by Andrea Malcolm
Stewart Group managing director Nick Stewart says the new funds which are based on Dimensional Fund Advisors (DFA) strategies address the gap in investment options between KiwiSaver and bespoke wealth management.
Current products cater to two categories; clients who can afford a minimum contribution of $250,000 and those whose only main option, beyond the family home, is KiwiSaver.
ACI Funds which are structured as PIEs with a low minimum entry of $50 act as a financial ‘barbell’ , says Stewart. The funds are diversified across markets, asset classes, countries and sectors. The minimum investment opens the scheme to a much wider audience than traditional wealth investment, he says.
“Everyone can get into KiwiSaver with a few pennies but there isn’t a transition to bespoke wealth management advice if you have less than 250,000 and many firms will tell you that $250,000 isn't enough, it’s more like $750,000.
“We have both those streams of retail advice in our firm and there's a gap in the middle. We see people turbocharging their KiwiSaver, maxing out their contributions at 10% of their salary and locking everything up. We would say for KiwiSaver you have 3% from your salary, 3% from your employer, and the other 7% should go into a liquid solution, rather than one that's tied up until you're 65.
“As financial advisers, we abide by a code of conduct enshrined in legislation, so to tell people to tie up their capital without having a liquid component, would not be acting as a fiduciary and putting their interest first.“
ACI Funds mirrors Stewart Group strategies offered through Booster’s Asset Class KiwiSaver scheme which also leverages Dimensional Fund Advisors investment methodology. There are three fund categories; ACI Conservative, ACI Growth and an ACI Balanced Strategy which is a 50/50 combination of the other two. Stewart says clients and advisers, including those who are part of Stewart Group’s FAP FINZO, have been asking for a solution to fill the gap for three years.
“We assist a lot of advisers with KiwiSaver through the Booster Asset Class KiwiSaver, and they have been asking for the same solution but unlocked. This creates an opportunity for advisers who have clients in KiwiSaver, as it has the same investment approach and will feel familiar – but being unlocked, adds an additional cornerstone offering in meeting clients’ needs and planning requirements. “
Stewart says the ACI Funds options were created using the Fama-French Model, focusing on target drivers of high expected return during portfolio construction and asset allocation.
Stewart Group is encouraging ACI Fund investors to go with financial advisers. “We are, at our core, financial planners and we believe that people who receive financial advice have better outcomes. That's why we're not wanting this to be a direct channel. Someone can elect not to have an adviser, but we would much prefer, given the body of global evidence that client outcomes are better if they have a financial adviser in their corner.
“We’ve got a lot of grandparents who have been asking us for a solution so that they can gift money to grandchildren, so that's why we wanted a very low minimum. Having said that, the largest client in the fund so far is $1 million.”
ACI Funds are issued by hosting firm FundRock NZ (formerly Implemented Services Solutions) and are held by independent custodian Adminis, with Public Trust appointed as supervisor.
Stewart Group also has an agreement to distribute ACI through a new health investment scheme by startup health services provider Fettle.
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