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FMA releases KiwiSaver performance fees guidance note

Page last updated: 25 May 2012

Media Release
25 May 2012

The Financial Markets Authority (FMA) has today released a final version of its guidance note on KiwiSaver performance fees.

The guidance sets out the criteria against which FMA will assess the reasonableness of performance fees, which are fees charged to an investor when an investment manager outperforms an appropriate benchmark.

FMA Head of Compliance Monitoring, Elaine Campbell said, "While only two KiwiSaver providers currently charge performance fees, it was important to clarify how FMA would assess performance fees and the elements that should apply in any such fee arrangement."

"The guidance makes it clearer for everyone about the balance between how managers and investors are rewarded for the risks taken."

The guidance was first issued in draft form in November. 13 submissions were received with most supporting the overall objectives and principles.

Changes were made to clarify the status of the guidance note and to emphasise performance fees are only appropriate in certain, limited circumstances for example, actively-managed growth funds. FMA also clarified the performance fee elements expected to be present and added information on the disclosure of performance fees.

"FMA will continue to work with providers seeking to amend or introduce performance fees," said Elaine Campbell.

The guidance note can be found here


KiwiSaver legislation (Clause 2 of Schedule 1 of the KiwiSaver Act 2006) provides that fees for services in relation to the provision of a KiwiSaver scheme should not be unreasonable.

FMA is responsible for assessing the reasonableness of fees charged by KiwiSaver providers.

KiwiSaver is a regulatory priority for FMA and it also intends to provide guidance on other issues related to KiwiSaver, for example, investment risk disclosure.

In addition, yesterday the Government announced in its Budget 2012 new disclosure rules for KiwiSaver fund managers that will apply from 1 April 2013. These new periodic disclosure rules will require fund managers to report their performance and returns, fees and costs, assets and portfolio holdings, liquidity and liabilities, and key personnel, along with any conflicts of interest, in a standardised format on their website.

The Ministry of Economic Development is working on the development of regulations for KiwiSaver periodic disclosure requirements. This mandatory reporting will give investors access to consistent information to assist with comparisons across different KiwiSaver funds. More information is available here.


Scott McMurray Tel. 029 222 0776 or scott.mcmurray@fma.govt.nz