Whatever your aspirations, we can help you get there, not just with investing, but now with a high interest flexible savings account and a key we save a scheme too, share ease for the money you've got big plans for. Whatever your aspirations, we can help you get there, not just with investing, but now with a high interest, flexible savings account and a key we save a scheme too, share ease for the money you've got big plans for.
Kirakoto Garth Bray here with Shared Lunch. Today we are with Anna Scott, the CEO of Smart, talking about the for new exchange traded funds ETFs that they are bringing to market. But first, some important information that you really need to consider.
Investing involves the risk you might lose the money you start with. We recommend talking to a licensed financial advisor. We also recommend reading product disclosure documents before deciding to invest. Everything you're about to see and here is current at the time of.
Recording and a great to be here. Thank you for inviting us, Thanks for coming. Let's dive into those four new exchange traded funds that you are getting ready to launch. I think the day that this podcast goes out right.
Yep, there's day.
So if I look at the sorts of things you're talking about here, we're talking about a bitcoin ETF, we're talking about gold yep, and exposure to US tech stocks as well as our own large caps and the nz X. Yeah, so what made those four so attractive?
There's a lot of interest in bitcoin, so shall we start there?
Yeah, for sure.
Really the thing about bitcoin is it has got a lot of interest and people are on either side of that whether you really believe in cryptocurrency and digital currency going forward or you don't, and either way that's okay. But we really believe that our job and part of the branding around smart is to bring choice to people. So part of that is bitcoin, and for us, what we've done is we've brought that home to the local exchange.
That means that when you want to get into if you believe in cryptocurrency as a a good place to have some of your investment money, not all of it, but some of it, then you don't have to worry about getting into the world of how do you buy a digital currency, how do you store it, what is your security key or your what it looks like, and
how you're going to manage that ongoing basis. Instead, what you can buy is an ETF that is going to track the price of bitcoin and you're going to participate in its ups and downs.
It has been seen. I guess it feels really like about five minutes ago, it was not really even seen as a credible kind of an asset. Now, I mean you're talking about a product, but effectively someone could put their nana into effectively, right, Yes, so it's really really made the successible. It is a very volatile kind of investment though, bitquen. That'll be reflected obviously as the ETF matches that value.
Yes, And so if you've been investing in any of our ETFs for a while, you'll know that each has a product disclosure statement we call it a PDS, and in there we need to do a risk rating. So when you look at that risk rating, that's a reflection of the volatilities. So that's the ups and downs that you're going to go over the lifetime of holding that product. But it also generally reflects the return that you think
you're going to get to pay that volatility off. So putting your nana into it or yourself really comes back to what are you wanting to hope to achieve with that? So what are your goals? How long do you want to hold it for? Because if you're going through the curves, then you're getting out at the top of the bottom or the middle, and when might you want your money
out of that? But for a lot of people, now that digital currency has become a valid currency around the world, and we do believe that bringing that choice home to our local investors means you've got a way to access that and New Zealand dollars on our own inzets.
A lot of the commentrary I read around this is ah, some people that are nervous about bitcoin. Other people say, look one to three percent and your portfolio is an acceptable risk. It's a very personal choice, isn't it. How much you get into this.
It is a personal choice. And I think that if you look back to the starting of all of us investing rope cash, and then you add on with OK bonds and then equity, and now we're getting into more and more different thematic or disaggregated views of that were than the equity space and the alternative assets. So yes, bitcoin is an alternative asset. A lot of people are using it for their own personal transactions and a method
of payment around the world. I Shares, who we've partnered with on this product, have that bitcoin that they went live with, and it's the largest market cap bitcoin ETF in the world at the moment, and so worldwide there is a lot of interest and belief in it.
So what sort of insights lead you to think this is what we need to do right now?
So we did two things. We looked at the local market and we got insights into the data of where people are investing. So a lot of New Zealanders are already investing in bitcoin anyway, either direct or going offshore
to buy that kind of product. And we also talked to global partners and looked at global data and research, including talking to I Shares and it being their fastest growing ETF and being part of that marketing suite that they see real insight and interest into mean that we thought that there was a real case for adding it to the choice of funds that are available here at home.
So if you break it down, then you've got people that are already happy to invest directly in cryptocurrencies or in bitcoin through an exchange, a coin exchange going there and just literally buying a commodity. And you've got others that are already using existing offshore listed ETFs, and now you're offering this. Can you explain why I'd want to be in one or other of those and why I might choose this rather than one of those other two.
