Index Funds NZ: A Complete Guide to Passive Investing in New Zealand

Index funds give you exposure to an entire market in a single investment, with fees as low as 0.10% per year in NZ. You can buy them through Kernel, Smartshares (NZX-listed), or via InvestNow, and most are structured as PIE funds, meaning your tax rate caps at 28%. Index funds aim to replicate market returns at low cost.

Here's what's available, what it costs, and how to get started.

What is an index fund?

An index fund is a type of investment fund that tracks a specific market index. Instead of a fund manager picking individual stocks, the fund simply holds all (or most) of the companies in a given index, in the same proportions.

For example, a fund tracking the S&P/NZX 50 index holds shares in NZ's 50 largest listed companies. A fund tracking the S&P 500 holds the 500 largest US companies. The fund's return mirrors the index it tracks, minus fees.

The key advantages are straightforward: instant diversification, low fees (because there's no active stock-picking), and consistent market returns. You don't need to pick winners. You own the whole market.

Index funds vs active funds: performance data

S&P Global's SPIVA scorecard (2025) shows that over a 15-year period, approximately 85% to 90% of actively managed funds globally underperform their benchmark index after fees. The NZ data tells a similar story. While a handful of NZ active managers have delivered strong results (Milford being the most cited example), the majority have not beaten a simple index approach over 10+ years (S&P Global SPIVA, Morningstar).

The reason is largely fees. An active fund charging 1.0% to 1.5% per year needs to consistently outperform the index by that much just to break even with a passive fund charging 0.20% to 0.30%. Over decades, the compounding effect of lower fees is significant.

What fee differences actually cost you

On a $50,000 portfolio growing at 7% per year (gross) over 20 years:

Fee level	Total fees paid	Final balance
0.25% (index fund)	~$7,400	~$183,800
0.50% (low-cost active)	~$14,400	~$177,000
1.00% (typical active)	~$27,600	~$163,900
1.50% (higher-cost active)	~$39,500	~$151,500

That's a difference of roughly $32,300 between a 0.25% index fund and a 1.50% active fund over 20 years, on the same starting amount and the same gross return (Forge Money projections based on 7% gross return).

Fees reduce net returns. The compounding effect of fee differences grows over longer time periods.

Index funds available to NZ investors

NZ investors have access to a range of index funds covering domestic, international, and global markets. Here are the main options, grouped by provider.

Kernel

Kernel is a NZ fund manager that builds its own low-cost index funds, all structured as PIE funds. You invest directly through Kernel's platform (Kernel).

Fund	Tracks	Annual fee	PIE
NZ 20 Fund	S&P/NZX 20	0.25%	Yes
Global 100 Fund	S&P Global 100	0.25%	Yes
S&P 500 Fund	S&P 500	0.25%	Yes
NZ Commercial Property Fund	S&P/NZX Real Estate Select	0.25%	Yes
NZ Cash Fund	NZ cash rate	0.25%	Yes
NZ Bonds Fund	S&P/NZX NZ Government Bond	0.25%	Yes
High Growth Fund	Multi-index blend	0.25%	Yes
Balanced Fund	Multi-index blend	0.25%	Yes

Kernel charges a flat 0.25% fee across most funds. No transaction fees. Automatic investing from $1. A $60 per year admin fee applies for balances over $25,000 (Kernel).

Smartshares

Smartshares is NZ's largest ETF provider. Its funds are listed on the NZX, meaning you can buy and sell them like shares during trading hours. Most are PIE funds (Smartshares, NZX).

Fund	Ticker	Tracks	Annual fee	PIE
NZ Top 50 ETF	FNZ	S&P/NZX 50	0.20%	Yes
NZ Top 10 ETF	TNZ	S&P/NZX 10	0.20%	Yes
US 500 ETF	USF	S&P 500	0.34%	Yes
Total World ETF	TWF	FTSE Global All Cap	0.40%	Yes
US Large Growth ETF	USG	S&P 500 Growth	0.36%	Yes
NZ Property ETF	NPF	S&P/NZX Real Estate Select	0.54%	Yes
Australian Top 20 ETF	AUS	S&P/ASX 200	0.29%	Yes
Emerging Markets ETF	EMF	FTSE Emerging Markets	0.69%	Yes

Smartshares fees range from 0.20% for NZ index funds to 0.69% for emerging markets. You can buy Smartshares ETFs through any NZX broker, through InvestNow (no brokerage), or directly through Smartshares (Smartshares, NZX).

