The Managed Fund takes away the manual aspect of investing and will invest on its investor’s behalf into a blend of all three of Squirrels investment classes, providing a currently projected return of 4.50% after fees and before tax. These returns will get paid to investors each month.
We recognise that investing through our online platform works well for many people, while others want a more hands off approach. That’s where the Managed Fund comes in. We manage the investment while you watch the returns come through. Additionally, for some investors there may be after tax benefits from the PIE tax regime rather than paying Resident Withholding Tax. More on the tax element below.
The benchmark return is the Official Cash Rate + 4.00%. You can read the Product Disclosure Statement for all the nitty gritty details here.
The Fund has been built with Implemented Investment Solutions. They’re expert Fund Hosts whose experience we’ve leveraged to create the Fund. They also own the InvestNow investment platform, which for now is the best way to access the Fund.
You can register with InvestNow here.
With the Squirrel Monthly Income Fund, you simply invest your money and receive a distribution (that’s the official term for your return) once each month. You can choose to have your distribution reinvested or paid directly into your bank account, removing the hassle of keeping an eye on your On-Call account to make sure your funds are always invested.
You can also add new money whenever you like and withdraw your investment with 30 days notice.
Squirrel’s Monthly Income Fund has a fee of 0.65% including GST. This fee covers our overheads for providing a managed fund and the fee is simply deducted from your returns each month.
Investing directly into Squirrel’s investment classes remains completely fee free.
Note that Squirrel continues to earn its Platform Service Margin in the same way it does for P2P investments.
The Squirrel Monthly Income Fund applies Portfolio Investment Entity (PIE) tax to your returns. The PIE tax rates could be lower than investors Resident Withholding Tax rates, particularly for higher income earners and may see your after-tax returns improve.
The top tax rate for a PIE based Fund is 28% compared with many investors being on a 33% RWT and some on 39% RWT. The best place to find information about what PIE and RWT rates apply for you is the IRD website. If you’re investing across a blend of Squirrel investment classes already, there might be a tax benefit from using the Fund.
The Squirrel Monthly Income Fund will invest alongside our direct peer-to-peer investors to begin with. That means that the Fund’s investments will have the support of the relevant reserve funds, just like any other investor.
As the Funds grow, they will be big enough to take credit risk in their own right. This means that in some situations the Fund may invest in a first mortgage-backed loan without the support of a reserve fund, increasing risk and potentially increasing returns.