Another KiwiSaver scheme joins the market

If these quotes are correctly ascribed to Scott, there are some pretty big claims about this scheme (positive) as well as the rest of the KiwiSaver providers (negative). Be good to see the evidence behind each of these claims.

Evidence-based investing, while often touted as a rational and data-driven approach, can be overly rigid and dismissive of the dynamic nature of markets. It relies heavily on historical data, assuming that past patterns and statistical relationships will continue into the future.

This backward-looking focus may ignore the impact of innovation, changing investor behavior, or the current environment that the world has entered that defy statistical norms.

By clinging to models and metrics that worked in the past, investors will miss opportunities that don’t neatly fit into established frameworks.

Moreover, evidence-based investing can foster a false sense of certainty.

Enthusiastic advisors may place too much trust in historic strategies and academic theories, underestimating the role of human judgment and market psychology - with the latter being aspects that clients will happily pay a premium for.

Real-world investing involves ambiguity, emotion, and rapidly shifting conditions that can’t always be captured by empirical data. In trying to reduce investing to a science, this approach inadvertently strips away the art and intuition that are also vital to navigating financial markets successfully. As a result, it will lead to underperformance or missed opportunities when the markets behave in ways that historical evidence simply can’t predict.

Whilst it’s great to see differing flavors of kiwisavers coming to market, independent financial advisors (or at least those who claim to be) must remain open-minded to all investment styles and strategies to support their clients objectives.
Especially now.

Pragmatic, thinking about your comments, I remember just after the lockdowns I spoke with a Kiwi who had lectured at Yale for 40 years, alongside Noble Prize Laureate Robert Shiller. He said the trouble with academics, we don’t all agree.

Then there was the active funds BDM at a FANZ conference I asked what their investment philosophy was. Sadly he didn’t know but offered me a free pen.

My point being, for a large number of advisers in their careers, the Evidential KiwiSaver will be a safe product to use. It has a strong set of rules and will have a high level of long term certainty for clients. Meaning, long term cash flow planning can be achieved with certainty. I wouldn’t want to attempt this with some funds.

As an adviser we have to decide whether we want to attempt picking the fund manager with the highest returns or who is most consistent for long term planning. The trouble with picking the highest return manager is, they are rarely the same from year to year, decade to decade. If you’re not providing long term certainty, what are you providing?

Thanks @John Milner for a considered response.

I tend to agree with your statement that passive/quasi passive/evidence-based investing provides relative predictability - a nice bell curve of outcomes, and the soothing comfort of not being wrong, just average. And that’s a convenient approach for uber-long savers such as Kiwisavers who continue to contribute to their nest-eggs without the desire to review their progress often. My contribution to this approach is to ensure that your preferred investment gateway is at the budget end of the price spectrum so that the investor is not paying a premium for mediocrity.

Academia is full of nuance, debate, and elegant footnotes. And while I’m sure a Kiwi ex-Yale lecturer has forgotten more about market theory than I’ve had hot dinners, markets are not laboratories. They’re messy, emotional, irrational places. Shiller himself has spoken often about market inefficiencies and irrational exuberance. So if we accept that markets aren’t always rational, isn’t there room for managers who actively spot and exploit those inefficiencies?

And yet active investing is not easy. It is not a set and forget “she’ll be right” approach. It’s about finding managers with a consistent process, an edge, and discipline. It’s about understanding their philosophy (yes, even if the pen-wielding BDM doesn’t), not just chasing heat charts that illustrate annualised performance superiority over the past 13 weeks.

Whilst certainty is lovely for long-term planning, flexibility around both market and client events is crucial for long-term success. Markets change. Regimes shift. Life gets in the way.

My central point (in response to the claims in this article) is that no single investment approach is divine, and that all advisers must be open to all categories. Despite the relentless argument from passive enthusiasts, active investing is not about betting the house or chasing unicorns. It’s about strategic decisions, tactical allocations, and managers who have the freedom - and the skill - to act when markets wobble. This approach can / should be balanced with ultra-low-cost beta strategies to provide investors with a collaborative solution for their investments.