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April 22, 2022

Is the Kernel KiwiSaver Plan Right for You?

Have you been sitting on the fence as to whether you should change KiwiSaver providers or not? Perhaps you’re seeing interest rate changes and thinking about how you might adapt your investment portfolio accordingly. Or maybe you’ve seen our new products and you’re wondering whether the Kernel KiwiSaver plan could be suitable for you?

Look no further, we have all the answers to your questions.

Launching in May, the Kernel KiwiSaver plan is low-fee and is designed for long-term investors. Unique to many existing KiwiSaver options currently in the market, the Kernel High Growth Fund comprises of 98+% holdings in equities. Comparatively, most other providers have 20 – 25% of their growth funds in non-growth assets such as bonds and/or cash.

Being primarily growth assets, the Kernel High Growth Fund can be more susceptible to short-term fluctuations yet have greater long-term growth potential. And this leads us to why we’ve decided to start offering a KiwiSaver plan in the first place.

Why we’re only currently offering Equity Funds in the Kernel KiwiSaver plan

Today we live in a historically low but rising interest rate environment. Investors need to adapt their investment portfolios to ensure they are getting the most from their money, in order to reach their long-term goals. So, while keeping your money in fixed income investments may have made sense 15-20 years ago, when you could get a 6-8% return (p.a), the same cannot be said today.

For many Kiwis, their KiwiSaver account is one of their most valuable assets, yet many KiwiSaver schemes currently available aren’t necessarily suitable for those with a long investment horizon (10+ years).

The role of fixed income investments in a KiwiSaver portfolio

It’s paramount that the fund you’re invested in matches both the current environment we’re in, and most importantly when you’ll need the money (investment horizon). Whether it be to buy your first home or using your KiwiSaver account to fund your retirement.

For those with a longer time horizon of 10, 20 or even 30 years the benefit gained by adding fixed income investments to a KiwiSaver portfolio - in order to reduce volatility and stabilise performance - may come at the expense of your long term expected return, and your balance when it comes to retirement. In other words, you may not want much of your balance invested in cash or bonds.

As you can see below, six-month term deposit interest rates have reduced significantly over a 20-year period across all banks.

Average six-month term deposit rate (% p.a.)

Source: Reserve Bank of New Zealand.

Specifically, according to the Reserve Bank of New Zealand, the average six-month term deposit interest rate across all banks for the 20-year period from 1990 to 2009 was 6.83% per year. For the following 10-years from 2010 to 2019, it went down to 3.64% p.a. and has stayed low at 1.36% p.a. during the 2020-2021 period.

Whilst fixed income assets such as term deposits can offer a relatively stable income stream, their returns over the long-term are generally lower than growth assets (shares and property). Noting of course, term deposits come with lower risk.

On top of this, new research has shown that bonds tend to perform poorly during a low and rising interest rate, inflationary environment compared to other asset classes such as equities, listed real estate and listed infrastructure.

It’s for these reasons, we think that ~25% is quite a bit of your portfolio to have invested in income assets if you truly are thinking and acting for the long term. When you have time on your side to ignore the noise and market fluctuations, a higher allocation of growth assets can be a better option for growing your long-term wealth.

Who is the Kernel KiwiSaver Plan for exactly?

The Kernel KiwiSaver Plan is suitable for investors with an investment horizon of 7+ years, and with an ability to withstand normal market volatility.

You might’ve just drained your KiwiSaver account to purchase a home and now working towards retirement. Or, you might’ve purchased a house a while back but still have a time on your side until retirement and when you’ll need the money. Or that first home (and the necessary deposit) might be in the distant future at a date and time you can’t yet imagine.

Who wouldn’t consider the Kernel KiwiSaver plan equity funds?

If you plan to use your KiwiSaver balance to buy a house in the short-term (under 3 years) or are nearing retirement and wish to use a large proportion of your money in the short term, then the Kernel KiwiSaver Plan equity funds are probably not for you. 

