Savings Product Review: NZX Smartshares

Wednesday 1st February 2006

What is it called and what sort of savings product is it?
Smartshares - these are a sharemarket or equity investment. There are four products in the range, TENZ, MIDZ, FONZ and MOZY.

Who is the company behind it?
NZX Funds Management own and run Smartshares. The company is a business owned by NZX - the company which runs the New Zealand stock exchange.

Who is the target market?
Smartshares are suitable for any investor who want to own shares. However one of the target groups are people who are starting off as sharemarket investors.

What return does it offer?
Each of the four funds tracks a basket of shares. TENZ is made up of the 10 biggest companies listed on the exchange, MIDZ is made up of middle sized companies, FONZ comprises the 50 biggest listed companies and MOZY is middle-sized Australian listed companies.
The returns are whatever these baskets of shares produce. Over the long-term indices Smartshares funds track have generated returns of between 7.1% annually for TENZ through to 14.74% annually for FONZ.

When was it launched?
The first of the four funds, TENZ, was launched in November 1996. The last, FONZ started just over a year ago.

What other products is it like or is it competing with?
Smartshares compete with managed funds (they are funds themselves), and other sharemarket-based investments.

Is it long term, short term or medium term?
Index funds are good medium to long-term investments.

What is the unique selling point?
One of the biggest attractions are that index funds like Smartshares provide investors low-cost access to the sharemarket. Added to that is good diversification, or a wide mix of underlying investments, which helps to lower the risk.

How strong a stomach do you need for it?
Mild. You are taking on sharemarket risk, in a well-managed, and arguably, subdued way.

What's the hitch?
You own shares in all the companies which make up the relevant index fund, including the dogs and the stars. Your returns are what the market does, if it goes up the outcome is positive. If it falls you lose money.

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