Passive funds can be OK, but I always try to do better.
I believe that the best investment funds are actively managed by investment professionals, which means it's worth paying higher fees.
Active fund managers do in-depth research into potential investments and make informed decisions about where to invest your money - they not only try to get higher returns, but also manage risk for you. They work to steer clear of poor performers and select the investments with the greatest upside and the least downside.
That's not to say fees aren't important. Fees should be a factor in your decision making - just not the only factor. The fees of the KiwiSaver fund you're considering should be reasonable and reflect the amount of work that your manager does. They should also be presented clearly and simply in plain English.
Ethical investment
I can't imagine why anyone would want to invest in a company involved in cluster bomb manufacturing. Values and principles matter to me, which is why I try to make ethical investment choices. If you have a similar philosophy, that means you'll need to find an actively managed fund with an ethical philosophy. You should ask to see a fund's socially responsible investment policy.
At Summer KiwiSaver, our approach to ethical investing is guided by the New Zealand Superannuation Fund. We've made that commitment so that when we invest directly, we will actively steer away from any company involved in making cluster bombs or landmines, making or testing of nuclear weapons, making any tobacco products or processing whale meat.
We also hold any external managers we employ on your behalf to account as well. We need to see and assess their attitude to ethical investing and at the end of each month we'll review what's in their investment portfolio. And our position is not "set and forget". We monitor every investment we make, and if a company or fund manager changes their spots, we're pretty sure we'll know about it.
Learning by doing
I've spent years helping people discover the fascinating world of investment. If there is one thing I know, it's that people learn best by doing. The best way to learn about investment is by being involved in the investment decisions that are made.
Summer KiwiSaver gives you the option to set your own asset allocation (the amount that you have in shares, property, bonds and cash) and to change that as you perceive opportunities or unacceptable changes in risk. I help by sending regular updates about market conditions. You can decide if you want to have a lot of shares in your KiwiSaver account at any time, or a lot of bonds or listed property.
Of course, you can also choose to let the investment professionals make the allocation choices for you.
Consider your KiwiSaver provider and the fund that you are in well. It is really easy to switch and the dividend may make a few minutes of your time one of the best investments you make.
KiwiSaver from scratch
It was the chance to build a KiwiSaver product from scratch that hooked well-known financial adviser Martin Hawes.
Hawes is lending his face and investment nous to Forsyth Barr's revamped KiwiSaver offer, branded Summer.
The name comes from Hawes' popular financial advice book Twenty Good Summers, which aims to set people up for a financially secure retirement.
"I'm really happy with what we've designed," he says.
"I didn't just want to come and help out somebody who had an existing scheme who was just going to keep it going like it was.
"Forsyth Barr had a scheme but it needed a pretty good makeover and we were able to sit back and think: what would the ideal KiwiSaver look like?"
Through his newspaper columns and books, Hawes is a familiar and trusted source of financial advice for many Kiwis, so was he concerned about losing some independence?
Hawes says his move into governance roles - he's on the board of Ngai Tahu's savings scheme Whai Rawa, the annuities provider Retirement Income Group and a local housing trust in Queenstown - means he has avoided the "independent" word for several years.
As the chair of the Summer investment committee, he says he has made no secret of wanting Summer KiwiSaver to be successful on all levels, but that has meant relinquishing his unaligned position.
One of the elements that attracted him to backing Summer was the strategy to be "advice rich".
"It was not just that you put your money in, forget it and hope that everything will be OK, but the learning that would come out of it."
Martin Hawes is Chair of the Summer Investment Committee. The Summer KiwiSaver scheme is managed by Forsyth Barr Investment Management Ltd. You can obtain the Scheme's product disclosure statement and further information about the Scheme at www.summer.co.nz, or by calling us on 0800 11 55 66. A disclosure statement is available from Martin Hawes, on request and free of charge.