I think that comes into therefore coming back to what your call goals are. So when might I want to be? What am I investing for? Am I investing for a return? Or am I investing for an income? And then after that, well when might if I'm after a return, when might I want that return? And how secure do I want that to be? Do I want to be able to access it whenever I like, etc? So those kind of things, and also what else have I got in my investment portfolio?
So if you come out of and decide, well, actually, I think that bitcoin is a really interesting asset class, I do think it's worth me having a percentage of my portfolio and it then it's to your point, You've got a couple of choices. How do I get in? So I can decide that I directly want to own bitcoin, but that means I need to open an account and have a wallet and figure out how am I going to kind of buy and store and manage that on
ongoing basis. And for a lot of us, with our long laundry list of things we've got to do at home or with the kids of the family, you're like, ok, that sounds quite hard.
Sounds like a lot of admins.
It does, right, and it's an unknowing, and we already have in our mind that oh maybe that's a risky unknown. So what a ETF gives you in terms of that exchange traded fund to hold that is okay. Now I know that I don't have to worry about all of that admin of buying, holding, managing it. But I know that I've got a product that's going to track that
bitcoin market, and that's actually what I'm interested in. I'm interested in knowing whether it's going to go up, and I want to be part of that if that's the case.
But if I'm part of one that's listed overseas, why would I want to look at it locally listed one? What's the difference.
So you've got choices there as well. Yes, you can go offshore and directly buy I shares ETF yourself. With that comes the fact that you need to be trading externally offshore on that market what currency is in So I'm going to have to pay a currency conversion rate because I'm buying here locally in New Zealand dollars. And also what's the cost of holding that on an offshore basis?
And so you normally pay custody fees to pay offshore for an international custodian who's holding your yes it for you if you buy it locally, then what we've done is it's in a PIE structure. And so PIE is that structure that we have that's special to New Zealand. That means that all the taxable income in that fund are taxed at a final tax rate of twenty eight percent, and for some of us, that tax rate is lower than our own personal tax rate final tax in New Zealand.
In New Zealand dollars on the exchange that I can buy and sell easily in my trading account. So we think those are all benefits.
Super simple. I guess the point with PIE, and I'm not a tax advisor, but I would say that if your tax rate happens to be lower, you'll have to chase after that extra red yourself yeah, you're back in the admin you mentioned. I suppose as well the idea that you're getting exposured a bitcoin. You're not actually buying
the currency, though, are you? And I'm thinking straight away, banks quite often want to know or lenders want to know if you're invested in crypto for anti money laundering purposes. So this is a way to actually own exposure to cryptocurrency without actually owning it. It's correct, So there's another little bonus perhaps for people to think about.
It's very true. And that's when I say, you're not holding that direct asset, and that's the same as ol gold etf so similar idea, another alternative asset. You're not holding that gold, so no gold bars. It's going to be handing around in there, but you absolutely are owning They market the gold market as it were, and therefore you're tracking and following the market, but you don't have to worry about the actual underlying direct asset there.
Weirdly, sort of gold's the original bitcoin.
Isn't it It is?
So yeah, it's scarce. There's only so much of it on the planet. You can't make anymore. It's something that people sort of figure has some inherent value.
It's been long around for a very long time, and so people talk about it as a safe haven, but really it's a store of wealth, and it's the original store of wealth. You're right. But in terms of being that safe haven, and why we've added it in that alternative space in terms of those assets, is that it's uncorrelated to equity markets. And so by that I mean, you know, we talk a lot about diversification. What does
that mean. So diversification can mean those buckets you're going to put your assets in traditionally, right, the cash, the bonds, the equities, et cetera, but now there are more of those. Property is a well understood acid allocation diversifier, and so these ones are the same. So for gold, we talk about it as a safe haven because it's not directly tied to or moving in tandem, and that's the correlation part. It's not moving in tandem with the equity markets, so
it's a nice hedge against inflation. It's also a hedge of wind the equity markets are going at any time, and so people like it for that purpose. But it doesn't pay you an income, right, there's no dividend on that.
It's a pure capital play. Basically, you're just bet hoping it's it'll increase in value and that's it.
Yeah, And I think that store of wealth idea kind of brings that across, right. It's not like it's increased things sitting there paying you anything, but it is a rock solid store of that wealth it has it continues to have the same buying power over time that it had originally.