Funds available via InvestNow

InvestNow is a platform that gives you access to managed funds from dozens of NZ providers. It charges zero platform fees. You pay only the underlying fund's management fee (InvestNow).

Key index and passive funds available on InvestNow include:

Fund	Provider	Tracks	Annual fee	PIE
Smartshares NZ Top 50	Smartshares	S&P/NZX 50	0.20%	Yes
Smartshares US 500	Smartshares	S&P 500	0.34%	Yes
Smartshares Total World	Smartshares	FTSE Global All Cap	0.40%	Yes
AMP All Country Global Shares Index	AMP	MSCI ACWI	0.39%	Yes
Simplicity NZ Share Fund	Simplicity	NZ shares	0.10%	Yes
Simplicity International Share Fund	Simplicity	International shares	0.10%	Yes
Simplicity Growth Fund	Simplicity	Multi-asset growth	0.10%	Yes

Simplicity charges 0.10% per year. InvestNow also carries the full Smartshares range, Nikko AM index funds, and others (InvestNow, Simplicity, Disclose Register).

Fee comparison: index funds vs active funds in NZ

Fund type	Typical annual fee	Example funds
NZ index (cheapest)	0.10% to 0.25%	Simplicity NZ Share, Kernel NZ 20
NZ index (moderate)	0.20% to 0.40%	Smartshares NZ Top 50, AMP index range
International index	0.25% to 0.40%	Kernel Global 100, Smartshares US 500
NZ active (low-cost)	0.50% to 0.80%	Harbour NZ Equity Focus, Nikko NZ Equity
NZ active (mid-range)	0.80% to 1.20%	Fisher NZ Growth, ANZ Growth
NZ active (premium)	1.00% to 1.60%	Milford Active Growth, Platinum International

All fee data from Disclose Register and provider websites as at March 2026. Fees include management fee and estimated fund expenses but exclude performance fees where applicable.

The gap between the cheapest index option (0.10%) and a typical active fund (1.0% to 1.2%) is roughly 1% per year. On a $100,000 portfolio, that's $1,000 per year in additional fees, compounding over time.

Your tax rate affects which fund structure works best — PIE funds cap tax at 28%, but if you're under $53,500 there's no advantage. Check your marginal rate →

NZX 50 vs S&P 500 vs global indices

Most NZ index fund investors split their money between a NZ index and an international index. The question is how much to allocate to each.

Index	What it covers	10-year annualised return (to Dec 2025)	Number of companies
S&P/NZX 50	NZ's 50 largest listed companies	~10.5% p.a.	50
S&P 500	US's 500 largest companies	~12.5% p.a.	500
MSCI ACWI	Global developed + emerging markets	~10.0% p.a.	~2,900
FTSE Global All Cap	Global all-cap (incl. small companies)	~9.8% p.a.	~9,500

Returns are approximate, in local currency, and include dividends. Past performance does not predict future returns (S&P Global, MSCI, NZX).

A few things to note about NZ's sharemarket. The NZX is small and concentrated. Five companies (Fisher & Paykel Healthcare, Auckland International Airport, Spark, Mercury, and Meridian) make up a large share of the NZX 50's total value. That concentration means your "diversified NZ index fund" is heavily weighted toward a handful of companies in healthcare, utilities, and infrastructure (NZX).

International exposure gives you access to sectors underrepresented on the NZX: technology, consumer goods, pharmaceuticals, financials at global scale. A common starting allocation for NZ investors is somewhere around 30% to 40% NZ and 60% to 70% international, though the right split depends on your goals and preference for NZD-denominated income.

How to buy index funds in NZ

Three main paths:

Through Kernel directly. Sign up at kernelwealth.co.nz, choose your funds, set up automatic investments. All Kernel funds are PIE. No brokerage. From $1.

Through InvestNow. Sign up at investnow.co.nz, choose from Smartshares, Simplicity, AMP, or other providers' index funds. Zero platform fees. $50 minimum per fund.

