Managed Funds NZ: How They Work and What They Cost
A managed fund pools money from many investors and invests it according to a stated strategy, run by a professional fund manager. You buy units in the fund, and the value of your units rises or falls based on the performance of the underlying investments. In NZ, managed funds are one of the simplest ways to get diversified exposure to shares, bonds, and property without picking individual investments yourself.
The most important number to focus on is the total annual fee, because it directly reduces your returns every year, regardless of whether the fund goes up or down.
How managed funds work
When you invest in a managed fund, your money is combined with money from hundreds or thousands of other investors. The fund manager uses this pool to buy a portfolio of assets (shares, bonds, property, cash, or a mix) according to the fund's investment mandate.
You own units in the fund, not the individual shares or bonds inside it. The price of each unit is the fund's total net asset value (NAV) divided by the number of units on issue. When you invest $1,000, you're buying units at the current unit price. When the underlying assets rise in value, your unit price increases. When they fall, it decreases.
You can typically buy and sell units on any business day. Most NZ managed funds process transactions at the next day's unit price. There's no lock-in period on most funds, though some charge a buy/sell spread (a small fee, usually 0.05% to 0.20%) to cover the fund's transaction costs when money flows in and out.
Types of managed funds
Index funds (passive)
Index funds aim to match the performance of a market index (like the S&P/NZX 50 or the S&P 500) by holding the same stocks in the same proportions. The fund manager doesn't try to pick winners. The goal is to deliver market returns at the lowest possible cost.
Annual fees on NZ index funds typically range from 0.20% to 0.45%. Kernel's NZ 20 fund charges 0.25% and its Global 100 fund charges 0.25% (Kernel). Smartshares' NZX 50 ETF charges 0.20% (Smartshares, Disclose Register).
Active funds
Active funds employ fund managers who research companies and make decisions about what to buy and sell, aiming to outperform the market. This hands-on approach costs more.
Annual fees on NZ active funds typically range from 0.80% to 1.50%, and some charge a performance fee on top. For example, Milford Active Growth charges a management fee of 1.05% p.a. plus a performance fee of 15% of returns above its benchmark (Milford, Disclose Register). Fisher Funds' Growth Fund charges 1.04% p.a. (Fisher Funds, Disclose Register).
The evidence from decades of global research shows that most active funds underperform their benchmark index after fees over the long term. That doesn't mean all active funds are bad, but the odds are against any single active fund consistently beating a low-cost index fund over 10 or more years (S&P Global SPIVA reports).
Balanced funds
Balanced funds hold a mix of growth assets (shares) and income assets (bonds, cash). They're designed as a one-fund solution for investors who want diversification without choosing individual asset classes. A typical balanced fund holds roughly 60% shares and 40% bonds, though the exact split varies.
Examples: Simplicity Balanced Fund (0.31% p.a.), Milford Balanced Fund (0.85% p.a.), Fisher Funds TWF Balanced (0.99% p.a.) (provider websites, Disclose Register).
PIE funds
A PIE (Portfolio Investment Entity) fund is a tax structure, not an investment type. Any managed fund, whether index or active, balanced or growth, can be structured as a PIE fund.
The key advantage: returns in a PIE fund are taxed at your Prescribed Investor Rate (PIR), which is capped at 28%. If your marginal income tax rate is 33% or 39%, you pay less tax on returns inside a PIE fund than you would on equivalent returns outside one (IRD).
Most KiwiSaver funds are PIE funds. Many non-KiwiSaver managed funds available through platforms like InvestNow and Kernel are also PIE funds. This is covered in more detail below.
Understanding managed fund fees
Fees are the single most predictable drag on your returns. A fund can't guarantee performance, but it can guarantee it will charge you its fee every year. Here's what to watch for.
Management fee (or base fee)
The ongoing annual percentage charged on your total balance. A fund charging 1.00% p.a. on a $50,000 balance costs you $500 per year. This fee is deducted from the fund daily, so you never see it leave your account directly. It's already reflected in the unit price.
Performance fee
Some active funds charge an additional fee when they beat a specified benchmark. For example, a 15% performance fee on returns above the NZX 50 index means that if the fund returns 12% and the benchmark returns 8%, the manager takes 15% of the 4% outperformance. Performance fees can significantly increase total costs in strong years (Disclose Register).
Buy/sell spread
A small fee (often 0.05% to 0.20%) charged when you invest or withdraw. This covers the fund's costs of buying or selling the underlying assets to accommodate your transaction. It's not a profit for the fund manager. It protects existing investors from bearing the cost of others entering or exiting.
Total fund charges (ICR)
The ICR (Investment Charges Ratio) or total fund charges figure is the most useful number for comparison. It includes the management fee plus other ongoing charges (administration, custody, audit), but typically excludes performance fees and buy/sell spreads. Look for this number on the fund's quarterly fund update, which every NZ managed fund is required to publish on the Disclose Register (FMA).
