I first got to know Kernel Wealth existed when I signed up to and attended an insightful event, Money moves to make in your 30s and 40s in Feb 2020. The event was presented by Hatch and Kernel and featured Kristen Luman (Co-founder & GM at Hatch), Dean Anderson (Founder & CEO at Kernel), Darcy Ungaro (NZ Everyday Investor podcast host & Financial adviser), Tom Hartman (Managing Editor at Commission for Financial Capability) and hosted by Frances Cook (Cooking the Books podcast host, columnist for NZ Herald & author).
At that point in time, I had taken more of a keen interest in my (our) personal finance. It was time to get more proactive, to improve my money mindset and relationship with money. With this came increasing my financial literacy and capability which is all a work in progress.
What Dean had to share about his thoughts on money and investing piqued my interest in Kernel. I took a look at what Kernel had to offer and at the time, they had 3 local funds. I didn’t feel it was in my best interest to invest in any of them as I had just started investing in the Smartshares NZ Top 50 ETF (FNZ) through Sharesies. The justification behind my decision was the fund overlap and therefore a reduction in diversification.
They hinted towards launching new funds and in July 2020, they launched 3 global funds: The Kernel S&P Global 100 Fund, The Kernel S&P Global Dividend Aristocrats Fund, and The Kernel Global Infrastructure Fund. After reading through the Product Disclosure Statement and doing a bit of research, I settled on The Kernel Global Infrastructure Fund.
What is infrastructure?
The world population is coming close to the 7.8 billion mark and every one of us needs some sort of infrastructure to live our daily lives. The New Zealand Treasury refers to infrastructure as ‘fixed, long-lived structures that facilitate the production of goods and services, including transport, water, energy, social assets, and digital infrastructure such as our broadband and mobile networks’.
Kernel divis infrastructure out into 5 general sectors namely:
- Water – pipelines and treatment plants
- Energy – gas and electricity transmission, distribution and generation
- Transportation – toll roads, airports, seaports, rail
- Communication – broadcast, satellite and cable
- Social – hospitals, schools and prisons
NZ Treasury talks about access to adequate, fit for purpose infrastructure that can withstand the various pressures put on it by an ever-changing population. A fair proportion of it is ageing and needs renewal, replacement or something completely new. This requires a significant amount of investment over several years (for example, the Auckland City Rail link which is due in 2024 at a cost of $4.419 billion). This is something that is happening all over the world where businesses and governments are spending big on infrastructure.
Why invest in Kernel’s Global Infrastructure Fund?
The Kernel Global Infrastructure Fund tracks the Dow Jones Brookfield Global Infrastructure Index. It measures the performance of pure-play infrastructure companies from across the globe where at least 70% of their revenue is from infrastructure and at least 70% of cash flow is from those lines of business. At present (August 2021), it is made up of 106 constituents (companies) across 20 countries.
The top 5 countries that the fund invests in by weight are:
- United States 48.9%
- Canada 15.6%
- Spain 6.8%
- Great Britain 6.5%
- Hong Kong & China 5.5%
The top 5 Global Industry Classification Standard (GICS) weighting for the fund are:
- Oil & Gas transportation 22.9%
- Specialised REITs 19.8%
- Multi-Utilities 11.5%
- Gas Utilities 11.3%
- Electric Utilities 9.8%
The top five companies as a percentage of the fund’s net asset value are:
- American Tower 10.22% (USA)
- Crown Castle 6.64% (USA)
- Enbridge 6.48% (Canada)
- Vinci 4.13% (France)
- National Grid 3.90% (United Kingdom)
If investing in this sector was of interest to you, it would probably take you quite a bit of time and cost you a bit in fees and so on to buy shares in each of the companies in the index. Not to mention foreign exchange fees and tax implications (Foreign Investment Fund tax, withholding tax and tax treaty benefits) and so on and so forth.
With Kernel you don’t have to worry about any of that. You get access to a global fund with all transactions in New Zealand dollars. When it comes to tax, Kernel’s funds are registered portfolio investment entity (PIE) funds. This means that you will generally pay less tax (maximum rate of 28%) and they can take care of the tax obligations (so in most cases, no need to file a return). For more information on tax, visit A beginners guide to tax and investing.
A benefit of investing through Kernel is the relatively low cost. There are no transaction fees when buying units, and their fund management and member fees are set out as follows:
- 0.39% – Under $25,000 invested
- 0.29% – Over $25,000 invested
- $3 – monthly member fee (on total portfolio balances of over $1,000)
- $1 – minimum investment (low barrier to entry)
I invest via a weekly auto-invest (I get paid weekly) which is easy to set up. A weekly set autopay goes from my bank account to Kernel which is then auto-invested into the fund. This is a nice and easy set and forget setup that works well for me.
A quarterly distribution (dividends from companies in the funds) is paid out to investors. You can choose to either get a cash payment or have it automatically reinvested. I went with the automatic re-investment option and buy more units in the fund.
Diversification is something you will hear a number of industry experts talk about. As I was already invested in NZ, it made sense to look at options outside of NZ. With what was on offer, Global Infrastructure was the next logical step because of stability of the assets, long-term contracts (I’m in this for the long haul) and a hedge against inflation (generally do well in high inflation environments).
Kernel Global Infrastructure Fund performance
As at 24 August 2021 fund returns are as follows:
- 3 months – 6.14%
- Since inception (15 July 2020) – 10.26%
The index returns are as follows:
- 3 months – 6.35%
- 1 year – 13.31%
- 5 years – 8.46%
- 10 years – 11.85%
Given the global situation over the past year and a bit, there has been some fluctuation in the unit price. My guess is probably because a number of projects were put on hold due to COVID. But, the price has been generally trending upwards. Do keep in mind that all investing comes with risk. This particular fund has a rating of 5 (on a scale of 1 to 7 with 1 being lower risk and 7 being higher risk). 5 makes it a high-risk investment and generally speaking, higher risk could mean potentially higher returns.
Signing up to Kernel Wealth
Signing up is a quick and easy 5-minute process with the right information at hand (ID, IRD number, bank account details). After signing up I also got in touch with Kernel about setting up accounts for my kids. They were very responsive to my messages and even though they didn’t have (and still don’t) kids accounts, they came up with possible workarounds.
If you are looking to start investing or if you already are and are looking to diversify your portfolio, take a look at what Kernel Wealth has to offer.
Disclaimer: Please do not take this as investment advice. I am not a financial adviser and this is simply a chronicle of my personal finance journey. Please do your own research and if need be, engage the services of an authorised financial adviser.
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