Through the NZX (Smartshares ETFs). Buy Smartshares ETFs on the NZX through any broker: Sharesies, ASB Securities, Jarden Direct, or Tiger Brokers. You'll pay brokerage on each trade (varies by platform). You can also buy Smartshares units directly through Smartshares' website with no brokerage.

You can compare platforms to find one that suits your needs. If you already have a share trading account and want the flexibility to trade during market hours, buying Smartshares ETFs on the NZX is also an option.

Tax considerations: PIE index funds vs non-PIE

This is one of the biggest advantages of NZ-domiciled index funds. Most index funds available through Kernel, Smartshares, and InvestNow are structured as PIE funds.

In a PIE fund, your returns are taxed at your PIR, which caps at 28%. If your marginal income tax rate is 33% (income $78,101 to $180,000) or 39% (income above $180,000), you save on every dollar of investment return (IRD).

Your income	Marginal tax rate	PIR (PIE tax rate)	Tax saving per $1,000 of returns
Under $53,500	17.5% or lower	17.5% or lower	None (PIR matches)
$53,501 to $78,100	30%	28%	$20
$78,101 to $180,000	33%	28%	$50
Over $180,000	39%	28%	$110

On a $100,000 portfolio returning 7% per year ($7,000 in returns), the PIE advantage for someone on a 39% marginal rate is $770 per year. Over 20 years, that tax saving alone compounds to a meaningful difference.

If you invest in overseas index ETFs directly (through Hatch or Sharesies, for example), those holdings are non-PIE. You'll face FIF tax if your overseas holdings exceed $50,000 in cost, and you'll be taxed at your full marginal rate (IRD). NZ-domiciled PIE funds that hold international assets (like Kernel's Global 100 or Smartshares' Total World ETF) handle all overseas tax within the fund, so you avoid FIF personally.

For more on FIF: FIF tax explained.

Building a portfolio with index funds

A simple, effective index fund portfolio for a NZ investor might look like this:

Two-fund approach:

• NZ index fund (e.g., Kernel NZ 20 or Smartshares NZ Top 50): 30% to 40%
• International index fund (e.g., Kernel Global 100 or Smartshares Total World): 60% to 70%

Three-fund approach:

• NZ index fund: 25% to 35%
• International index fund: 50% to 60%
• NZ or global bonds fund: 10% to 20% (if you want lower volatility)

The exact split depends on how long you're investing, how you feel about short-term volatility, and whether you want NZD-denominated income from NZ dividends. There's no single correct answer, but the principle is the same: broad diversification, low fees, long time horizon.

Rebalancing once or twice a year (selling a bit of whatever has grown above your target allocation and buying more of whatever has dropped below it) keeps your portfolio aligned with your original plan without overthinking it.

Index funds vs ETFs: what's the difference in NZ?

In NZ, the terms "index fund" and "ETF" overlap but aren't identical.

An ETF (exchange-traded fund) is listed on a stock exchange and trades like a share during market hours. Smartshares funds are ETFs because they're listed on the NZX.

An index fund is any fund that tracks an index, whether or not it's listed on an exchange. Kernel's funds are index funds but not ETFs, because they aren't listed on the NZX. You buy and sell them directly through Kernel at end-of-day prices.

In practice, for a long-term buy-and-hold investor, the difference is minimal. Both give you low-cost index tracking. The main practical differences:

• ETFs can be traded during market hours at live prices. Unlisted index funds process at end-of-day prices.
• ETFs are bought through a broker (brokerage fees may apply). Unlisted index funds are bought directly from the provider (usually no transaction fees).
• Both can be PIE funds in NZ.

For most NZ investors buying and holding for the long term, whether you use an ETF or an unlisted index fund matters less than the fee, the index it tracks, and the tax structure.

For more on ETFs: ETF investing in NZ.

Common questions

What is the best index fund in NZ?

There's no single best index fund — it depends on what market exposure you want, your tax position, and your preferences. The fee comparison tables above show the range of options available. All fees are sourced from the Disclose Register and provider websites.

How much money do I need to start investing in index funds in NZ?