Major NZ fund providers compared
The table below compares indicative annual fees for similar fund types across NZ's largest providers. Fees are total fund charges from the most recently published quarterly fund update on the Disclose Register as at February 2026.
| Provider | Growth fund fee | Balanced fund fee | Cash/conservative fund fee | PIE fund | Min. investment |
|---|---|---|---|---|---|
| Simplicity | 0.31% | 0.31% | 0.11% | Yes | $1 |
| Kernel | 0.25% to 0.39% | N/A (single-asset funds) | 0.25% | Yes | $1 |
| Milford | 1.05% + perf. fee | 0.85% + perf. fee | 0.45% | Yes | $1,000 (direct) |
| Fisher Funds | 1.04% | 0.99% | 0.62% | Yes | $500 |
| Harbour | 1.07% | 0.89% | 0.40% | Yes | $1,000 (direct) |
| Nikko AM | 0.99% | 0.89% | 0.35% | Yes | $1,000 (direct) |
| AMP | 0.70% to 1.10% | 0.65% to 1.05% | 0.30% to 0.60% | Yes | Varies |
| Pathfinder | 1.13% | 1.00% | 0.45% | Yes | Via InvestNow |
| Smartshares (NZX) | 0.20% to 0.75% | N/A (ETFs) | N/A | Some | $500 (direct) or via broker |
Most of these funds are accessible through InvestNow at zero additional platform cost. Kernel and Simplicity are direct-to-consumer only. Milford, Fisher, Harbour, and Nikko AM also accept direct investments, often with higher minimums than through InvestNow (Disclose Register, provider websites).
PIE funds vs non-PIE funds
This matters more than most people realise.
In a PIE fund, your investment returns are taxed at your PIR, which maxes out at 28%. In a non-PIE investment, returns are taxed at your marginal income tax rate, which could be 33% or 39% (IRD).
| Your taxable income | Marginal tax rate | PIR (in PIE fund) | Tax saving per $1,000 of returns |
|---|---|---|---|
| Up to $53,500 | 17.5% or lower | 17.5% or lower | None |
| $53,501 to $78,100 | 30% | 28% | $20 |
| $78,101 to $180,000 | 33% | 28% | $50 |
| $180,001+ | 39% | 28% | $110 |
On a $100,000 portfolio earning 7% ($7,000 return), the annual tax difference between a 28% PIR and a 33% marginal rate is $350. Between 28% PIR and 39% marginal rate, it's $770. Over 20 years, these differences compound to thousands of dollars (IRD).
Another advantage: PIE funds handle all the tax for you. The fund calculates your tax, deducts it, and pays it to IRD. You don't need to include PIE income in your tax return unless your PIR was set incorrectly (IRD).
For most NZ investors earning over $53,500, PIE funds have a clear tax advantage over non-PIE equivalents. This is a relevant factor when choosing between platforms and fund structures.
How to evaluate a managed fund
Look at after-fee returns, not gross returns
A fund's published return already has the management fee deducted. But performance fees and buy/sell spreads may not be reflected. Check the fund's quarterly update on the Disclose Register for the "return after total fund charges" figure. That's the number that matters (FMA).
Don't chase past performance
A fund that returned 15% last year might return 2% this year. Short-term returns tell you almost nothing about future performance. Even 5-year returns have limited predictive power. What you can predict with certainty is the fee. A fund charging 1.5% will always cost more than one charging 0.30%, regardless of market conditions.
The Disclose Register requires funds to show this disclaimer: "Past performance is not a reliable indicator of future performance." Take that seriously.
Understand the fund's strategy
Read the fund's Product Disclosure Statement (PDS) and investment policy. Know what the fund invests in, how concentrated or diversified it is, what its benchmark is, and what risks it takes to generate returns. A growth fund holding 100% NZ shares is very different from one holding a global mix (FMA).
Compare like with like
Don't compare a conservative fund's returns with a growth fund's returns. They take different levels of risk. Compare funds within the same category (growth vs growth, balanced vs balanced) and look at returns over 5 or 10 years after fees.
Worked example: the cost of fees over time
The following example shows how fees affect a $50,000 investment over 10 and 20 years, assuming a 7% gross return before fees. All figures are nominal.
| Fee level | 0.30% p.a. | 1.00% p.a. | 1.50% p.a. |
|---|---|---|---|
| Gross return assumed | 7.00% | 7.00% | 7.00% |
| Net return after fee | 6.70% | 6.00% | 5.50% |
| After 10 years | |||
| Balance | $95,600 | $89,500 | $85,600 |
| Total fees paid | $5,900 | $12,000 | $15,900 |
| After 20 years | |||
| Balance | $182,800 | $160,400 | $146,500 |
| Total fees paid | $20,500 | $42,900 | $56,800 |
The difference between 0.30% and 1.50% in annual fees on $50,000 over 20 years is approximately $36,300. That's $36,300 that went to the fund manager instead of compounding in your account. The higher-fee fund would need to consistently outperform the lower-fee fund by more than 1.20% per year just to break even.
