Call for transparency to ensure investor confidence

KiwiSaver providers should tell clients about exposures to Silicon Valley Bank and Signature Bank and put them in context to restore confidence.

Investment advisor Chris Douglas of My Fiduciary says KiwiSaver fund managers have an obligation to provide full and frank disclosure to investors and even prospective investors.

His comments come in the wake of multiple KiwiSaver schemes losing money through investment in the failed US mid-tier banks Silicon Valley Bank and Signature Bank.

“Too often people feel that funds are opaque. That’s changed a lot over the last few years with greater transparency from regulation and quarterly reporting, but with KiwiSaver in particular, there are incentives to join; it’s government sponsored, there’s the tax credit, and so there’s a higher level of obligation from fund managers to really make sure they engage with the public and with the media, on what they're doing and why.”

Last week Newsroom reported that the Fisher Funds KiwiSaver scheme had lost millions of dollars through Signature Bank investments. This was confirmed by Fisher to be around $50 million from its select international portfolio and NZX-listed investment company Marlin Global. A Fisher Fund spokesperson says, “To put that into perspective, for a customer with $50,000 invested in our KiwiSaver Growth fund, their total loss is only about $320.”

In its blog Fisher advised clients it had written the value of its Signature Bank holdings down to zero and emailed its clients an update of the situation as part of its regular schedule of investor updates which went out on Thursday.

Earlier this week the NZ Herald revealed that ANZ saw a loss in value of $31m from exposure to SVB across KiwiSaver and non-KiwiSaver with total funds under management of $30.5 billion. ASB Bank had exposure to both US banks as of February; SVB was worth less than $2 million and Signature Bank was less than $1m across total funds under management of more than $20b. The impact on client funds was estimated at less than 0.01 per cent. Westpac’s KiwiSaver manager BTNZ had small exposure to SVB with around $100,000 in shares and $2 million in bonds. It sold the bonds for around half their original value and estimated the impact at around 0.004 per cent for growth and 0.015 per cent for conservative funds. Milford said it had a small exposure which had minimal impact on funds, and would advise clients through the usual updates. It wouldn’t put a dollar value on its investments.

Although there is no legal obligation of KiwiSaver providers to tell members if they lost money on a single investment unless it was material in the context of the investment portfolio, Douglas says right now is the time to give investors confidence that they are in a well diversified portfolio, that the US regional banks are a very small part of the wider economy, and that the regulator has stepped in to give a tremendous amount of confidence to deposit holders in all banks.

“I understand why they don't necessarily need to always be putting out notes to investors. They have to balance between scaring people and worrying about what's going on within the markets and assuring them they should be focused on the long term. How they think about engaging with clients is really important because the reality  is they have to strike a balance. With KiwiSaver people can easily switch out and move to another KiwiSaver provider.”

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