In November 2011, FMA released a draft guidance note on KiwiSaver Performance Fees.
See draft guidance note.
13 submissions were received with the majority supporting the overall objective and headline principles.
Issues raised included whether the guidance note was too prescriptive, the requirement for market-related benchmarks and whether it was outside the scope of the 'not unreasonable' test in the KiwiSaver Act 2006 for FMA to be considering any performance fees charged or paid to managers of third party/underlying funds.
The final version of the guidance note incorporated the changes described below. Copies of the non-confidential submissions are also attached below.
About this guidance note
Emphasis was added that KiwiSaver is a regulatory priority for FMA and that FMA will update its guidance as market norms evolves.
A statement was added that FMA expects trustees to monitor fees.
General principle 1
Emphasis was added that performance fees are only appropriate in certain, limited circumstances.
General principle 2
Reference to sharing the downside (i.e. fulcrum fees) and to extended timeframes was removed.
A new bullet point was added about giving investors sufficient information on the risks being taken to drive performance fees.
Performance fee elements
We have revised this section. In particular:
Hurdle Rate of Return: acknowledgement that 'absolute return' funds can be treated differently in certain circumstances.
Resets -wording has been clarified in the 'High Water Mark' and 'No resets' sections.
Crystallisation periods - this section replaces section on multi-year assessment .
Performance caps - section on caps has been expanded and changed to provide more flexibility.
Assessment of performance fee arrangements
No substantive changes.
Disclosure of performance fees
This has been rewritten and now references FMA's Effective Disclosure Guidance Note. An example table has also been added.
Reference to performance fees charged at asset class or sub-manager level has been removed.
- ANZ Submission (507 kB pdf)
- Commission for Financial Literacy and Retirement Income Submission (156 kB pdf)
- Fidelity Life Submission (265 kB pdf)
- ISI Submission (294 kB pdf)
- Kensington Swan Submission (110 kB pdf)
- MCA NZ Limited Submission (230 kB pdf)
- Medical Assurance Submission (35 kB pdf)
- Morningstar Submission (110 kB pdf)
- TCA Submission (190 kB pdf)
- TOWER Submission (3 MB pdf)
- Workplace Savings NZ Submission (71 kB pdf)