This page gives an introduction to the Investment Funds available in the ASB KiwiSaver Scheme and provides general information to help you understand the choices offered.
- Five ASB KiwiSaver Scheme Investment Funds
- How the Investment Funds are managed
- Understanding the investment terminology for the funds
Five ASB KiwiSaver Scheme Investment Funds
The ASB KiwiSaver Scheme has five Investment Funds, each with a unique risk/return profile shown by the mix of assets they are invested in.
- One Investment Fund invests solely in New Zealand bank deposits.
- Four of the five Investment Funds invest in a pre-set mix of asset types including cash, fixed interest, property and shares.
Investments that are spread out among different asset classes are known as diversified investments. This means that overall returns for these four Investment Funds are not impacted by one particular market's performance. This is important because different markets perform best at different times - for example the share market may perform well at one time but the property market at another.
How the Investment Funds are managed
The ASB KiwiSaver Scheme Investment Funds are a type of fund known as index-tracking investment funds (also known as passive funds). Simply put, this means that the Investment Funds in the ASB KiwiSaver Scheme follow an investment style that aims to mirror the return of the markets in which they are invested. For example investments in New Zealand shares invest in the NZX50 Index (which is made up of New Zealand's 50 largest listed companies), in proportion to the size of each company (based on the value of total shares). As the NZX50 rises and falls, so too will investments in this index. This type of investment fund has two major benefits:
- Firstly, as an investor you can have confidence that you will get a return that is similar to the markets the Investment Funds are invested in. This also removes any concerns about individual fund manager performance and means you can focus on choosing an investment fund that invests in the type of assets that best meet your needs.
- Secondly, index tracking investment funds generally have lower investment management fees than actively managed investment funds. This is important because fees may have a big impact on returns over time.
Understanding the investment terminology for the funds
Investment time frames
When we refer to investment time frames, we mean:
- Short-term - periods of up to five years
- Medium-term - periods of five to ten years
- Long-term - periods of more than ten years
Income and growth assets
When we refer to income and growth assets, this refers to the type of assets the ASB KiwiSaver Scheme Investment Fund is invested in. The proportion of your Investment Fund that is invested in each type of asset determines the level of risk for each ASB KiwiSaver Scheme Investment Fund.
- Income assets - cash and fixed interest investments (such as bank deposits and government bonds) are lower risk investment types that primarily generate an income.
- Growth assets - shares and property investments are higher risk investment types that have the potential over time to increase in capital value and deliver higher returns to investors.