Why? Because all our equity funds have a recommended minimum investment horizons of 5-7 years, to be able to recover sufficiently from inevitable market crashes and corrections

Our current offering might not be suitable for those with short-medium investment horizons, however we are working on launching more conservative options. Stay tuned for more info.

The Kernel KiwiSaver plan key highlights

Just like with Kernel Invest, you can choose to invest in our curated High Growth Fund or DIY it with a custom mix of Kernel funds.

The intention underpinning the creation of the Kernel High Growth Fund is to offer a suitable asset allocation in a single diversified fund for the normal New Zealand based investors. Our High Growth Fund is a combination of Kernel’s five existing equity funds: S&P Global 100, NZ 20, NZ Small & Mid Cap Opportunities, Global Infrastructure and Global Green Property with corresponding weights shown in the table below:




Global 100

S&P Global 100 ex-Controversial Weapons - Custom


NZ 20

S&P/NZX 20


Small & Mid Cap Opportunities

S&P/NZX Emerging Opportunities


Global Infrastructure

Dow Jones Brookfield Global Infrastructure


Global Green Property

Dow Jones Global Select Green RESI Hedged NZD



S&P/NZX 90-day bank bill index


This target asset allocation reflects both the industry norm and Kernel’s views on:

(i) the relative importance of the domestic economy, to an everyday non-institutional investor,

(ii) the low correlation between NZ equities and other asset classes (Global equities, Global listed real estate and Global listed infrastructure), and; 

(iii) the benefits of listed infrastructure and listed real estate in a mixed-asset portfolio.

We will review this annually, but don’t expect or believe in large shifts. 

Our Kernel High Growth Fund helps diversify across sectors and countries where opportunity sets, as well as the timing and impact of macroeconomic policy are different for each sector.

A breakdown of the Kernel High Growth Fund weightings

As of 31 March 2022, the sector exposure of our Kernel’s High Growth Fund closely matched that of S&P Developed BMI, a broad market index designed to capture global investable opportunity set in developed markets.

We are slightly overweighted on Real Estate and Utilities due to our favourable views on the investment attributes of listed real estate and listed infrastructure, including:

(i) high dividend yield with growth potential,

(ii) low correlation to other asset classes, and; 

(iii) great performance during low-interest rate and inflationary environments. 

The below graph shows the sector weight that the Kernel High growth fund invests in: (as of 31 March 2022)

The below graph shows the GICS weighting for the S&P Developed BMI index: (as of 31 March 2022)

So, what else is on offer?

Low fees!

With the Kernel KiwiSaver Plan, the only fee you pay is the fund’s management fee of 0.25% p.a., regardless of your balance.

To put this into practise, on a $10,000 KiwiSaver balance this equates to $25 per year. For a $30,000 KiwiSaver balance it’s $75 per year. All inclusive. The Kernel platform fee of $5/month only applies to the use of Kernel Invest and Kernel Save for investments over $25,000.

The only exception is with our 3 Thematic funds - S&P Kensho Moonshots Innovation, S&P Kensho Electric Vehicle Innovation and S&P Global Clean Energy - where the management fee is 0.45% p.a.

Be mindful of cost efficiencies

It's important to keep an eye on the cost efficiency of your KiwiSaver portfolio – hidden costs such as those generated from frequent buying and selling decisions in actively managed funds. As we follow an index investing strategy with all our funds, we’re able to reduce our costs and improve our cost efficiencies. You can read more here.

Whilst both fees and cost efficiencies related to investment funds and KiwiSaver plans are important to consider, we’re also advocates for ensuring you’re choosing investment options based on their merits as well, and that they align with your investment horizon and financial goals.

I’m sold! How do I sign up for the Kernel KiwiSaver Plan?

We’re currently working behind the scenes to test the Kernel KiwiSaver plan and will be opening public access up in May.

To get ready for the public release, you can set up a Kernel account here and ensure you are fully verified and ready to go. Further, you can register below for first access when we launch – get in quick!

Chi Nguyen

Research Analyst


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Indices provided by: S&P Dow Jones Indices