The passive index investing movement has taken off in a big way- in New Zealand, we’re just catching up with the rest of the world- especially the US. When it comes to Invex funds, the big-name is Vanguard, but there is also iShares (ETF) managed by BlackRock.
We all know what makes passive index funds appealing- they are low cost, expose us to many companies, and a huge proportion of the market. Studies have shown they are equivalent to and, more often than not, outperform actively managed funds. So it makes sense to want to invest in index funds.
The problem is that it’s not as easy for us Kiwis to get access to the really low fee index funds on offer overseas- Some of the overseas fees for index funds are as low as 0.03%. Now that’s low! So in New Zealand, what are good value ETF funds to invest in. Well, Vanguard and iShares by Blackrock are some of the best.
So what options do us Kiwis have to invest in iShares funds?
Can Kiwis invest in the iShare Index Funds?
The short answer is yes- you can invest in iShare funds if you are in New Zealand. Smartshares struck a deal with BlackRock to badge a range of iShare ETF. And a bonus- all the iShare funds available through Smartshares are ESG funds.
What’s an ESG fund you ask? ESG funds are portfolios of shares and/or bonds for which have been screened for environmental, social and governance factors. This means the shares and bonds contained in the funds have passed stringent tests over how ethical the company or government is regarding the ESG criteria of the fund manager. Basically- they are ethical funds. Check out Blackrocks ESG criteria for more information.
iShare funds screen out companies associated with controversial weapons, nuclear weapons, tobacco, thermal coal, oil sands, civilian firearms and those violating United Nations Global Compact principles.
Smartshare’s iShare funds on offer
Smartshares offer 8 iShare funds to invest in. Here are the 8 funds;
- Smartshares Emerging Markets Equities ESG ETF (0.59% fee) which invests in the iShares MSCI EM IMI ESG Screened UCITS ETF (0.18% Fee)- The fund aims to track the performance of an index composed of emerging markets companies.
- Smartshares Europe Equities ESG ETF (0.55% fee) which invests in the iShares MSCI Europe ESG Screened UCITS ETF EUR (0.12% fee). The fund aims to track the performance of an index composed of European companies.
- Smartshares Global Equities ESG ETF (0.54% fee) which invests in the iShares MSCI World ESG Screened UCITS ETF USD (0.20% fee). The fund aims to track the performance of an index composed of developed market companies.
- Smartshares Japan Equities ESG ETF (0.55% fee) which invests in the iShares MSCI Japan ESG Screened UCITS ETF USD (0.04% fee). The Fund aims to track the performance of an index composed of Japanese companies which also hedges JPY currency in the index back to USD on a monthly basis.
- Smartshares US Equities ESG ETF (0.34%) which invests in the iShares MSCI USA ESG Screened UCITS ETF (0.07% fee). The fund aims to track the performance of an index composed of U.S. companies.
Bond and Fixed Interest Funds
- Smartshares Global Aggregate Bond ETF (0.30% fee) which Invests in the iShares Core Global Aggregate Bond UCITS ETF NZD Hedged (0.10%). The fund aims to track the investment results of an index composed of global investment-grade bonds.
What’s a Thematic fund? A Thematic fund is a fund of investment which aims to invest in the next big thing or societal trends and then invest in underlying investments that stand to make money from the trend taking of.
As an example, say you think electric cars are going to be the next big thing, an electric car thematic fund could hold shares in companies associated with electric cars such as car manufactures such as Tesla and Toyota, but also other companies associated with driverless car technology like Google, or electric car infrastructure companies like ChargePoint or Schneider Electric.
- Smartshares Automation and Robotics ETF (0.70% fee) which invests in the iShares Automation & Robotics UCITS ETF USD (0.40% fee). The Fund aims to track the performance of an index composed of developed and emerging market companies which are in the specific sectors associated with the development of automatic and robotic technology.
- Smartshares Healthcare Innovation ETF (0.75%) which invests in the iShares Healthcare Innovation UCITSETF USD (0.40% fee). The Fund aims to track the performance of an index composed of developed and emerging market companies which are in the specific sectors focused on pushing the boundaries in medical treatment and technology
Where to get Smartshare’s iShare funds
InvestNow is a platform that gives you access to different funds from New Zealand and international fund managers and Banks Term deposits. They have no platform fees and make theirs by charging the fund managers a fee for being available on their platform. You won’t pay anything extra by going through InvestNow compared to going to the fund manager directly.