Over 20 years, the 0.30% fund grows your $50,000 to about $182,800. The 1.50% fund grows it to about $146,500. Same starting amount. Same market. Different fees.
This doesn't mean low-fee funds are always better. But it does mean the fee is the hurdle that active management must clear before it adds value. Most don't clear it consistently over the long term (S&P Global SPIVA reports).
Common questions
What is a managed fund?
A managed fund pools money from many investors and invests it in a portfolio of assets (shares, bonds, property, cash) managed by a professional fund manager. You buy units in the fund, and your returns come from the change in the fund's unit price plus any distributions. Managed funds are regulated by the FMA and must publish quarterly fund updates and a Product Disclosure Statement on the Disclose Register (FMA).
How do fees affect my investment returns?
Fees are deducted from your fund's returns every year, regardless of performance. A fund charging 1.00% on $50,000 costs $500 per year. Over 20 years at 7% gross return, the difference between a 0.30% fee fund and a 1.50% fee fund is roughly $36,300 on a $50,000 investment. Fees compound against you in the same way returns compound for you. The lower the fee, the more of the return you keep (Disclose Register).
Active funds vs index funds: which is better?
Index funds aim to match the market at low cost (typically 0.20% to 0.45% in NZ). Active funds try to beat the market but charge more (typically 0.80% to 1.50%). Global data from S&P Global's SPIVA reports consistently shows that the majority of active funds underperform their benchmark index over periods of 10 years or more, after fees. Some active funds do outperform, but identifying them in advance is difficult. For most investors, a diversified portfolio of low-cost index funds captures market returns with certainty about costs.
What is a PIE fund?
A PIE (Portfolio Investment Entity) fund is a managed fund with a special NZ tax structure. Returns are taxed at your Prescribed Investor Rate (PIR), which is capped at 28%, instead of your marginal income tax rate (up to 39%). The fund handles all the tax and pays it directly to IRD. PIE status is a significant advantage for anyone earning above $53,500. Most KiwiSaver funds and many non-KiwiSaver managed funds available through InvestNow and Kernel are PIE funds (IRD).
What is the minimum investment for managed funds in NZ?
Minimums vary by provider and platform. Through InvestNow, most funds have a $50 minimum. Kernel starts at $1. Simplicity starts at $1. Investing directly with providers like Milford, Harbour, or Nikko AM often requires $1,000 or more. In practice, you can start investing in managed funds in NZ from as little as $1 (provider websites, InvestNow).
How do I withdraw money from a managed fund?
Submit a withdrawal request through your platform (InvestNow, Kernel, Sharesies) or directly to the fund provider. Most NZ managed funds process withdrawals within 1 to 5 business days. The fund sells your units at the next available unit price. Some funds charge a sell spread (typically 0.05% to 0.20%) on withdrawals. There's no lock-in period on most NZ managed funds, though some specialist funds may have notice periods (provider websites).
Are managed funds safe?
Managed funds are regulated by the FMA and must be registered on the Disclose Register. Your money is held separately from the fund manager's own assets by an independent supervisor (custodian). If the fund manager goes bankrupt, your investments are protected by this separation. However, the value of your units rises and falls with the market. A growth fund can drop 20% or more in a bad year. Regulation protects the structure and governance, not the investment returns (FMA).
How are managed fund returns taxed in NZ?
In a PIE fund, returns are taxed at your PIR (capped at 28%) and the fund handles all tax. You don't include PIE income in your tax return. In a non-PIE fund, distributions are taxed as income at your marginal tax rate. You're responsible for declaring this in your tax return. For funds with overseas investments, FIF tax may apply within the fund (for PIE funds, this is handled internally) or at your personal level (for non-PIE investments above $50,000 overseas). The tax treatment is a meaningful reason to prefer PIE funds for most NZ investors (IRD).
What to do next
- NZ investing platforms compared: Compare where to access managed funds and other investments
- KiwiSaver fund comparison: KiwiSaver is a managed fund too. Compare all NZ KiwiSaver funds
- Index funds vs active funds NZ: A deeper look at the evidence on passive vs active investing
Last updated: 28 February 2026. Sources: Disclose Register (disclose-register.companiesoffice.govt.nz), FMA (fma.govt.nz), IRD (ird.govt.nz), Morningstar, S&P Global SPIVA, provider websites (Simplicity, Kernel, Milford, Fisher Funds, Harbour, Nikko AM, AMP, Pathfinder, Smartshares, InvestNow). Fee data from the most recently available quarterly fund updates on the Disclose Register. This is financial information, not financial advice.
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This is educational content, not financial advice.