Investment products and markets
The product landscape
New Zealand investors typically meet NZX-listed shares and NZDX-listed bonds, direct government and corporate bonds, term deposits, managed funds structured as managed investment schemes under the FMCA, exchange-traded funds, KiwiSaver schemes, listed property vehicles and, for wholesale or eligible investors, private equity, hedge funds and derivatives. Managed funds need a licensed manager and an independent supervisor, and must offer a product disclosure statement (PDS) and fund updates.
What documents do and do not tell you
A PDS gives objectives, strategy, fees, risks and liquidity. It is a disclosure document, not a recommendation, and the FMA does not approve products as suitable for any particular person. Read the fees table closely: management fee, performance fee, buy/sell spread and any underlying fund costs. Liquidity and valuation frequency separate products sharply, as direct property may take months to sell while a daily-priced unit trust does not.
Worked example
Two NZ equity funds tracking the same index, gross return 6%. Fund A charges 1.20%; Fund B charges 0.50% plus a 0.15% buy spread. On $100,000 over ten years, A nets about $159,800 and B about $170,800, roughly $11,000 more, before the one-off $150 spread. Same market exposure, materially different outcome, so cost is a suitability issue rather than a detail.
Traps
- Assuming a PDS means the product is safe or endorsed.
- Comparing management fees while ignoring spreads and performance fees.
- Assuming every ETF is cheap and passive.
- Overlooking unhedged foreign currency exposure inside an offshore fund.