Investnow offers the entire range of iShare fund from Smartshares, with no markup in fee for the SmartShare fund. The fees on the iShare funds range from 0.34% to 0.75%
Sharesies is a Wellington-based platform that offers you access to over 170 companies listed in New Zealand. They also offer more than 35 funds, some of which are Vanguard funds mediated through SmartShares. Sharesies runs a subscription fee to use their platform, starting at $1.50 per month to use its platform for balances over $50.
Sharesies offer the entire range of iShare fund from Smartshares, with no markup in fee for the SmartShare fund. The fees on the iShare funds range from 0.34% to 0.75%
You can buy the iShare ETFs directly thought Smartshares– however, I’d suggest you use one of the other providers who provide the iShare funds without any markup. This will make it easier to track your investments and sell funds if you need to.
There is a one-off $30 establishment fee when you invest through Smartshare, enabling investment in one or as many different shares as you wish. All further investments have no fee applied. The minimum investment is $500.
Obviously, since Smartshares issues the iShare fund the entire range is available.
ASB Securities is an online share trading service. That provides access to New Zealand and Australian Markets and access to a wide range of Exchange Traded Funds (ETFs) listed on the NZX or ASX. They also offer market intel and research, including recommendations and expert updates. They provide 24/7 brokerage from $15 per trade- which does make them expensive.
ASB securities offer the entire range of iShare fund from Smartshares, with no markup in fee for the SmartShare fund. The fees on the iShare funds range from 0.34% to 0.75%. If you’re a small investor who wants to invest in Index funds, you should look at an alternative option such as Sharesies, InvestNow and SmartShares which provide cheaper options than ASB.
iShares through Hatch
Hatch is a platform which allows you to invest directly into companies and funds listed on both the Nasdaq and New York Stock exchanges in the United States.
Hatch has an incredible number of iShare funds available-in fact a total of 246 iShare funds! All are available at the true iShare annual fees starting from 0.03%- no markup. There is truly an iShare fund for everybody.
Here’s just a taste of some of the 246 iShare funds on offer through Hatch;
- Core S&P Total US Stock Mkt iShares ETF (0.03% annual fee). A Low-cost and convenient way to access the total U.S. stock market in a single fund, ranging from some of the smallest to largest companies. You could use this fund as the core of your portfolio to seek long-term growth.
- iShares Russell 2000 Value ETF (0.24% annual fee). The iShares Russell 2000 Value ETF seeks to track the investment results of an index composed of small-capitalization U.S. equities that exhibit value characteristics.
- Global Clean Energy iShares (0.46% annual fee). The iShares Global Clean Energy ETF (ICLN) seeks to track the investment results of an index composed of global equities in the clean energy sector.
- Gold Trust (ETF) iShares (0.25% annual fee). Allows you to invest in the day-to-day movement of the price of gold bullion in a convenient, cost-effective way which you can use to diversify your portfolio and help protect against inflation
- iShares Cybersecurity and Tech ETF (0.25% annual fee). Allows you to invest in companies at the forefront of cybersecurity innovation with exposure to global stocks along the full value chain of cybersecurity and tech industries. Seek long-term growth with companies that can shape the global economic future
So what’s the catch? Well- there are extra fees involved when investing with Hatch, like currency exchange fees of 0.5% and a minimum $3 USD fee per trade. But they are far more competitive that the likes of ASB and ANZ securities. You will also have to do a bit more work come tax time as all the funds are foreign investment funds- just like on InvestNow- Hatch does most of the hard calculation work for you though. Read more about Hatch here, and about foreign Investment fund tax requirements here.
There are so many index funds on the Hatch platform. I would encourage you to sign up to Hatch (for free) just to look around and see what’s on the platform- they also have access to other large ETF fund providers such as the Vanguard with annual fees starting from 0.03%.
This is not a complete list of ways to invest in iShare funds while living in New Zealand. I’m sure I haven’t covered them all-and if you know of other ways- let me know in the comments. These are just some of the cheaper ways I know about. We’d all love to learn if there are others.
Depending on what stage you are at and what you plan on doing will depend on what suits you best. If you were looking to invest in iShare funds on the regular- tieing in with when you get paid- I would suggest sticking with the Smartshare funds on InvestNow or Superlife.
InvestNow is free to join. You don’t have to deposit $250 to become a user. And you don’t have to pay a trade or currency exchange fee every time you purchase some iShare funds units.
If you want to invest in alternatives iShare funds than what’s on offer from Smartshares through Investnow, and SuperLife, and you had a large chunk of change to invest, I would suggest Hatch. The initial currency conversion fee and trade fee might sting a bit- but over the long term, the lower fund fees offered by iShares could make it cheaper. Remember, some funds start at just 0.03%.