Passive popular but with Kiwi investors should do more
Index investing is undoubtedly become popular but New Zealand investors are along way behind other countries.
Wednesday, June 10th 2026, 6:00AM
S&P Dow Jones Indices APAC Head of Index Investment Strategy Sue Lee, speaking at the recent Kernel conferences, said Exchange Traded Funds (ETFs) had seen significant growth in other markets over the past five years.
For instance ETF funds under management globally had grown at a 20% Compound Annual Growth Rate (CAGR) in the five years to December 2025.
Across the Tasman Australian ETF CAGR growth has been 33%, while in New Zealand it sits at 4%.
"New Zealand is actually at one extreme where passive adoption is very slow."
In New Zealand there is only one pure ETF provider, Smart, however many managers offer index investing solutions.
Lee says there has been a massive shift from active to passive in US equities with passive seeing a net inflow of US$2.9 trillion since 2016. On the flip side there has been a net US$2.8 trillion outflow from active managers.
Lee says index funds and ETFs make up 52% of the US fund market.
There is no definitive data on how much Kiwis invest into index strategies, but many managers use indices.
However, it is unlikely 52% of the New Zealand funds market is invested in index funds and ETFs.
Lee says the evidence is clear that passive outperforms active and more education is need to help investors and advisers understand the performance difference.
She is also critical of New Zealand active managers.
In 2025 the New Zealand market environment was unusually favourable for active managers, with 63% of NZX50 stocks outperforming the index - the highest probability in 10 years - yet 65% of domestic equity funds still underperformed.
The one bright side is the New Zealand bond funds had better outperformance over passive compared to equities.
Lee says the average management fee for KiwiSaver is 81 basis points delivering around $1.1 billion to managers. That would come down if more members used passive strategies, she says.
“That will benefit end investors.”
Note: All in the dollar amounts are in USD. In the local currency, New Zealand's ETF AUM has grown at 9% . Data source: ETFGI.
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