Article – BusinessDesk

Jan. 18 (BusinessDesk) – State-owned New Zealand Post subsidiary Kiwibank will buy KiwiSaver funds manager Gareth Morgan Investments to act as the cornerstone of its wealth management unit.

Kiwibank sixth biggest in KiwiSaver with Gareth Morgan buy

By Paul McBeth

Jan. 18 (BusinessDesk) – State-owned New Zealand Post subsidiary Kiwibank will buy KiwiSaver funds manager Gareth Morgan Investments to act as the cornerstone of its wealth management unit.

The bank will pay an undisclosed amount for the wealth manager, which has $1.5 billion under management and more than 57,000 clients, using internal facilities, chief executive Paul Brock told a media briefing in Wellington.

GMI has some $650 million in KiwiSaver funds, and the tie-up will make Kiwbank about the sixth biggest player in the market. The Wellington-based fund manager will benefit from having a greater physical presence across the nation through Kiwibank.

AMP Capital currently manages four actively managed funds for Kiwbank’s in-house KiwiSaver operation.

No decision has been made, but the GMI purchase means existing funds management relationships could be brought in-house, Brock told a media briefing this morning.
“We see significant opportunity in the KiwiSaver market” which Kiwibank is picking to grow more than six-fold to $60 billion in the coming decade, Brock said. “It effectively becomes the wealth management division of the company.”

Brock said the acquisition will be positive for the bank’s earnings from day one. Last year was the worst profit in five years for Kiwibank, as it booked a $79 million charge on impaired loans.

GMI will operate as a standalone business, with principal Gareth Morgan retaining an investment strategy role, though Kiwibank has yet to make a decision on whether to keep the branding. Morgan and fellow principal Andrew Gawith will remain directors, along with two Kiwibank appointments to the board.

Morgan initiated the sale, saying the operation had grown too big for him to oversee, and that he wanted an institution that would sign up to his firm’s own standards of transparency, including the use of the Global Investment Performance Standards and avoiding the pooling of investment funds to let clients see exactly where their money is.

“Institutions are usually quite jealous of protecting the interests of the firm over and above the interests of consumers,” Morgan said.

Kiwibank entered the KiwiSaver space in 2007, using Mercer’s scheme in a retail partnership. It later ditched Mercer in 2010, replacing it with AMP Capital to run Kiwibank’s own scheme. In 2009, it tapped .

(BusinessDesk)

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