You've got a store of wealth, You've got something you can dabble with. The US tech stocks story is one of those very very interesting kind of themes that people are investing in. What does this one have? How do you work out what to put it into? Or do you you're leaving this largely to your partners at I Show, This.
One was very much driven by local demand. So when I took this job about a year ago, came from a wealth background. You talk to a lot of people and advisors who are investing, and a lot of them said, there's nothing locally in that US tech. We're all going offshore for that. So we looked at that and talked to I Shares and said, well, how else do we bring that on shore and what does that look like? So we've chosen one of their again ETFs to wrap
in our local pie wrapper here. We've also done this a slightly different way because we're hedging this one hundred percent. So what that means is that instead of worrying so we've done the US tech sector. Instead of worrying that how the US dollar is going to move in relation to the Kiwi dollar, we've just taken that out of the equation and said you're buying it here in your local Keiwi dollars. You're buying it because you want to be able to keep track of where that innovative tech
sector in the US market is going. And therefore we've taken their currency exposure out by saying we're taking care of that and running the local fund. We will one hundred percent hedge that so that if it's going up twenty percent, your value of yours is also up twenty percent. Don't worry if then the New Zealand dollars dropped and therefore you have to take some percentage points off it because your key is worth less than the US.
Now, because that can really really change the bottom line result, Candent that can that cutsy risk.
A new one is the US tech sector. So it is based on the S and P. It's the top innovative US tech companies that are in that space, and therefore you want to be able to track that market because that's what you're putting it in your portfolio for. Not only do you want some diversification, but lots of us like this idea of I call it core and explore,
or you can call it cora a niche. You know what your solid asset allocation is, so how much you want and kind of income type or what you want in growth where you've got your safe stores of wealth versus your speculative growth ones. And so some of us when we look at our atfs might think that I'm really interested in the global healthcare sector, or I believe that Ossie resources are going to take off, or Japan
is poised for a massive growth in the economy. But that's where you put your little explore around the edges. I have a view on that area of the market. Same with a US tech and it's been really popular for a long time. It's got some great growth in it, and I think the beauty of the US market and the US tech part there is it's such a large market,
so it's really nicely self regulating. So if you look back over time of what those tops ten to twenty holdings will be, they churn themselves based on which are the up and coming If Navidia is coming through or if one drops out, We've got all of those top holdings for you, and we will make sure that we're holding those in proportion to their waiting in that market. And therefore you truly are going to have the same exposure as how all those tech companies in the US are doing.
Cel those top holdings have been pretty top heavy for quite a long time. The h something will change.
Yeah I'm talking back years, but yeah, you don't have to worry about is something the next Kodak or have I got the next Navidia, because they will work their way through into that index and we will hold them.
So what would be the attraction with all of that on offer and people looking at something that's based around the NZX twenty.
Yes, so it's the top twenty companies in New Zealand and So if you're interested in a view when you talk about your allocation of what our home economy and country is doing, then this is a really good way to say, well, I've got the top twenty the largest most liquid actively trade New Zealand stocks, So they're listed keyw companies and I've got the top twenty of those, and so therefore a slice of home where I am. I've got to spend my dollars here most of the
time in terms of participating in the local economy. Then I've also got a portion of my portfolio that is invested in the local economy and those top twenty companies and how they are doing.
So you put these out briefly on an early release, and then they're going to be traded I think from this week onwards. Yes, what sort of early indications did you get about what people like and why they like them?
So we went out and we've done this time a pre application process. So we've partnered with shares E's. We also have MUFG as the registry of our listed ETFs and gone out with them as well to ask people
if they've got interest in that. And then we've got our own intermediary channels around advisors, etc. Our most popular has been the US Tech, followed by the Gold, then Bitcoin and then the ends at Next twenty at this stage but actually a lot closer together than you might think in terms of that early interest, so we'll be
really fascinating. That's the pre application process where people have signed up and said, yet when it goes live, I'd like some of that money with their mouth is yeah exactly. And then when we do go live and have them out, then they're obviously tradeable on the exchange. Are we interesting to see if that early level of largely retail investor interest stacks up as those ETFs are on the exchange and start to be actively traded.
Are you using these ETFs as an investor to try and get that exposure, to get comfort with understanding how the market works and then moving on to something else, or do you see them as something that an investor could potentially hold as part of their portfolio right the way through.
