InvestNow turns world-cheap US ETF into PIE…

Anthony Edmonds: Founder of IIS

Fund platform InvestNow has packaged two ultra-low-cost Vanguard Exchange Traded Funds (ETFs) with New Zealand tax wrappers amid growing demand for passive products.

Offered under the InvestNow Foundation Series brand, the two funds feed the US-listed Vanguard S&P 500 ETF and Total World ETF respectively. Both feature a single-digit basis point annual management fee.

But while NZ investors in the new S&P 500 and Total World PIE will be paying standard Vanguard ETF annual fees of 0.03% and 0.07% respectively, the foundation’s products are problematic.

Taking a break from traditional practices on the platform, InvestNow charges a 0.5% buy and sell transaction fee in PIE backed by Foundation Vanguard.

“Simple and well-disclosed transaction fees are a unique feature of the two new Foundation Series funds,” InvestNow founder Anthony Edmonds said in a release.

“Transaction fees cover InvestNow’s operating costs and margins, ensuring long-term sustainability of the fund while keeping annual management fees very low,” said Edmonds.

Kiwi investors already have access to two Vanguard funds, directly through platforms such as Sharesies and Hatch, or even in PIE format through NZX-owned Smartshares, the foundation’s products come with different twists on pricing. I am adding

“Unlike other platforms that may offer access to the same underlying ETFs, we do not charge any other brokerage fees, forex fees or account fees.These fees are comprehensive and transparent. We often easily surpass reasonable transaction fee models,” said Edmonds. “We built these funds for long-term investors, not for traders. This is because long-term buy-and-hold investors have benefited from these very low annual management fees, which is the highest in years. It reflects the fact that it will benefit.”

He also said the PIE package would offer regular tax efficiencies to NZ investors compared to direct holdings of offshore-based funds.

“Because the new PIE fund will invest in US-dominated ETFs, there will be no non-resident withholding tax on US holdings,” Edmonds said. “However, New Zealand investors in offshore-based funds with access to exactly the same underlying shares would suffer losses of up to 0.3% annually due to this slippage.”

The new Foundation Series Fund is unhedged and allows investors to enter and exit at a daily unit price. Listed ETFs held directly are subject to constant price fluctuations during the trading hours of the exchange.

InvestNow also sells Smartshares versions of the Vanguard US S&P 500 and Total World funds with annual management fees of 0.34% and 0.4% respectively.

Boutique manager Colonel Wealth last month launched a PIE-hedged S&P 500 fund (again through Vanguard ETFs) with an annual management fee of 0.25% per annum amid increasing passive dollar competition.

Bahamas-based Apex Group has acquired InvestNow’s parent company, Implemented Implemented Investment Solutions, in a deal that closed this month. InvestNow turns world-cheap US ETF into PIE…

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