AMP Wealth Management New Zealand is changing its investment approach. Photo / File
AMP Wealth Management New Zealand is changing its investment approach. Photo / File
AMP Wealth Management will ditch using an active management approach in its managed funds including KiwiSaver in favour of using global index-tracking investment manager BlackRock in a move likely to see a significant drop in its fees.
AMP's KiwiSaver scheme is fourth-largest in the market, with $6.2 billion invested on behalf of 218,789 members.
But it has had a poor track record in terms of performance.
Morningstar figures show its default fund returned an average of 4.3 per cent per annum over the five years to June 30, ranking at the bottom for the nine providers with default funds.
While its balanced and growth funds have also languished at or near the bottom of the performance tables over the past five years.
The move from using an active investment management strategy to BlackRock's index tracking style should shave the fees on the funds and improve its performance.
It comes as fund managers compete to win appointment from the Government for the default provider status.
The Government has indicated fee cost will play a major part in its decision-making process.
Jeff Ruscoe, acting chief executive of AMP Wealth Management New Zealand. Photo / File
Jeff Ruscoe, acting chief executive of AMP Wealth Management, said it had delivered good outcomes for clients using its current investment manager - sister company AMP Capital Investors.
"However, this change to a predominantly index-tracking investment management approach is the right decision to ensure we are best placed to deliver long-run returns, further value for money and continue to support the financial wellbeing of our clients."
An AMP spokesman confirmed AMP Capital New Zealand, which alongside AMP Wealth Management is owned by the dual NZX and ASX listed AMP Financial Services, would continue to provide active investment management options on its WealthView platform.
"But the changes will apply to the majority of AMP managed funds (not just KiwiSaver)."
They will also apply to its New Zealand Retirement Trust - a corporate superannuation scheme which has $3.42b invested on behalf of 37,828 members.
The change means instead of having people making the investment decisions it will be driven by computer algorithms where the funds track a particular index like the NZX-50 index or S&P 500 investing in companies based on their weighting in that index.
Index-tracking is a much cheaper way of investing and is also used by other KiwiSaver managers including ASB, Simplicity, BNZ and SuperLife.
Ruscoe said the next step would be a repricing of its funds within its AMP KiwiSaver scheme and implementation of a sustainable investment strategy. It did not give a timeframe on when the fee changes would be made.
AMP would continue to exclude companies involved in the manufacture of cluster munitions, anti-personnel mines, chemical weapons, nuclear explosive devices, civilian firearm stocks or tobacco.
Ruscoe said its partnership with BlackRock would also allow further consideration of sustainability including reducing the impact of climate change.
