2 Comments 2 Commentsby Jenny Ruth
The ethical investment specialist fund manager, which is a subsidiary of Alvarium (NZ) Wealth Management, now has $1 billion invested in its KiwiSaver and other funds, and saw management fees grow by $2.3 million, or 41.2%, to nearly $7.8 million in the year ended March.
“Recent data has revealed that 75% of Kiwis expect that their KiwiSaver provider will invest their funds ethically and responsibly, with almost half, or 49%, considering changing to ethical funds within the next five years,” says John Berry, cofounder and chief executive of Pathfinder KiwiSaver.
“This demonstrates that Kiwis are increasingly committed to investing in line with their values, and we’re pleased to share that as investor interest in ethical investing grows, so too does Pathfinder,” Berry says.
Since Pathfinder is an active manager, it's no surprise that Berry is sensitive on the matter of fees.
“Active managers normally have higher fees, but we challenge the idea that fees should be a primary focus for investors,” he says.
“It’s important for Kiwis to look holistically at the returns that are delivered after fees, and also think about how we can utilise our KiwiSaver to invest for a better future, to create the world we want to live in.”
Returns from Pathfinder's conservative and balanced funds have exceeded their Morningstar benchmark in the last five years with returns of 4.1% a year and 7.75% respectively compared with the Morningstar benchmarks of 2.6% and 7.66% respectively.
The company's growth fund has achieved annual returns of 9.43% over five years, short of the Morningstar benchmark return of 10.29%.
With expenses growing at a slower 23.8% pace, the company reported a bottomline net profit of $1.2 million for the year, up nearly three-fold from nearly $474,000 the previous year.
One reason for the slower growth in expenses was the drop in advertising and marketing spending to nearly $766,000 from nearly $1.2 million the previous year.
Berry said the marketing spend in the previous year was significantly higher because the company had been focused on refreshing its brand, website and communications materials, which it continued to use in the year just gone.
“Significant ‘above the line’ advertising campaigns are not something we activate every year. We are strategic and intentional about our marketing efforts, and carefully consider what each campaign conveys,” he says.
Pathfinder has just gone to market with its latest campaign which emphasises the ethical investing message.
“In a hyper-connected world, global events unfold in real time. Every headline feels personal, feeding a sense of unease, leaving us wondering when good will return.
“But your actions can have positive reactions: invest ethically with Pathfinder KiwiSaver plan, where good returns,” The YouTube ad says.
Another reason for the relatively slow growth in expenses was that charitable donations fell to $86,000 from more than $538,000 the previous year.
Berry says that reflects a change in the way Pathfinder donates from 20% of its KiwiSaver fees previously to 1% of all its revenue from both KiwiSaver and other managed funds.
Previously, these donations were untagged, meaning the charities KiwiSaver members chose could use the funds as they saw fit.
The relaunch of the charitable programme “included ensuring our giving has a more direct connection to the ethical pillars of our investing,” Berry says.
“We’ll continue to support charities whose work actively improves our planet, and the lives of people and animals, but we have also broadened our horizon to include scholarships, social enterprise grants, and education, to support initiatives where we see potential to promote positive change.”
Alvarium has recently bought the Salt Funds Management business which will continue to be managed separately by its existing team.
“Salt has a highly respected and skilled investment team. We look forward to being able to tap into their additional expertise for our clients,” Berry says.
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At the same time, net performance should be considered in context: the risk profile of the fund and the appropriateness of the benchmark are vital in assessing whether a manager has truly added value. Ethical and responsible investment considerations remain central to many investors, but in today’s market ESG integration is now a baseline expectation rather than a differentiator that justifies a fee premium. The vast majority of funds have embedded ESG frameworks into their processes, meaning investors can rightfully demand both values alignment and strong after-fee returns.
In short, the most meaningful measure of a fund’s worth is the sustainable value it delivers to investors - responsibly, competitively, and net of all costs.