Both of those Actually, a lot of us might do the exactly there as you talk about that's my baby steps. So I actually believe in US tech or I believe in robotics, but I don't really know which of those companies in particular, but I do believe in that sector or that disegregated view of the market. So perfect way to enter that explore part of your portfolio to say I think I'm interested in that sector, so let's buy that, and I'm buying a basket of those stocks, and I'm
now tracking that market. If that continues to go on and that's a particular area of interest for me, then I might find that there's one or two in there that I really like more than the others, and so I can hold them directly. By buying that stock directly doesn't necessarily mean I have to sell the ETF, because I've still got a whole market following bet. But I might want to say, actually, I like this one even more, and I think into the long run, I want to
hold that too. But when we look off shore and to a lot of investors, when we think about wealthier individuals or people with a larger portfolios, a lot of people have now moved away from individual stockholding and actually hold a whole portfolio of ETF or FUN type structures. And that's not to say that they're the multi asset fun They've got all those individual building block components in there.
But it just is a way that suits people to get a good diversified spread of everything that's going on, but still have from particular mars at all thematic feelings and beliefs within the book.
So these four that you're launching, they feel going back to your core and explore idea. They feel very much part of the Explore side of things. This is people who are feeling a little bit more confident taking. Does that mean that you feel that people are at the stage where we've done all of the education around the core that we need.
To definitely not and that's also part of our rebrand and that wise investmart This comes with a renewed commitment to do investor education. Really what it is it's about, do we as New Zealanders understand it enough about maths and money? And those of your two we go back.
To the core, Well, the stats out of the schools would suggest horribly not yes, And I think that.
We talk a lot about do we understand enough about maths? Probably not, as you said when you look at the scores, but also money kind of goes with maths, and if we put it together at the very basic form at the beginning, then those are some things that we can teach all of our children and everyone who's getting educated in New Zealand about simple things like compounding interest. If I put my dollar in now and that grows to
a dollar twenty at the end of the year. Then next year, I've invested a dollar twenty and that grows proportionally more. You don't even have to do anything else apart from it continues to compound and pay the fees. Absolutely, yeah, absolutely, But that's a different view from I've invested my money and now I've made a profit, and I'm taking that out to spend on something else. So next year, I've
still got the base dollar invested. Or I've invested my money and it pays dividends, but I'm going to take those dividends rather than reinvesting them. So everyone needs to make their own choice, depending on where they are in their life's journey and whether they need the income or the growth. But even the fact that not all of our kids understand the power of that compounding interest over time.
Perhaps it's because people need that practical experience of actually putting some money on the line and seeing what it does. Because reading about these things and so on in the abstract is pretty dry. It's not until you've actually got some results to turning up or not turning up, and you're trying to ask questions about what happened there.
Yeah, nothing like dollar in your pocket instead of a spreadshet in front of you. Completely agree, and I think that's been the power of online trading platforms and the power of what shares use has done in terms of retail space. But I also think that that's the power of what Kei we Saver has brought to And we're not there nearly yet right in terms of there being enough people making enough contributions for a good retirement and
a dignified retirement, but actually on the way there. What it's meant is a whole lot more people are now interested in investing, and so instead of our somewhat traditional right yep, I buy a property and then that'll be my ticket to retirement. People are understanding and need to diversify, so I don't want all my eggs in one basket. And that's encouraged a whole lot more people to, as you say, get involved and actually feel it themselves and see it.
I want to bring your partners in this ice is into the equation a little bit. You've talked about them before. Who who are I shares and why are you working with them on.
This I Shares are owned by black Rock they're the one of the biggest fund managers in the world. I Shares is the part that runs a whole lot of their ETFs, and so why we've partnered with them is because they have a great global footprint in terms of the product set and the depth of their knowledge that they have out there. So we started talking to them about how do we do that in a local market. A lot of people have done this in other markets before us, and I always think you should look off
shore to see what you can learn from that. But the common goal that we both had, which was around trying to make investment more accessible.
What's in it for them? Why are they not just directly taking their exposure to the market here, Why come through smart?
I think it's the balance of what we both bring to that relationship. So I think that this is a really good blend from our local smarts, if you will, about our customer and market knowledge in our local New Zealand market and their global breadth and depth. So why would they not come here and do it themselves. Well, technically they could, and this is a market that they need to open up. We're already established in that place.
