Though if you are willing to take on the extra risk and think that crypto currencies are appropriate for you, you can invest some of your Kōura KiwiSaver plan in our Carbon Neutral Crypto Currency Fund.
Interested in Crypto?
Crypto is an interesting asset class for KiwiSaver investors to consider. Read on for key considerations, risks and more.
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A word of warning
Cryptocurrencies are not something that we would recommend for everyone as they can be highly risky. They are only appropriate for investors with a long-term investment horizon and those that are willing to withstand a significant amount of volatility (cryptocurrencies are regularly subject to sudden and sharp falls in value).
What are Cryptocurrencies?
Crypto currencies are forms of currencies that exist digitally and use advanced cryptography to secure individual transactions.
Unlike traditional currencies, crypto currencies are controlled by their users and do not have a central regulatory or issuing body. Transactions are typically “validated” by a network of users, these users are remunerated for validating transactions through the issuance of new coins (also known as mining).
There are thousands of crypto currencies in existence with a combined capitalisation of over US$1 trillion*.
* Source - CoinBase May 2022
How kōura invests in crypto?
At this stage, the Kōura Carbon Neutral Crypto Currency Fund invests exclusively in a fund that invests in Bitcoin. We invest exclusively in Bitcoin due to its investment characteristics, history and the significant institutional support that it has. Over time we may also consider investing in other cryptocurrency assets. We invest in partnership with Fidelity Digital Assets, a subsidiary of the world’s fourth largest asset manager Fidelity with over US $4 trillion of assets under management.
Crypto and your KiwiSaver plan
Cryptocurrency is not for everyone, it is a high risk investment and still unproven. Because of this it is only appropriate for investors with a long term investment horizon and those that are willing to withstand a significant amount of volatility. It is higher risk than a more traditional investment; because of this cryptocurrency assets are only appropriate for a small component of a KiwiSaver portfolio. We don't want to put your whole retirement at risk.
Theoretically, a 3-4% allocation of your growth assets to Bitcoin is sufficient to optimise the risk and return characteristics of your KiwiSaver. With Kōura, if you tell us that you would like to invest in cryptocurrencies, we will suggest you allocate 3% of your growth assets to the Kōura Carbon Neutral Cryptocurrency Fund. If you do not ask to invest in cryptocurrency, we will not allocate any of your KiwiSaver plan to this fund.
You are able to allocate a maximum of 10% of your KiwiSaver to the Carbon Neutral Cryptocurrency Fund, if you do this, 10% of your current funds will be invested in the fund and 10% of your ongoing contributions will also be invested in the fund, though due to market movements, the actual percentage of your KiwiSaver may grow above this 10% level. You will be rebalanced back to your chosen allocation every 6 months.
Importantly, you need to remember that the more you allocate to our Carbon Neutral Cryptocurrency Fund the riskier your KiwiSaver will be. If you go all the way to the maximum amount of 10% you need to be prepared for a significant amount of volatility in your KiwiSaver. Remember this asset class is expected to fall by over 50% at least every 2 years.
How we make the fund carbon neutral
Kōura will fully offset its share of the carbon emitted by the crypto currency networks that it invests in. This will be achieved through an annual calculation of the carbon used and the purchase of carbon offsets. Kōura will report annually on the amount of carbon purchased and where the offsets have been achieved.
The cost of achieving carbon neutrality will not be charged to the fund, it is a cost that the manager, Kōura Wealth Limited, will incur.
More information is available with the Kōura Responsible investments policy which is available here.
Key risks to consider
The Kōura Carbon Neutral Crypto Currency Fund invests in Bitcoin. Bitcoin is higher risk than traditional financial assets. The value of Bitcoin (and therefore the Fund) could fall significantly or even go to zero. Some of the key risks an investor should consider ahead of investing in the fund include:
Highly volatile asset
Bitcoin is a highly volatile asset and historically has experienced significant value swings (+100% or – 50%) over short periods of time. There is no guarantee that assets will recover after a significant fall or that historical returns will continue. The volatile nature of the asset may result in the value of the fund falling significantly in value or even going to zero. Investors will be significantly disadvantaged if they need to withdraw funds during a Bitcoin downturn.
Regulatory risk
The majority of crypto currencies exist outside of the traditional regulatory environment. The lack of regulation and ability to hide transactions has meant that crypto currencies have and are being used by criminals to launder and transfer the proceeds of crime around the world. Some countries have banned their citizens from investing in or using crypto currencies as a result of these concerns. Some financial institutions refuse to interact with companies or individuals who operate in the crypto currency space due to Money Laundering concerns.
There is a risk that crypto currencies become subject to increased regulation or financial institutions refuse to process transactions that originate from crypto currencies. This will result in the value of cryptocurrencies falling due to investors being unable to convert their currencies into traditional currencies.
Network risk
The blockchains upon which crypto currencies sit are operated and maintained by individuals who are compensated through transaction fees and / or the issuance of new coins / tokens.
There is a risk that individuals are no longer sufficiently incentivised / rewarded to maintain their respective blockchains which will make it impossible to validate and verify transactions causing the network to disintegrate and subsequently causing the value of crypto currencies to fall.
Product displacement risk
Crypto currencies are currently in their infancy with the two largest crypto currencies Bitcoin and Ethereum being launched in 2009 and 2015 respectively. Both of these crypto currencies are leaders and early innovators in their space and have issues that can only be resolved through consensus agreement by holders of the respective coins (For example: Agreements to change underlying code or how transactions are processed).
There is a risk that new products are developed that are more efficient and deliver better utility than the current cryptocurrency offerings. If this happens the value of assets invested in by the fund are likely to fall because they would effectively be unable to keep up with the competition, eventually becoming obsolete e.g, like your landline or home phone - no need for it now that you have something that can do the same thing, only it can do a whole lot more than just making some calls.
