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How does Kernel hold the S&P 500 (NZD Hedged) Fund?

Lovelyn avatar
Written by Lovelyn
Updated over 10 months ago

We structure all our funds to be optimised for the NZ resident investor, including tax. For the S&P 500 (NZD Hedged) Fund, we use a US-domiciled ETF. This is because as a US-domiciled fund holding only US securities, there is no tax leakage, and all foreign tax credits can be captured. See page 7 of the international tax guide for full details.

Investing directly with Vanguard

For those thinking of going direct, remember being a New Zealand Portfolio Investment Entity (PIE), the obligatory and annoying FIF tax is capped at 28%.

So for those on RWT rates of 33% or 39%, it means 0.25% or 0.55% per annum less tax and therefore after-tax return for the investor, which more than covers any difference in the management fee.

For all investors and those thinking de-minimis (the $50k threshold many seem over-obsessed with), there are still alternative costs and inefficiencies to consider.

The Kernel S&P 500 (NZD Hedged) is currency hedged

Currency hedging is designed to minimise the impact of NZD/USD currency fluctuations. Whether currency hedging is attractive is up to you. But your return should be much closer to that published for the S&P 500 in New Zealand and international media (always quoted in USD), but for you in New Zealand dollars.

We offer also an unhedged version of this fund - Kernel S&P 500 (Unhedged) Fund.

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