Managed funds pool money from multiple investors to buy a diversified portfolio of assets — shares, bonds, property, and other investments. In New Zealand, most managed funds are PIE funds, giving them a significant tax advantage.
A managed fund pools your money with other investors — a fund manager invests it across many assets. NZ managed funds that are PIE funds tax investment returns at your Prescribed Investor Rate (PIR) — capped at 28% regardless of your marginal rate. This is the most important tax advantage in NZ investing. The best low-cost managed funds: Simplicity (0.10%), InvestNow Foundation Series (0.20%), Kernel (0.25%).
What Is a Managed Fund?
A managed fund (also called a collective investment scheme or unit trust) works like this:
- You invest money into the fund by buying units
- Your money is pooled with thousands of other investors
- A fund manager invests the pooled money across a portfolio of assets
- Your units increase or decrease in value based on the fund’s performance
- You can sell your units (redeem) at any time — typically within 2–5 business days
Why use a managed fund instead of buying shares directly?
- Instant diversification — even $1,000 invested in a managed fund gives you exposure to hundreds of companies
- Professional management — (passive or active) — you don’t need to pick stocks
- Lower transaction costs — the fund buys in bulk; you couldn’t buy 500 companies directly without huge brokerage
Active vs Passive Managed Funds
| Type | What the manager does | Fee | Expected performance |
|---|---|---|---|
| Passive (index) | Tracks a market index — holds same stocks in same proportions | 0.10–0.35% | Index return minus fee |
| Active | Manager picks stocks trying to beat the index | 0.80–1.50% | Varies; most underperform after fees |
Most evidence supports passive management for most investors over the long run. In NZ, low-cost passive managed funds (Simplicity, InvestNow Foundation Series, Kernel) are the dominant recommendation for individual investors.
→ See: Passive vs Active Investing NZ
The PIE Tax Advantage
Portfolio Investment Entity (PIE) is a NZ tax structure. Managed funds structured as PIEs:
- Tax income and gains at your Prescribed Investor Rate (PIR) — not your marginal rate
- PIR is capped at 28% regardless of your actual marginal rate
- This means high earners (33% or 39% marginal rate) save significantly on investment returns
Example:
- Marginal rate: 33%
- Investment return: $10,000
- Tax in non-PIE investment: $3,300
- Tax in PIE fund (28%): $2,800
- Saving: $500 per year on every $10,000 return
The PIE advantage compounds over decades and significantly benefits higher-income investors.
→ See: PIR Rate NZ — Full Guide
Types of NZ Managed Funds
By structure
| Structure | Tax | Access |
|---|---|---|
| PIE Unit Trust | PIR (max 28%) | Most common — Simplicity, InvestNow, Smartshares |
| KiwiSaver | PIR (max 28%) | Locked until 65 (limited exceptions) |
| Term deposit (managed) | PIR (max 28%) | Various term deposit PIE funds |
| Superannuation scheme | PIR (max 28%) | Less common for new investors |
By asset class
| Fund type | What it holds |
|---|---|
| Growth/equity funds | Primarily shares (NZ, global, or mix) |
| Balanced funds | Mix of shares and bonds (e.g., 60/40) |
| Conservative funds | Primarily bonds and cash |
| Bond funds | Government and corporate bonds |
| Property funds | Listed REITs, unlisted property |
| Cash/money market | Short-term instruments, near-cash |
Best Low-Cost Managed Funds in NZ (2026)
Simplicity
| Fund | Fee | Best for |
|---|---|---|
| Simplicity Growth Fund | 0.10% | Long-term investors, lowest fee |
| Simplicity Balanced Fund | 0.10% | Mid-term, 60/40 allocation |
| Simplicity Conservative Fund | 0.10% | Lower risk tolerance |
| Simplicity NZ Bond Fund | 0.10% | Fixed income only |
Minimum: $1,000. No platform fee. PIE structure.
InvestNow Foundation Series
| Fund | Fee | Best for |
|---|---|---|
| Foundation Series International Shares | 0.20% | Low-cost global equities |
| Foundation Series NZ Shares | 0.20% | NZ equities |
| Foundation Series Total World | 0.20% | Broadest global coverage |
| Foundation Series Global Fixed Income | 0.20% | International bonds |
Minimum: $250/fund. No platform fee. PIE structure. Over 100 funds total on InvestNow.
Kernel
| Fund | Fee | Best for |
|---|---|---|
| Kernel High Growth | 0.25% | Broad global mix |
| Kernel Global 100 | 0.25% | Large global companies |
| Kernel S&P 500 Fund | 0.25% | US exposure |
| Kernel NZ 20 Fund | 0.25% | Top NZ companies |
Minimum: $1 (no minimum). No platform fee. PIE structure. KiwiSaver also available.
How to Invest in a Managed Fund in NZ
- Choose a platform: Simplicity, InvestNow, or Kernel (all low-cost, no platform fee)
- Select your fund: Growth/balanced/conservative depending on risk tolerance and timeframe
- Open an account: Online, identity verification required (NZ driver licence or passport)
- Set your PIR: Provide your PIR rate to the fund — they use it to tax your returns correctly
- Fund your account: Bank transfer to the platform
- Set up auto-invest: Regular contributions (weekly, fortnightly, or monthly) for dollar-cost averaging
Managed Funds vs ETFs in NZ
| Feature | NZ Managed Fund (PIE) | NZ-listed ETF (Smartshares) | US-listed ETF |
|---|---|---|---|
| Fee | 0.10–0.35% | 0.20–0.54% | 0.03–0.20% |
| Buy/sell | Direct with provider | NZX during trading hours | US exchange trading hours |
| Minimum | $1–$1,000 | ~$100 (1 unit) | 1 share (~$400+ for VOO) |
| PIE tax | ✅ Yes | ✅ Yes | ❌ No |
| FIF tax above $50k | ❌ No (PIE) | ❌ No (NZX listed) | ✅ Yes |
| Auto-invest | ✅ Yes (most) | ❌ No | ❌ No |
| Intraday trading | ❌ No | ✅ Yes | ✅ Yes |
For most NZ buy-and-hold investors, managed funds (PIE structure) are more efficient than US-listed ETFs due to PIE tax and no FIF. Smartshares NZX-listed ETFs are a middle ground.
→ See: ETF vs Managed Fund NZ
Common Questions
Can I lose money in a managed fund? Yes. Managed funds that hold shares will fall in value when markets fall. A growth managed fund can fall 30–40% in a severe market downturn. Over long periods (10+ years), global equity managed funds have historically recovered and grown — but short-term losses are a normal part of investing.
Are managed funds safe? NZ managed funds are regulated by the Financial Markets Authority (FMA) and must publish a Product Disclosure Statement (PDS). Investor assets are held by a licensed supervisor (e.g., Public Trust) — separate from the fund manager. If the fund manager fails, your assets are protected.
How long should I invest in a managed fund? As a general rule: at least 5 years for balanced funds, 7+ years for growth funds. The longer the timeframe, the more time you have to recover from market downturns.