We notified you about changes to our Ethical Investment Policy and Statement of Investment Policy and Objectives (SIPO) last year.
The changes included:
- Change of benchmark for the Ethical Growth Fund, and each of the KiwiSaver Fund;
- Change of asset allocation for the Ethical Growth Fund, and each of the KiwiSaver Fund;
- Narrow of permitted asset range for Other Assets;
- Changes of our Ethical Principles so that the wording is more accurate;
- Changes to the Ethical Exclusion policy so that the rules are more specific and measurable.
Original copies of these notices can be found here (notice regarding changes in Ethical Investment Policy) and here (notice regarding changes in the SIPO).
What is a Benchmark?
Benchmarks are independent and widely recognised and used market indexes that Pathfinder considers appropriate in representing our Funds. Each Fund has their own benchmark which can be one index or a composite of indexes. There’s no market standard index that applies to all funds in the same risk category. Pathfinder is an active fund manager with ethical bias and do not manage our Funds against any Benchmark allocation.
We have changed benchmarks for our KiwiSaver Funds and the Pathfinder Ethical Growth Fund.
Prior 1 October the benchmark of the Pathfinder Ethical Growth Fund is a composite of: 5% Bloomberg NZ Bank Bill Index, 20% Bloomberg Barclays, Global Aggregate (100% hedged to NZD), 20% S&P/ NZX50 Gross Index, 20% S&P/ASX200 index (50% hedged to NZD) and 35% Morningstar Developed Markets Net Index (50% hedged to NZD).
Prior to 1 December 2021, the benchmarks used for the Pathfinder KiwiSaver Funds are:
For the Conservative Fund: 20% Bloomberg NZ Bank Bill Index, 60% Bloomberg Barclays Global Aggregate Total Return Unhedged (gross of interest and tax; 100% hedged to NZD) & 20% Morningstar Developed Markets Net Index (net of dividends and tax; 50% hedged to NZD).
For the Balanced Fund: 10% Bloomberg NZ Bank Bill Index, 30% Bloomberg Barclays Global Aggregate Total Return Index Unhedged (gross of interest and tax;100% hedged to NZD) and 60% Morningstar Developed Markets Net Return Index (net of tax and dividends, and 50% hedged to NZD).
For the Growth Fund: 5% Bloomberg NZ Bank Bill Index, 15% Bloomberg Barclays Global Aggregate Total Return Index Unhedged (gross of interest and tax, 100% hedged to NZD) & 80% Morningstar Developed Markets Net Return Index (net of tax and dividends; 50% hedged to NZD).
Pathfinder’s rationale for changing benchmarks was that:
a. The new benchmark index is independently administered, easily verified, and widely used to compare funds in NZ.
b. As the new index is a NZ based index, it more closely aligns to the asset classes that the funds actually invest in. By contrast, the old benchmark was a weighted composite of three indices which was formulated and manually calculated by the manager and did not reflect the asset classes of the funds as well as the new benchmark (e.g., the equity index used was the Morningstar Developed Market Index which did not reflect the Australian/NZ bias of NZ fund managers). The new index is a composite of 7 indices which are weighted and calculated by Morningstar rather than the manager.
c. The components of the old index would have required licenses from Bloomberg and Morningstar. The new index only requires a Morningstar licence and is therefore more economic.
d. The new indexes are introduced by Morningstar in 2020 and were not available when the KiwiSaver Funds started in July 2019. There was no change to the investment strategy or actual investments as a result of the benchmark change and both indices could have been used since inception but, for the reasons outlined above, the manager considers that the new benchmark is better.
You can find original copies of the notices we sent out about changing these indexes here (notice regarding changes in Ethical Investment Policy) and here (notice regarding changes in the SIPO).
Please call us at 0800 ETHICAL or email email@example.com if you have any questions about your investment or these changes.