Someone asked us again recently: “Is there a Kiwisaver gold fund that I could invest in?”
We wrote about this a few years ago here: Questions From Readers: Precious Metals & Kiwisaver, BoomBust Cycle, Gold & Silver Exit Strategies
The gist of our answer was that there are no specific precious metals Kiwisaver funds available and we thought unlikely there would be. Why? Because gold and silver are seen as “too risky” by the mainstream fund management community. And they are not “diversified” like a standard “balanced” fund would be. There also probably isn’t enough demand to justify setting such a fund up.
Of course diversification does not do you much good in a financial crisis. In 2008 every sharemarket plummeted regardless of where it was located.
But we digress. Back to the question at hand. Is there a Kiwisaver gold fund or gold investment option?
How You Can Create Your Own D-I-Y KiwiSaver To Invest in Gold
The answer appears to now be “yes” you can create your own do-it-yourself (DIY) Kiwisaver gold fund .
A while back a helpful reader pointed out there is actually one way of gaining significant exposure to gold via Kiwisaver.
That is via the Craigs Investment Partners KiwiStart Select KiwiSaver scheme. Note: This has since been renamed, Craigs Investment Partners KiwiSaver.
This scheme allows you to select individual holdings in your Kiwisaver. So effectively a do-it-yourself (DIY) Kiwisaver fund.
You can choose individual stocks and funds from a fairly large range of Australasian and global shares and funds.
How You Can Use Craigs Investment Partners KiwiSaver To Invest in Gold
As far as we could see there are no individual gold or silver mining companies listed in the Australian or New Zealand listed equities. Only diversified miners such as Rio Tinto.
However we did see 2 possible gold investment funds listed. They were:
DIY Kiwisaver Gold Fund Option 1: VanEck Vectors Gold Miners ETF [GDX]
VanEck Vectors Gold Miners ETF. This is an NYSE listed fund that:
“Aims to provide returns that match the performance of the Amex Gold Miners Index, an index of around 40 global companies that mine for gold or silver.”
DIY Kiwisaver Gold Fund Option 2: SPDR Gold Trust (ETF) [GLD]
Also an NYSE listed fund that:
“Aims to reflect the performance of gold bullion, less the fees and expenses associated with the fund. GLD is backed by gold bullion held in the form of London Good Delivery Bars by the HSBC Bank USA.”
As far as we could see there is no minimum number of holdings you are required to have. So you could have one or both of these overseas listed funds as a holding in your DIY Kiwisaver fund.
You can download and learn more about the product here: Craigs KiwiSaver Scheme Product Disclosure Statement.
Then you can download the full list of investment options from this page.
You can contact Ryan Goldsmith at Craigs Investment Partners and say David at Gold Survival Guide sent you. Email: [email protected]
Gold Kiwisaver “Investment” Versus Gold as Financial Insurance
Both these gold funds of course have counterparty risk. (For more detail on counterparty risk see: Why Gold Bullion is Your Financial Insurance).
In the case of GDX you rely upon the individual companies to remain solvent. You also rely upon the fund manager to remain solvent.
With GLD you have the fund manager as your counterparty, along with HSBC as the custodian of the gold bars.
In the Kiwisaver fund itself, you also have Craigs Investment Partners as a counterparty. As they state in the investment statement:
“Your contributions are pooled with other members’ contributions and invested into the securities selected by you and held through the Scheme.
…Your portfolio is not segregated and liabilities of the Scheme can affect all portfolios.”
Of course this is not too different from any other Kiwisaver fund. Refer to this for more on the risks of Kiwisaver: Kiwisaver and Bank Bail Ins: If a Bank Fails, Are Kiwisaver Funds Affected by the OBR?
So we certainly wouldn’t view these funds as financial insurance as we do physical gold and silver bullion. But rather as exposure to the gold sector. So a gold related investment.
Other Things to Consider in This DIY Kiwisaver Precious Metals Fund
Owning individual shares and funds may not be the most efficient in terms of taxation, compared to other Kiwisaver funds.
“Craigs KiwiSaver Scheme is not a Portfolio Investment Entity (PIE) so is taxed as a widely-held superannuation fund at a flat rate of 28% on taxable income.”
Be aware the fees may be higher than a standard Kiwisaver fund which are often around 1.00%. For example:
- Brokerage to a maximum of 1.25% when you buy or sell. But no minimum brokerage charge, so you can purchase in small increments and still only pay a percentage fee.
- Then a management and fund fee. In the case of VanEck Vectors Gold Miners ETF [GDX] the total fees would be 1.76% per annum.
- While for the SPDR Gold Trust (ETF) [GLD] fees are 1.65% per year.
- There may also be a small annual member fee.
Should You Use Your Kiwisaver to “Invest in Gold”
That’s up to you! But, as we say above, don’t confuse investing in gold funds and gold mining shares, with holding physical gold and silver bullion.
We’d suggest you own physical gold and silver bullion as the bedrock of your wealth.
To learn about how to invest in physical gold or silver see: How to Buy and Invest in Gold and Silver >>
Then what you do with the rest of your assets is what we’d call investing. This could include exposure to the potential upside in the gold price via funds in Kiwisaver, along with other investments. But just as your average financial advisor would want you to be aware of the risks in gold, be aware of all the risks in other investments too!
For more on selecting the right type of physical gold bar to buy see: What Type of Gold Bar Should I Buy?
Editors Note: This post was originally published 24 July 2018. Updated 4 March 2019 to includes corrections to fees.