Annual fund charges
All investors in our funds pay annual fund charges. These are charged to the fund and are reflected in the unit price. Because they are part of the unit price, they also effect the returns you receive.
These charges are shown as management fees and expenses. For our KiwiSaver investors, expenses are included in the management fees.
We cap our expenses to ensure early investors into the funds are not unfairly charged.
The annual fund charges are calculated and accrued daily and reflected in the unit price. The management fee and expenses are paid monthly to us.
Our diversified funds pay performance fees to some of the wholesale funds they invest in.
- The Balanced and Growth Funds invest indirectly into the Nikko AM Wholesale Concentrated Equity Fund which charges a performance-based fee, payable to us, of 10% of gains above the “hurdle-rate”;
- The Balanced and Growth Funds invest indirectly into the Nikko AM Wholesale Option Fund which charges a performance-based fee, payable to us, of 15% of gains above the “hurdle-rate”.
The “hurdle-rate” is the minimum return a fund must achieve before being able to charge a performance-based fee. The hurdle-rates are:
- Nikko AM Wholesale Concentrated Equity Fund: 5% above the RBNZ Official Cash Rate over a 12 month financial period.
- Nikko AM Wholesale Option Fund: 4% above the S&P/NZX Bank Bills 90-Day Index over a 12 month financial period.
Performance-based fees are only payable when the return is above the hurdle rate and the fund value exceeds the relevant “high-water mark” (the value the fund must reach before we can charge a performance fee). A high-water mark ensures that if the fund loses value over a period, we must make up those losses before receiving a performance-based fee.
Our diversified funds also invest in a fund run by an external manager, JP Morgan Alternative Asset Management (JPMAAM). We use this manager as they are experts in alternative investments which gives our funds more diversification in what they are invested in. This manager charges us a fee to invest in their fund. This fee is included in the ‘Estimated performance-based fee and other expenses’ in the table above.
Other specific fees
There are currently no contribution, establishment, termination, withdrawal or switching fees being charged to any of our funds.
You may be charged other fees on an individual basis for investor-specific decisions or actions.
The purpose of a buy/sell spread is to ensure that if a transaction occurs in a fund because an investor is buying or selling units, that this investor pays these costs and not the other unit holders in the fund.
The transaction costs that buy/sell spreads offset are specific costs that are incurred when securities (e.g. bonds or shares) are bought or sold. An example of such a cost would be a fee paid to a share broker to buy and sell shares.
At times of heightened market volatility there may not be the normal number of buyers and sellers of securities, which can lead to a difference between the price you would pay to buy a security and the price you would receive for selling it. We will amend the buy/sell spread in our funds to ensure that this cost difference is borne by those who are transacting and not the other unit holders.
Buy/sell spreads vary by fund and we may change the spreads from time to time to reflect the latest brokerage costs and market conditions. The spreads are reviewed at least annually and more frequently as required during periods of heighted volatility.
A buy/sell spread is only charged on application and withdrawal of units from a fund, it is not charged to unit holders that are not transacting. The spread is applied to the unit price when you either buy or sell units in a fund. As an example, if a fund has a unit price of $1.00 and a buy/sell spread of 0.1%/0.3%, you will pay $1.001 per unit to buy units and receive $0.997 per unit when selling.
The spread is not paid to us, but stays in the fund to prevent non-transacting investors from being impacted by the costs of trading from those that need to buy/sell units.