Cyber security risk
Crypto currencies exist entirely on a distributed ledger (think records that are hosted and maintained by individual users rather than by a central body), there are no traditional records. There is a chance that cyber criminals disrupt the ledger (a place where users store private keys for crypto currencies), gain access to individual keys or expose other flaws. The exploitation of any flaws in the underlying blockchain technology may reduce confidence in the broader crypto currency market or may result in the assets held by the fund being stolen.
Impossible to recover assets if they are lost
Crypto currencies are registered on distributed ledgers and each coin or token is represented by an individual key. That key is used to identify the asset and transfer ownership between users. If a criminal manages to steal the individual key or that key is lost the crypto currency assets will be lost and there may be no way of recovering those assets.
Lack of market adoption
The value of crypto currencies is predicated on them becoming increasingly accepted and recognised as a store of value and / or currency that can be used for transactions. We are still very early into the life span and journey of crypto assets and therefore there is a chance that the current investment hypothesis does not prove correct and market adoption wanes rather than grows, reducing the demand for crypto currencies and the assets that the fund invests in.
Corruption of the blockchain
Crypto currencies are stored on a blockchain (a ledger that is maintained and validated by users rather than a central traditional spot). There is a chance that the blockchain or the source code that it relies upon may become corrupted or subject to cyber attacks. Any issues with the blockchain that the cryptocurrency is stored upon will end up impacting the value of the underlying cryptocurrencies.
Risk that the underlying fund that the Fund invests into does not perform as expected
The Kōura fund invests in a fund that is intended to mirror the performance of Bitcoin. There is a risk that the funds that we invest in do not accurately track the underlying performance of Bitcoin.
The Fund relies on underlying third party fund providers to be able to transact in and store their respective crypto currencies appropriately
Kōura relies on Fidelity (the issuer of the underlying fund) to transact in and store Bitcoin safely. Crypto currency exchanges have suffered significant cyber attacks and assets have been lost in the past. The ETFs that we purchase have taken steps to ensure that this does not happen but it is still possible. If a cyber attack occurs on the exchange or custody platform where the coins are stored then the value of the fund is likely to fall.
Choice and freedom, with Kōura
Low Fee
kōura's core funds are half the price of the average KiwiSaver growth fund - lower fees typically means more money for you.
You choose
We have nine funds - from traditional equities funds all the way to crypto currency - you make your own choices.
Ethical Investing
We all need to do our bit to ensure we live in a sustainable world. At kōura, we only invest in the things that we, and you, can be proud of.
On track
With traditional KiwiSaver schemes, you invest and hope for the best. But kōura’s smart technology looks out for you - and the road ahead.
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About Kōura
You’re unique and so are your KiwiSaver goals. So it makes sense that your KiwiSaver plan should be 100% personalised to you and your needs. And that, in a nutshell, is why we created the Kōura KiwiSaver Scheme and digital advice tool.
We opened our ‘digital doors’ in 2019 and today have over $30m funds under management. In our opinion , we’re New Zealand’s most personalised KiwiSaver scheme. We offer nine KiwiSaver funds, and partner with some of the best names in the business – Hobson Wealth for our New Zealand funds, Blackrock for our core international growth funds and Fidelity for our Cryptocurrency fund.
With low fees (almost half the industry average growth fund*), robust ethical and sustainable investment rules, exceptional digital advice tools, and unparalleled choice, Kōura was born to give Kiwis more control over their KiwiSaver plan: to save smart today for a better tomorrow.
*Source: Morningstar (Q4 2021 KiwiSaver Review)
The freedom to take control
We offer you the freedom to make your own investment choices. You can choose between our Core Growth Funds (different global equity exposures), our Core Income Funds (Fixed Income and Cash), or our Specialty Growth Funds (Clean Energy, Cryptocurrency, or Property).
You can pretend to be a regular Warren Buffet and build your own portfolio of funds, or you can let the Kōura digital tool do the heavy lifting for you - it's your choice.
Lower fees, so you have more
The more you pay in fees, the harder your KiwiSaver has to work to give you the retirement you expect.
At 0.63%, the Kōura core fund fees are half the industry average growth fund. For our specialty funds, the fees are still a paltry 1.1%. For a client that invests in all of our specialty funds, they will still only pay 0.67%**. And if you’re under 18, we’ll waive our membership fee to help get you started on your savings journey*.
*Fees exclude facilitator fees of 0.3% if you engage the services of a facilitator
**Based on a client taking the recommended allocation of 3% of a growth portfolio (8.1% in totality). If a client maximises their allocation to specialty funds (30% in totality) they will pay 0.77% of their balance as the annual fees.
Sustainable and ethical investments you can feel good about
We’re big believers in ESG (Environmental, Social, and Governance) investing, and take it into consideration all of our investment decisions.
We use a two-step process for choosing investments: First, we completely avoid the nastiest industries (and then we only pick the most sustainable and ethical of the remaining companies. What’s more, we also take into account companies' behaviours when choosing whether to invest.
We all need to do our bit to ensure we live in a sustainable world. We only invest in the things that we, and you, can be proud of.
Your savings, invested with the best
When you trust Kōura with your KiwiSaver savings, you’re also trusting some of the biggest and best names in the business. We invest our core international growth funds into BlackRock funds (the world’s largest fund managers) and we build our domestic funds with the assistance of Hobson Wealth (one of New Zealand’s largest wealth managers) and our crypto currency fund is built with Fidelity (the worlds fourth largest asset manager).
We work with the industry’s best, to deliver the best outcomes for you.