Happy with Kiwisaver?
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.