Happy with Ki­wisaver?

Central Leader - - NEWS -

Are you pleased with the re­turns you’ve got from your Ki­wiSaver fund?

While I would hope your an­swer is ‘yes’, I sus­pect a fair num­ber of you would say ‘‘Don’t know’’.

I’m not be­ing crit­i­cal. Life is busy and hav­ing a view on ev­ery as­pect of it is not al­ways easy.

Also fund man­agers have a ten­dency to be com­mer­cially savvy about the way they re­port their re­turns to you. That gen­er­ally doesn’t in­clude telling you the fund you chose is the third worst of its kind in the coun­try over the last three years.

So how do you know if your fund is per­form­ing the way it should?

By hav­ing some­thing mean­ing­ful to com­pare it to. For some that is house prices, for oth­ers cash. To me those bench­marks seem as silly as the ‘‘bench­marks’’ many fund man­agers try to con­vince us they are ge­niuses for beat­ing.

My view is that ac­tive fund man­agers, the kind who like to say they use their wit and in­tel­li­gence to buy only the best shares and bonds, as a group tend to un­der­per­form the mar­ket. As star fund man­ager Carmel Fisher told me a few weeks back: ‘‘It is hard to state cat­e­gor­i­cally one way or an­other be­cause some man­aged funds have out­per­formed over time and jus­ti­fied their fees, while oth­ers haven’t.’’

In one sense an ac­tive fund man­ager has no busi­ness charg­ing fees (and costs) un­less they beat the mar­kets, oth­er­wise peo­ple might as well buy a pas­sive fund.

But in an­other, we, as the pub­lic, need peo­ple to op­er­ate funds for us which ne­ces­si­tate fees (and costs).

Per­haps or­di­nary Kiwi savers need a new bot­tom line be­low against which to judge the suc­cess of their Ki­wiSaver fund.

I think we have it in the ASB Ki­wiSaver scheme funds.

It is a pas­sive scheme with lower fees than ac­tive Ki­wiSaver fund man­agers.

Gone is the cost of the fund man­ager us­ing his or her bril­liance to beat the mar­ket.

Broadly speak­ing, the ASB funds (and they are not the only pas­sive Ki­wiSaver funds on the mar­ket) in each sec­tor are the ones ac­tive fund man­agers should re­main in front of if their bril­liance is real rather than hype. So how have the ac­tive funds done in com­par­i­son to ASB’s? Take the bal­anced Ki­wiSaver fund sec­tor, the most pop­u­lar kind of di­ver­si­fied Ki­wiSaver fund.

Ac­cord­ing to Morn­ingstar data pub­lished in Sun­day Star-Times each week­end, the ASB bal­anced fund was ahead of eight other Ki­wiSaver funds over the five-year pe­riod to the end of June and be­hind five. The pic­ture was bet­ter in the growth fund sec­tor with the ASB Growth fund ahead of five over that time­frame and be­hind 11.

It’s no won­der Adrian Orr, the for­mer Re­serve Bank deputy gover­nor and man in charge of the gi­ant state-funded New Zealand Su­per Fund, has opted for a pas­sive Ki­wiSaver growth fund, sug­gest­ing he has lit­tle con­fi­dence in the way many ac­tive man­agers go about their busi­ness.

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