ASB has shuttered its BlackRock-managed Positive Impact Fund ahead of a full wind-up next year, citing the closure of an underlying strategy and weak demand.
In a statement, Adam Boyd, ASB executive general manager personal banking, said the impending shutdown next January of the BlackRock Global Impact Fund triggered the bank’s move to axe its niche product.
The ASB impact fund (available in KiwiSaver and retail formats) is split about 60/40 between two BlackRock vehicles – the to-be-cancelled global equities strategy and the iShares Green Bond Index Fund.
Boyd said while the bank-owned investment group investigated alternative third-party managers to replace the BlackRock product “we’ve observed ongoing low customer demand for the Fund, and we didn’t think this was likely to increase customer demand”.
As at the end of June, the ASB Positive Impact Fund reported about $120 million spread across just over 5,000 KiwiSaver members with a further $14 million (and 400 or so investors) in the retail product.
The September quarter Melville Jessup Weaver investment survey shows the ASB impact fund dwelling last out of 17 balanced KiwiSaver options with a three-year return of 3.3 per cent – well below the median 5.5 per cent.
“We gave this decision careful consideration, taking into account this development from BlackRock and its impact on the funds’ management, as well as declining customer demand for the PIF funds,” he said.
Launched to somewhat mixed reviews in 2019 amid the first flush of environmental, social and governance (ESG) enthusiasm, the ASB impact fund peaked at about 5,200 members.
Originally, the Positive Impact Fund invested via a Mercer global equities strategy and the Vanguard Ethically Conscious Global Aggregate Bond Index Fund before switching to BlackRock products in 2022.
Vanguard was recently fined a record A$12.9 million over greenwashing breaches in its Ethically Conscious Global Aggregate Bond Index Fund during a period where ASB was invested in the product.
The Vanguard case, and others including Active Super and Mercer in Australia, highlights a growing ESG-labelling risk for investment managers as regulators crack down on perceived greenwashing in the funds industry.
For example, the First Sentier-owned Stewart Investors last month announced a move to drop the ‘sustainable’ tagline from its product suite, partly due to regulatory dithering.
The NZ government has followed other jurisdictions by committing to taxonomy rules for sustainable finance products – although the work is still in development.
ASB will officially close the Positive Impact Fund on January 15 next year in line with the underlying BlackRock product.
After cashing up, ASB will redistribute the proceeds across remaining members’ other KiwiSaver holdings or in the balanced fund if they only invested in the impact fund.
But due to a mismatch between withdrawal periods from the respective BlackRock equity and bond funds, the sell-down process could tip the asset mix out of whack as redemptions accelerate.
“As a result, the proportion of the Positive Impact Fund’s total assets invested in bonds (and therefore, exposure to bond price movements) will increase for remaining investors until the instruction to sell units is complete,” the ASB KiwiSaver disclosure document says.
The bank is contacting investors in the fund to “notify them of the change and the options available to them”, Boyd said.
