The Bank of New Zealand has decided to close its International Equity Index Trust as it doesn't believe the Inland Revenue Department (IRD) will renew its binding ruling next year.
Just over a year ago IRD released guidelines for managers wanting binding rulings for passively managed funds. One of the elements it considers necessary is that the fund has to replicate the index it tracks.
BNZ Investment Management product manager Grant Hill says to replicate the MSCI Modified World Index the fund would need to be at least $100 million in size. Currently it has about $26 million in funds under management.
Hill says it is "considered unlikely that the IRD will renew the ruling," therefore BNZ has closed the fund to new investments. Full and final closure is scheduled for March 27, 2002.
Since the IRD released its guidelines a year ago a number of managers, including Guardian Trust Funds Management and Direct Funds Management have closed index funds because the IRD was unlikely to renew their rulings.
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