website, managed by a body such as the FMA.

"We don't have as good a market in information in relation to KiwiSaver funds as we do in the airfare market."

Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz

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Comments from our readers

On 9 May 2012 at 9:58 am Barry Milner said:

I have a view that KiwiSaver investment should always be conservative, this is not play money for speculation, it's probably the only retirement money many workers will ever have. What good a fund that takes two steps forward and one giant leap back every cycle. Better the tortoise than the hare approach to KiwiSaver investment. After all the hare loses its way and runs out of steam whilst the tortoise plods on and gets there in the end.