Smartshares are able to keep their costs down because active investment decisions requiring research and analysis are not being made. Plus, trading only occurs to rebalance Smartshares shareholdings to match the weighting of each company's shares in the index. There are still some costs involved such as registry, trustee and exchange trading fees when the fund is rebalanced, but these are covered by the manager - Smartshares Limited.

The only annual fee investors pay is the management fee and this is taken out of dividend distributions. A normal brokerage fee is payable when you buy Smartshares funds through an NZX Advisor, or a small application fee of $30.00 for amounts up to $19,999 or 0.20% for amounts of $20,000 or more when you purchase direct from Smartshares.

By contrast, actively managed funds, where the manager makes constant investment decisions in an attempt to outperform an index, incur much higher costs. This is because they require a lot of input from a team of managers and analysts. Typically, actively managed funds will charge an annual management fee, entry fee (up to 5% in some existing New Zealand funds), trustee fee and sometimes an exit fee which together can be up to three times higher than Smartshares fees.