As little as $1 on Kernel. InvestNow requires $50 per fund. If you're buying Smartshares ETFs on the NZX through a broker like Sharesies, you can start from $1 with fractional shares. The barrier to entry is effectively zero.

Are index funds safe?

Index funds are not risk-free. Their value goes up and down with the market they track. In a severe downturn, a share index fund can drop 20% to 40%. However, because they hold many companies, you avoid the risk of a single company going to zero. Historically, broad market indices have recovered from every downturn and gone on to reach new highs, though recovery timescales vary. Index funds are considered lower risk than individual shares but higher risk than term deposits or bonds (NZX, S&P Global).

What's the difference between an index fund and a managed fund?

An index fund is a type of managed fund, but it's passively managed. It follows a set of rules (track this index) rather than relying on a manager's judgment. Active managed funds employ managers who pick investments, aiming to beat the market. The key differences are cost (index funds are cheaper) and consistency (index funds deliver market returns, active funds may do better or worse). In NZ, index fund fees range from 0.10% to 0.40%, while active fund fees typically range from 0.80% to 1.50% (Disclose Register).

Do I pay tax on index fund returns in NZ?

Yes, but the amount depends on the fund structure. If the fund is a PIE (most NZ index funds are), your returns are taxed at your PIR, capped at 28%. The fund handles the tax, and you don't need to declare it in your tax return. If the fund is non-PIE, returns are taxed at your marginal income tax rate and you report them yourself. PIE funds are generally more tax-efficient for anyone earning above $53,500 (IRD).

Can I lose money in an index fund?

Yes. If the market falls, your index fund falls with it. The NZX 50 dropped roughly 30% in early 2020 during the Covid sell-off, and the S&P 500 dropped about 34%. Both recovered within 12 to 18 months and went on to reach new highs. Over any rolling 10-year period in modern history, broad market indices have delivered positive returns, but there are no guarantees. Index funds are designed for long-term investors who can ride out short-term volatility (NZX, S&P Global).

Is it better to invest in NZ index funds or international index funds?

Both, ideally. NZ's sharemarket is small and concentrated in a few sectors. International index funds give you access to technology, healthcare, consumer goods, and other sectors underrepresented on the NZX. A common approach is to hold 30% to 40% in NZ index funds (for NZD income and lower currency risk) and 60% to 70% in international index funds (for broader diversification). The right mix depends on your goals and preferences.

How do index funds compare to KiwiSaver?

KiwiSaver is an account type, not a specific fund. Many KiwiSaver providers offer index-based options within KiwiSaver. Simplicity and Kernel both have KiwiSaver schemes built on index funds. The index fund principles are the same: low fees, broad diversification, market returns. The difference is KiwiSaver has contribution rules, employer matching, and withdrawal restrictions. Investing in index funds outside KiwiSaver gives you more flexibility to access your money when you need it.

What happens to my index fund if the provider goes bust?

Your money in a managed fund is held separately from the provider's own assets, typically by an independent custodian or supervisor. If Kernel or Smartshares went into liquidation, your fund units would still exist and could be transferred or wound up and returned to investors. This separation is a legal requirement under the Financial Markets Conduct Act 2013 (FMA). The value of your units still depends on the market, not on the provider's financial health.

What to do next

• ETF investing in NZ: How ETFs work, NZX-listed options, and tax implications
• NZ investing platforms compared: Compare Sharesies, InvestNow, Kernel, Hatch, and others
• Sharesies vs Hatch vs InvestNow: Head-to-head platform comparison
• FIF tax explained: How overseas investments are taxed

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This guide presents factual information about index funds available in New Zealand. It is not a recommendation to invest in any specific fund, platform, or investment strategy.

Last updated: 1 March 2026. Sources: Disclose Register (disclose-register.companiesoffice.govt.nz), Kernel (kernelwealth.co.nz), Smartshares (smartshares.co.nz), InvestNow (investnow.co.nz), Simplicity (simplicity.kiwi), NZX (nzx.com), S&P Global SPIVA, Morningstar, IRD (ird.govt.nz), FMA (fma.govt.nz). Fees and returns are current as at March 2026 and can change. Past performance does not guarantee future returns. This is financial information, not financial advice.