See below to find answers specific to managed investment schemes. If you don’t find the answers you are looking for, please contact us.
If a restricted scheme XYZ invests in another registered scheme ABC (such as a master trust), does scheme XYZ need to monitor investments made by ABC to ensure there has been no breach of scheme XYZ’s in-house asset rule (as set out in section 176 of the FMC Act)?
No, investments made by registered scheme ABC will not count towards restricted scheme XYZ’s in-house asset rule. This is because the definition of ‘in-house asset’ in section 176(3) specifically excludes investments made into another registered scheme.
Our view is since the initial investment in registered scheme ABC is not considered to be an in-house asset, any investments made by the registered scheme should also not be considered an in-house asset.
What is a manager’s basic fee?
The manager’s basic fee is a subset of a fund’s overall management and administrative charges. It refers to the fees charged by the manager for their services.
In this respect it distinguishes the management and administrative charges which originate from the manager from those which have been passed onto investors for services provided by other parties (underlying funds, auditors, supervisors etc).
We note that in some instances, third parties services are charged to the manager. The manager then charges these fees to the fund. These third party service charges should not be classified as the manager’s basic fee.
References: Schedule 4, clause 1 and 63 of the FMC Regulations.
If I am a restricted scheme, when does my obligation to provide a fund update commence?
A restricted scheme must produce a fund update within three months of the balance date for the scheme, or the last day of the scheme’s disclosure year.
The obligation to provide a fund update only applies to schemes after their effective date of transition. This means that if the scheme’s balance date occurs prior to their effective date, the scheme will not be obliged to provide a fund update until the following balance date.
For example: A restricted scheme has a balance date of 31 March. It transitions to the FMC Act on 31 May 2016. The scheme will not be required to provide a fund update until 30 June 2017.
References: Regulation 56(2) of the FMC Regulations.
My fund provides a number of fee rebates to investors, can these be included as part of the worked example of the return for a hypothetical investor in the fund update?
The worked example in the fund update is intended to provide information at a general level only. It must be calculated based on the fund’s actual total fund charges. The example cannot be modified to take into account rebates which are only available to some investors.
However, the fund update may include additional information about the effect individual discounts or rebates may have, when the manager genuinely believes such information is necessary to clarify the worked example. In deciding whether further information is required, the manager should consider whether the rebates are available to all investors, if so, the extent it will affect the worked example.
I am a licensed MIS manager producing my first fund update. Part of my fund is invested in New Zealand dollar denominated bonds issued by foreign issuers (Kauri bonds). These bonds are registered, but not listed, in New Zealand. For the purposes of the asset categories specified in clause 1(4)of schedule 4 of the FMC Regulations should these bonds be categorised as ‘New Zealand fixed interest’ or ‘international fixed interest’?
We recognise the asset categories specified in clause 1(4) of schedule 4 could lead to some uncertainty in relation to certain fixed interest investments such as Kauri bonds. The FMA and the Ministry of Business, Innovation and Employment are currentlyworking to clarify this issue. In the meantime, you could either categorise these bonds as ‘New Zealand fixed interest’ or ‘international fixed interest’ depending upon your assessment of the characteristics of the bonds.
Your PDS and SIPO should provide clarity around the types of assets the fund invests in. We will provide further guidance to assist MIS managers to take a more standardised approach to categorisefixed income assets in the near future.