Bhanu Singh
New Zealanders seeking global investment solutions that target measurable sustainability goals without sacrificing broad diversification, efficient tax management and higher expected returns now have additional access to the systematic strategies of one of the world’s most respected fund managers.
Dimensional Fund Advisors, which has a four-decade history of applying Nobel Prize-winning research to investing, has launched for Kiwi investors an Australian sustainability equity fund within a Portfolio Investment Entity (PIE), a tax-effective NZ-domiciled investment structure. The fund has gone live this week.
The launch of the Australian fund comes nearly 16 months since Dimensional offered two Global Sustainability Funds within the increasingly popular PIE structure. Those funds – one unhedged and the other hedged to the NZ dollar – now have more than $NZ450 million in assets under management.
Offering tax benefits to Kiwi investors and implementation advantages for advice firms, PIE funds have been rapidly expanding relative to Australian unit trusts in recent years. Over the past decade, PIEs have grown at a rate of 12.4% per annum to a total of nearly $60 billion in assets as of July this year.[1]
“We have seen a strong appetite among New Zealand financial intermediaries for both our systematic investment approach and our sustainability strategies in recent years,” said Dimensional Australia Chief Executive Officer and Head of Asia Pacific Portfolio Management, Bhanu Singh.
“While some Kiwi clients are happy to continue investing through our Australian resident unit trusts, others have said the PIEs make more sense from an administration and tax perspective,” Singh said. “Ultimately, we want to give intermediaries choice in how they access our investment expertise.”
In a PIE, the tax administration is handled within the fund as opposed to the clients having to incorporate the fund’s returns and performance information within their own tax returns. This tax efficiency is aided by the fund holding stocks directly rather than via an offshore vehicle.
Dimensional, founded in the US in 1981 and with 14 offices around the world, now manages close to $NZ1 trillion for clients globally using a systematic investment approach. The firm applies financial science in real-world portfolios integrating research, portfolio design, management and trading. 2
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Dimensional opened its Australian office in Sydney in 1994, initially as a regional trading centre, and began offering strategies tailored to Australian and NZ clients from 1999. These days, it manages more than $40 billion on behalf of clients in Australasia.
Among its most popular strategies in this part of the world are its sustainability suite of equity and fixed income funds which are designed to reduce carbon footprint exposure across markets and within industries while pursuing higher expected returns in a cost-effective and diversified way.
“New Zealanders increasingly are wanting to align their investments with their personal values around sustainability, but they also want to maintain the focus on their financial goals,” Singh said. ”So that requires a disciplined approach to sustainability within a sound investment framework.”
The newest PIE in Dimensional’s offering to New Zealanders is based on the Australian Sustainability Trust. Since its inception five years ago, this Trust has delivered competitive returns via a systematic focus on higher expected returns compared to its benchmark. It also delivered substantially reduced exposure to weighted average carbon intensity and potential emissions.
Total annual charges for the new fund is estimated at 0.35%. In launching the PIE, Dimensional is partnering with fund hosting platform FundRock New Zealand, which is registered as manager and issuer of the funds.
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