We are the local ETF manufacturer and we already have that customer presence in that connection and through the market, so we keep that local presence, that expertise, the feeling that we absolutely are connected to our local market, but we help leverage our expertise and amplify it in some areas by connecting into them. The other great thing they bring on a global platform basis is that they've done
this in lots of other markets around the world. They have a huge library I like to call it of ETF investment knowledge and education, and we're really hoping that we are going to really do a good job of leveraging that.
So they're effectively doing all of the tracking for you.
Yes, So you know when we talked about the investors and said do you start here and then do you grow as you grow your portfolio and hold direct assets instead of a fund product kind of the same idea as a product manufacturer. So if you think about that product cycle, we've gone live with a product where we have wrapped their I shares, so we put our line
local PI tax wrapper around it. We make sure that we're handling that for the US tech the currency hedging here and what that looks like because it's listed here in New Zealand dollars. But we've chosen to just wrap their product. So that's the single holding that our fund
will have over time. As that grows, which we really hope it will do, then it gets to a point in size where we have other options to manage that fund, we might decide that actually it makes most efficient sense in terms of running that product and getting the best end result for investors in terms of the fee, that we will unwrap that I share and instead we will
hold all of those assets ourselves directly. Our other choice when we get to that is that we can decide, yep, we want to run that ourselves locally, or sometimes what happens within any jurisdiction or New Zealand is you get to a certain size where you think, actually the size and scale of that and I want to partner with someone else who's going to run it for me under an investment management agreement.
When you came into I think partly to consolidate here, I think you said, and to make some smart choices forty four E. Now is that a smart portfolio to be holding? Do you want to look at pruning back some of those and how might that look if that happen.
How many is too many? How many is not enough? Very good question. So we are looking at what the economics of those look like, but also what our investors want to have in choice. If we go back to the core and explore, I think you always want to have a corset, and that's where we're heading to as well.
And at the moment, those are probably ten to eleven funds that we think would be the core part of any investor's portfolio, and in fact would be the same universe of building blocks that we would choose when we put together our own ready made investment strategies in our diversified funds for Key we Savior or superannuation, etc.
I'm going to guess that they look an awful lot like the top ten trades that Cheese's customers make, because we seem to exactly Yeah.
So I think that although we might all think that we have a really different outset allocation or strategic as the allocation strategy, basically it all comes back to the same core. So those are really important to have. Then what you put around and your explore around the outside, well, yeah, that will change over time because there when we think about our job as a product manufacturer. We need to be providing product and choice to people, meeting the demand
that people have. And that's not to say that those themes will run forever. So we need to look at how many people are invested in that fund, how much is it growing over time, is it still a really useful part of people's portfolios or not. So we will constantly go into that, and we're now talking about an annual product review cycle so that we can look at what new products need to come to market, where might there be consolidation in that, and which ones are just no longer used by people.
So you might have a bit of a watch list there, but nothing's about to be cut us'.
Absolutely not, because I think that when we think about pushing that new brand and talking about and really sharing that education and information, we do think that there's still some things in our forty four that we probably haven't well publicized or talked to people about, or talked about
what the value proposition of those is. So we absolutely want to give ourselves a time and a roadway to do that and then to see what market feedback we get to help design what their end product set looks like.
And it almost feels a bit much to be asking you when you're just launching these four, But I guess you see other stories and themes around, like infrastructure and the ability to invest in other kinds of sectors or industries that perhaps people can't certainly at the retailing get easy access to. Is there a place for ETFs there and is that something that you're considering.
E bit Yes, both of those. I think there is a place for ETFs, and especially again when you look offshore and you look at alternative ETFs or some of the work that Singapore has done, say to encourage and how do you again make that more accessible or democratize it as people talk about, how do you bring some of those alternative asset structures to the wider retail market and do it in an easily digestible way. So we're looking at some of those as well.
That's year two, is it.
Yeah? If it was a month to two, my team would kill me. So yeah, definitely year two.
Anna Scott, thank you so much for your time today. Thank you for listening and for watching. If you're on YouTube, you're catching us there. If you're listening, you're probably on Apple, Spotify or work.
Now you can combine the experience of multiple fund managers and get even more diversification in your Chezy's Kiwisaber scheme. Select up to six base funds ranging from conservative to high growth to make at least fifty percent of your investment plan, and add your own picks on top. If you wish it's real choice multiplied. Head to Chezy's dot nz slash kisaber to get more info. Chezy's Investment Management
Limited is the issuer of the Chaz's Kiwisaber Scheme. View the lodged product disclosure statement at Chezy's dot nz slash kisaber slash documents