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New fund based on religious beliefs

Q.        I am in the Mercer Conservative (default) fund with $23,400 in my account. I am pleased to see my savings growing, but I don’t know where my money is invested and that worries me. How do I find out more? For example, I would not like to be invested in companies involved in gambling or weapons manufacture.

A.         KiwiSaver fund managers are required to produce a quarterly disclosure statement providing key information about their funds. According to the most recent statement from Mercer, their default fund has $880 million invested on behalf of 89,576 investors, including you. The fund has averaged 4.02% net since inception and your savings are mostly in fixed interest and cash, with a modest 17% in shares. 
 
Trying to pin down exactly where your money is invested is more a challenging task. The disclosure statement shows that the largest investment within the fund is the AMP Capital NZ Cash Fund making up 34% of the fund. Look up that fund online and you will see that it is ‘an actively managed portfolio of bank bills, floating rate notes and short term deposits and securities’. Most of the money is invested in term deposits with BNZ, ANZ and Westpac. 
 
The largest share fund is the Schroder Global Enhanced Index Fund. This makes up 3% of the Mercer KiwiSaver fund and invests in over 500 companies worldwide. Schroder selects stocks ‘with a higher probability of outperformance while being careful not to concentrate risk in any region, sector, industry or theme.’
 
At this point you will realise that the Mercer Conservative (default) Fund is a lower risk fund that is strong on diversification, but is possibly not the ideal fund for someone who wants to take a more principled approach to investing. 
 
New Zealanders have limited choice when it comes to socially responsible or ethical KiwiSaver funds. However, just last month a new fund was launched which may pave the way for more funds to be established based on religious as well as ethical principles. 

The Amanah Ethical KiwiSaver fund was officially launched on 31 January 2015. 
Amanah Ethical is a boutique fund management group based in Auckland. They aim to meet a need for a KiwiSaver Scheme that adheres to the strict rules associated with Sharia law.  To ensure this process, the Company has an Islamic Advisory Board, consisting of local and international Islamic scholars and academics. 
 
Islamic Investment Principles are strictly observed by Amanah New Zealand. For an investment fund to comply with Shari’ah Law, there are a number of principles it must abide by (or types of investment that must be avoided). The first of these is Riba which is prohibition of interest or usury. Riba encompasses any return of money on money, regardless of whether the interest is fixed or floating, simple or compounded, and at any rate. The prohibition of Riba also places restrictions on business activities. Muslims cannot invest in businesses that operate on interest payments, including major Western banks and mortgage providers.
 
The second is Haraam which prohibits investment in business activities deemed impermissible under conventional Islamic law. Haraam business activities include the manufacturing or marketing of such products or services as alcohol, pork, tobacco, pornography, prostitution, gambling, weaponry and many forms of Western entertainment and advertising that are contrary to Muslim values. 
 
The third is Maisir which prohibits speculation or gambling. It is prohibited in Islamic finance to create wealth from chance instead of productive activity. The concept of Gharar is excessive uncertainty, therefore financial products where details of the conditions of sale are unknown or uncertain are generally forbidden for example derivatives products.
 
Amanah Ethical KiwiSaver fund is classified as an aggressive fund as it invests mainly in shares. 

While this fund will have obvious appeal to the many Muslims living in New Zealand, it is open to anyone. Directors of the company include former Race Relations Commissioner Gregory Fortuin, Auckland barrister Brian Henry, Dr Farruk Balli Associate Professor of Finance at Massey University and Claude Oberto who has previously worked for New Zealand Treasury and the Securities Commission.

Other KiwiSaver Schemes based on religious beliefs include the Koinonia KiwiSaver Scheme restricted to people ‘involved in Christian activity and outreach’ and the BCF KiwiSaver Scheme which is available only to members of the Brethren Christian Fellowship. 

Hawkes Bay Today 10 February 2015
 
Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 870 3838 or go to www.peak.net.nz. The information contained in this article is of a general nature and is not personalised. Send your KiwiSaver questions to shelley.hanna@peak.net.nz