Managed funds: where does your money go?

Investing in a managed fund? Find out whether your money stays local or goes global, if a company’s bad luck could hurt you, and how low ‘low-risk’ really is.

3 minute read

When investing in managed funds like the BNZ KiwiSaver Scheme or YouWealth, it can be hard to get a feel for what’s happening behind the scenes. Where does your money actually go? Does it stay local, or go overseas? How low is ‘low-risk’? And could a single company’s bad run really impact your funds?

Find out the answers to the big investment questions, and learn a little more about where and how your money is invested.

Growth assets vs. income assets

Many managed funds feature two types of assets: income and growth. Income assets generally come in the form of bonds, and are lower-risk, but with potentially lower-return. Growth assets – usually shares – are higher-risk, but with the potential to generate a higher return.

Income assets

If you choose a fund that holds income assets, those funds will most commonly be put into bonds. Bonds are issued by governments or large companies who need to borrow money.

That means when you put money in a fund that invests in bonds, you’re essentially loaning money to whoever issues those bonds – which they then pay back, with interest throughout the term of the bond, or later on (at the 'maturity date').

The amount of interest paid is aligned to the risk of the issuer not paying back the loan – which is known as ‘credit risk.’ Generally speaking, governments are considered "lower risk" than companies, so they tend to pay less interest.

Growth assets

If you're looking at a fund that holds growth assets, it's likely the fund will contain shares. Shares are essentially a unit of ownership in a company. When you own shares in a company, your investment enjoys the same ups, and weathers the same downs as the company does.

Often you’ll see your funds invested in larger companies, rather than smaller ones. Or in companies that are big on a New Zealand scale, even though they may be smaller compared to international companies. For example, you might see that your managed fund provider invests a higher percentage of funds in Spark NZ, than the comparatively much larger Microsoft.

Staying local vs. going global

There’s something to be said for investing in your own backyard - especially considering the comparative strength of the New Zealand market. But there are also thousands of great companies all over the world, and the benefits of investing with them can be significant. That’s why many local managed funds often direct funds to both Kiwi and international companies.

Typically with BNZ’s funds’ investment in growth assets, one third of the investment will be in New Zealand shares and the rest in global shares.

When choosing whether to invest more in the ups and downs of growth assets, or opting for a less volatile fund with more income assets, a solid understanding of where your money is going can help you make the call.

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This article is solely for information purposes and is not intended to be financial advice. If you need help, please contact BNZ or your financial adviser.

Neither Bank of New Zealand nor any person involved in this article accepts any liability for any loss or damage whatsoever which may directly or indirectly result from any, information, representation or omission, whether negligent or otherwise, contained in this article.

BNZ Investment Services Limited, a wholly owned subsidiary of Harbour Asset Management Limited, is the Issuer and Manager of the BNZ KiwiSaver Scheme and YouWealth. Download a copy of the Product Disclosure Statements:

• BNZ KiwiSaver Scheme Product Disclosure Statement (PDF 1.1MB)
• YouWealth Product Disclosure Statement (PDF 1.4MB)

Investments in the BNZ KiwiSaver Scheme and YouWealth are not bank deposits or other liabilities of Bank of New Zealand (BNZ) or any other member of the National Australia Bank Limited group. They are subject to investment risk, including possible delays in repayment. You could get back less than the total contributed. No person (including the New Zealand Government) guarantees (either fully or in part) the performance or returns of the BNZ KiwiSaver Scheme or YouWealth, or the repayment of amounts contributed. National Australia Bank Limited, the ultimate owner of BNZ, is not a registered bank in New Zealand but a licensed bank in Australia and is not authorised to offer the products and services mentioned on this webpage to customers in New Zealand.

BNZ Investment Services Limited (BNZISL) uses the BNZ brand under licence from Bank of New Zealand, whose ultimate parent company is National Australia Bank Limited. No member of the FirstCape group (including BNZISL) is a member of the NAB group of companies (NAB Group). No member of the NAB Group (including Bank of New Zealand) guarantees, or supports, the performance of any member of FirstCape group’s obligations to any party.