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Simplicity changes international manager
Published on 25/04/2023
As of April 28, Simplicity switched from Vanguard to DWS International GmbH (DWS) for the management of international equities and bonds.
The decision was made after our longtime relationship with Vanguard could not address international tax leakage. This leakage occurs because the Vanguard funds we currently invest in are based in Australia. This means our members do not get the full benefit of New Zealand withholding tax treaty rates for global share investments. For maximum tax efficiency, international funds need to be domiciled in New Zealand.
We asked Vanguard to set up funds in New Zealand and manage them, but they chose not to after a change in their strategic priorities. As a result, Simplicity has established its own New Zealand-based funds, and chosen DWS to manage these portfolios. We part ways with Vanguard as the best of friends :)
As international investments will be held in New Zealand-based PIE funds set up by Simplicity, these investments can now access New Zealand withholding tax treaty rates for overseas investment income.
All of our existing diversified KiwiSaver and Investment Funds - Growth, Balanced, and Conservative - have exposure to international assets and will be impacted by this switch. The benefits for our members will vary from year to year, but asset consultants estimate that use of NZ PIE funds should increase returns on international share investments by approximately 0.2 - 0.3% per year (in comparison to Australian domiciled funds).
For global shares, we are also changing the benchmark index to the Bloomberg DM ex NZ ESG Screened Index. For global bonds, the index will now be the Bloomberg MSCI Global Aggregate Sustainability Select SRI Float Adjusted Index.
Our international investments will continue to be highly diversified, holding shares in over 1,000 companies across more than 25 countries, and bonds from over 2500 issuers in more than 50 countries.
We will continue to apply the same ethical screens to all our funds.
You can find out more in our Statement of Investment Policy and Objectives documents (SIPOs), Product Disclosure Statements (PDSs), and on our fund pages for KiwiSaver and Investment Funds from 28 April.
You can also email our Investor Services team at info@simplicity.kiwi
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Q&A
Who is DWS?
DWS is a fund manager listed on the Frankfurt Stock Exchange, and 75% owned by Deutsche Bank. They currently manage global investments valued at over NZ$1.4 trillion.
They are headquartered in Germany, with a large presence in Australia.
Why the switch from Vanguard to DWS?
We have had a long and close relationship with Vanguard. However in one area we needed them to change, and they could not ie. in the area of tax leakage. Because the funds we currently invest in are based in Australia, the investments have not been getting the full benefit of New Zealand withholding tax treaties for income on global share investments.
We asked Vanguard to set up funds in New Zealand to eliminate the tax leakage, but they chose not to. That meant we needed to find an offshore fund manager who would have the investments domiciled in New Zealand based funds. After a comprehensive search and due diligence, we chose DWS to manage global investments.
Which funds are impacted?
All of our existing diversified funds KiwiSaver and Investment Funds - Growth, Balanced and Conservative - invest in international assets and are impacted. Any new diversified funds we set up in the future will also benefit from these arrangements.
How does this change the way my investments are managed?
There are several changes, all of which should benefit you.
Going forward all international investments will be held through Simplicity’s NZ based PIE funds, we will have 100% control over the investments and can get the full benefit of New Zealand withholding tax treaties for the income these investments earn.
For Global Shares, we are also changing the index to the Bloomberg DM ex NZ ESG Screened Index.
For global bonds, the index will be the Bloomberg MSCI Global Aggregate Sustainability Select SRI Float Adjusted Index.
The funds will continue to have a wide range of investments. In International shares there will be over 1,000 different companies in 29 countries, and in over 20,000 different bonds in 70 countries.
We continue to apply the same ethical screens for the new funds. The details are here.
Is there any change to the fees I pay?
No, the fees are the same.
Do I need to do anything?
No, the changes happen automatically.
What if I want more information?
You can find out more in our Statement of Investment Policy and Objectives documents (SIPOs), Product Disclosure Statements (PDSs), and on our fund pages for KiwiSaver and Investment Funds from 28 April.
You can also email our Investor Services team at info@simplicity.kiwi