Dimensional expands suite of ESG offerings for NZ investors

Dimensional Fund Advisors will from this week enable New Zealand investors to access a new sustainability-focused 100% Australian equities fund, which sits within a tax-effective Portfolio Investment Entity (PIE) structure.

The newest New Zealand investor-focused PIE is based on Dimensional’s five-year-old Australian Sustainability Trust. The fund promises Kiwi investors a tax-effective, NZ-domiciled investment structure.

According to Dimensional, the fund focuses on long-term capital growth. It provides 100% exposure to Australian equities that take into account certain environmental and sustainability impact and social considerations, with “substantially reduced exposure to weighted average carbon intensity and potential emissions”.

Dimensional notes that its sustainability suite of equity and fixed income funds are among the “most popular strategies in this part of the world”.

“[They] are designed to reduce carbon footprint exposure across markets and within industries while pursuing higher expected returns in a cost-effective and diversified way.”

In response to the fund’s launch, Dimensional Australia chief executive and head of Asia Pacific portfolio management Bhanu Singh said New Zealanders are seeking both to “align their investments with their personal values around sustainability” as well as to “maintain the focus on their financial goals”.

”[That] requires a disciplined approach to sustainability within a sound investment framework.”

The unveiling of the Australian equities fund this week expands the number of funds under the PIE structure, with Dimensional launching two Global Sustainability Funds for Kiwi investors around 16 months ago.

Those funds – one unhedged and the other hedged to the NZ dollar – now have more than $NZ450 million in assets under management.

Offering tax benefits to local NZ investors and implementation advantages for advice firms, Dimensional notes that PIE funds have in recent years seen rapid expansion relative to Australian unit trusts.

Over the past decade, PIEs have grown at a rate of 12.4% per annum to a total of nearly $60 billion in assets as of July this year.

In a PIE, the tax administration is handled within the fund as opposed to the clients having to incorporate the fund’s returns and performance information within their own tax returns.

This tax efficiency is aided by the fund holding stocks directly rather than via an offshore vehicle.

“We have seen a strong appetite among New Zealand financial intermediaries for both our systematic investment approach and our sustainability strategies in recent years,” Singh said.

He added: “While some Kiwi clients are happy to continue investing through our Australian resident unit trusts, others have said the PIEs make more sense from an administration and tax perspective”.

“Ultimately, we want to give intermediaries choice in how they access our investment expertise.”