When you make the decision to invest, it’s natural to seek comfort that your funds are being managed prudently. It doesn’t take much googling to find out that there have been many dodgy operators in the past and unfortunately there will be in the future. So we wanted to highlight just how well protected your hard earned savings is when invested with a licensed fund manager.
A major reason why Kernel took 12 months to launch is the amount of licensing and regulation required to obtain a fund manager’s licence. New Zealand introduced new laws which took effect in 2016 to make sure that investors’ money is safe and protected from events such as finance company collapses.
So, what does that mean for you investing in Kernel or any other licensed fund manager?
Professional oversight and segregation
Kernel is regulated by the Financial Market Authority and supervised by Trustees Executors Limited, who set our requirements to operate and receive regular reports from us. By law, the supervisor has the responsibility to oversee our activities in the interests of all investors and to ensure we meet our obligations.
Further, the supervisor must approve all changes and is the legal owner of the assets of the funds. They appoint an independent custodian to hold the investments and as the fund manager, we can only manage assets within the fund. That means that Kernel, or its staff, cannot withdraw from the fund, plus there are three unrelated parties who can see what is going on.
The funds are legal entities themselves and the assets inside each fund are segregated from other funds, the assets of each company and held only for the benefit of individual investors in the funds. Furthermore, the funds are audited each year by a professional auditor (Ernst Young for Kernel).
All these companies have the legal responsibilities to report if they see serious problems.
If we had to close down, what happens?
We believe it is an extremely unlikely event that would ever happen, however, should Kernel get into financial distress, our Supervisor would step in and appoint a temporary manager. The decision can be made by the Supervisor to wind up the funds or find a substitute manager, and should it be the former, they have the legal responsibility of distributing the investments back to the investors.
As explained above, customer money and investments are ring-fenced from any assets and liabilities of Kernel Wealth Limited. Therefore, these are not available for any creditors of Kernel Wealth Limited.
Furthermore, as a fund manager providing a service to our customers with personal and professional reputations at stake, we hold ourselves to the highest level of integrity and professionalism. We will always do the right thing by our customers.
What are my chances of losing money?
When you are investing in equities, there is always the chance of your investment value declining. We strongly suggest you read our blog on risk to understand your comfort level on this.
Generally, the diversified nature of each fund means that “losing” all your money is almost impossible. Even if one of the companies the fund invests in goes “bust”, that is only a fraction of the total investment. However, without being cute, if you invest for a short amount of time, there is a greater chance that the amount you withdraw is less than the amount you invested. That is the unpredictability of future share prices and economic conditions that underpins why the longer-term return is higher.
We encourage all investors to read and understand the Product Disclosure Statement for ours and any investment. They are short, easy to read documents on a standard template – not like their prospectus predecessors.
The PDS contains all the important information about how the investment works, what the risks and fees are and who is involved.
If you have any other questions about how Kernel works or understanding your options with investment, get in touch via chat or call our team on 0800 537 635.
Head of Marketing & Customer Strategy