Kiwibank, New Zealand's state-owned bank, is expanding its wealth management business with the acquisition of fund management firm Gareth Morgan Investments. 

Financial details were not disclosed, but GMI currently manages some NZ$1.5 billion ($1.2 billion) in assets, of which NZ$650 million is linked with the KiwiSaver scheme, for around 7,500 customers. KiwiSaver is a voluntary savings plan wherein workers pay a portion of their salary into accounts that are locked until they turn 65 years old. Kiwibank launched its own KiwiSaver program in 2010 and now has around 15,000 clients.

Upon completion of the takeover, Gareth Morgan Investments will operate as a standalone entity under the Kiwibank wealth and insurance line of business. Gareth Morgan, founder of GMI, will remain a major client and a member of the investment strategy team. Both GMI principals Morgan and Andrew Gawith will remain directors of GMI alongside two Kiwibank-appointed directors yet to be named. 

Kiwibank was established in 2002 and has about 800,000 customers.

The KiwiSaver scheme saw a decline in new memberships in 2011, from an annual average of 1.97 per cent in 2010 to 1.23 per cent, owing mostly to increasing competition, a report by Tower Investments shows. Nevertheless, 2011 added some 250,000 new members, bringing the current total to 1.86 million from 1.6 million in the previous year.