Choosing Between Core Global Equities at Kernel

Global equity exposure is often a dominant growth allocation choice. However, “core global equities” is not a homogeneous asset class: index methodology, market-cap concentration, regional composition, sustainability constraints, currency exposure and emerging-market inclusion all materially affect portfolio behavior.

Kernel’s four core global equity funds*, Global 100 Fund, Global ESG Fund, World ex-US Fund and Total World Fund provide distinct implementation options. Each can play a different role within a strategic asset allocation, depending on existing exposures, risk budget, ethical preferences and intended portfolio construction.

*Kernel also has sector global funds including Emerging Markets, Global Infrastructure, Global Clean Energy, Global Property and Global Dividend Aristocrats which aren’t included in this article.

The relevant question is therefore not which fund is “best”, but what incremental exposure each introduces, or removes, when assessed against clients holdings.

The Kernel Global 100 Fund tracks the S&P Global 100 Ex-Controversial Weapons Index, providing exposure to approximately 100 of the world’s largest multinational companies.

The portfolio is deliberately concentrated relative to broad-market global equity strategies. Its investee universe includes large, established businesses such as Apple, Microsoft, Amazon, Nvidia and Nestlé. While the fund has multinational revenue exposure and spans a range of sectors and countries, its market-capitalisation structure results in an approximately 80% allocation to US-listed companies.

Global 100 could be considered when a portfolio requires a targeted large-cap global equity allocation, rather than comprehensive market representation. It may be used as a core-satellite component, a complement to a broader ex-US or emerging-market allocation, or as an efficient route to a basket of globally dominant companies without introducing single-stock risk.

Portfolio considerations:

• The portfolio does not seek to replicate the breadth of the global equity market.
• Returns are likely to be more sensitive to the performance of a relatively small number of large-cap companies and to US equity-market outcomes.
• Due to the large-cap concentration, this fund has more exposure to tech.
• The fund embeds a controversial-weapons exclusion but is not designed as a broad ESG strategy.
• Management fee: 0.25% p.a.

The Kernel Global ESG Fund tracks the S&P World PAB ESG Ex-Non-Pharma Animal Testing Index (NZD). It offers developed-market global equity exposure using a Paris-Aligned Benchmark methodology, rather than simply applying a limited exclusionary screen.

The index adjusts constituent weights according to ESG scores and alignment with Paris Agreement objectives. It also excludes specified activities, including controversial weapons, tobacco, gambling and thermal coal. The result is a portfolio that retains broad developed-market equity exposure while introducing material active factor and sector deviations relative to a conventional market-capitalisation-weighted global benchmark.

This makes Global ESG relevant for clients with sustainability objectives who also require a transparent, rules-based implementation framework.

Portfolio considerations:

• The strategy will have sector, country and security-level deviations from broad global equity indices.
• It rebalances by sector, avoiding big stock exposures which can sometimes be caused by exclusions.
• Its methodology differs materially from that of the Global 100 Fund; it should not be treated as an ESG-adjusted version of Global 100.
• Management fee: 0.25% p.a.

The Kernel World ex-US Fund tracks the S&P World Ex-U.S., Controversial Weapons and Tobacco Index. It provides developed-market equity exposure outside the United States, including Europe, Japan, Canada and Australia.

The fund is best understood as a regional portfolio-construction tool. Enabling the modification of US allocation embedded in conventional global equity benchmarks, which are typically materially weighted towards US equities. This can be particularly relevant where clients already have substantial US exposure through S&P 500 mandates, global active managers, direct equities, or concentrated technology holdings.

Rather than representing a complete global equity allocation in isolation, World ex-US can be used to recalibrate geographic exposures while maintaining developed-market diversification. Read more on Why Now Might be the Time to Diversify Globally.

Portfolio considerations:

• The fund may be added as a sleeve to global positions to downweight US exposure.
• It can also be paired with a US equity allocation if you wish to set the regional weights explicitly, rather than accept market-capitalisation weights.
• The fund excludes many of the world’s largest listed companies due to US exclusions.
• The fund incorporates controversial-weapons and tobacco exclusions.
• Management fee: 0.25% p.a.

The Kernel Total World Fund provides the broadest global equity exposure in Kernel’s range. It invests in the Vanguard Total World Stock ETF, which tracks the FTSE Global All Cap Index, providing exposure to more than 9,500 companies across developed and emerging markets.

For those seeking a single-fund global equity building block, Total World offers a comprehensive market-capitalisation-weighted solution. It incorporates large, mid and small-cap securities across global markets and retains the approximate 60% US exposure that reflects the United States’ current weight in global equity-market capitalisation.

The strategy is particularly relevant where simplicity, breadth and low-cost implementation are priorities, and where there is no requirement to introduce a specific ethical overlay, regional underweight or style tilt.

Portfolio considerations:

• It is unhedged, meaning NZD-based client outcomes will be influenced by currency movements.
• It does not apply a sustainability screen or thematic exclusion framework.
• Its breadth means it owns the full investable opportunity set, including both market leaders and lower-quality businesses.
• The fund is not currently a direct investment and therefore tax leakage should be considered.
• The Total World Fund is not available in KiwiSaver.
• Management fee: 0.12% p.a.

The key implementation discipline is to evaluate overlap, concentration and benchmark-relative exposures at the total-portfolio level. Core global equity fund selection should therefore be driven by strategic allocation, investor objectives and the incremental risk exposures introduced by each investment - rather than by attempting to identify a universally superior core global equity fund.

Investing involves risk, and returns are not guaranteed. Kernel Wealth Limited is the manager and issuer of the Kernel KiwiSaver Plan and Kernel Funds Scheme. Product Disclosure Statements for the Kernel KiwiSaver Plan and Kernel Funds are available at Kernel Wealth | Resources & Documents. Investing involves risk including the possible loss of principal and there is no assurance that the investment will provide positive performance over any period of time. The information provided should not be relied upon as investment advice or recommendations and should not be considered specific legal, investment or tax advice.