KiwiSaver returns hit milestone
Not one of the KiwiSaver funds that has passed its first decade lost investors money over that period, according to a Morningstar report.
The latest quarterly KiwiSaver fund report, which is designed to help investors compare their provider’s performance with others, marks the first time Morningstar has published the report including 10-year returns.
Over the decade to the end of September, the average default KiwiSaver fund has delivered annual returns of 5.4 per cent.
The average balanced KiwiSaver fund achieved returns of 5.9 per cent, while the average growth KiwiSaver fund did 6.7 per cent.
Backed by a decade of largely rising sharemarkets, KiwiSaver has grown to hold more than $43 billion of retirement savings. The money is amassed from contributions from savers and their employers, government ‘‘member tax credit’’ incentives, and returns from assets.
There have been wobbles, however. Morningstar’s director of manager research ratings, Chris Douglas, said shares had delivered reasonable returns during the third quarter of this year, from July 1 to September 30, though markets had dipped temporarily over fears nuclear conflict could break out on the Korean peninsula.
‘‘After some nervousness in August, principally caused by the geopolitical tensions around North Korea, world shares have recovered in September,’’ he said.
‘‘Closer to home, New Zealand shares were relatively resilient to the North Korean anxieties that held back global equity markets, but on the other hand, domestic political uncertainty held back local performance in September.’’
Noting the growing number of KiwiSaver funds with 10-year or longer track records, Douglas said judging KiwiSaver schemes’ performance over longer periods was ‘‘most appropriate’’.
‘‘Milford Active Growth KiwiSaver tops the performance across all multi-sector categories over 10 years. This approach started off with a much greater bias to Australasian equities, but has become more diversified as it has grown.’’
Fisher Funds KiwiSaver Growth and ANZ KiwiSaver were also notable performers, he said.
Not every fund had a great year. Five funds delivered losses to investors in the 12 months to the end of September: AMP Property (-0.3 per cent); OneAnswer Australasian Property (-1.4 per cent); OneAnswer International Property (-0.8 per cent); OneAnswer Fixed Interest (-1.3 per cent); and Booster Options (-1.3 per cent).
There remained the persistent concern that many people could get better returns if they shifted out of the giant conservative default funds into higher-risk balanced or growth funds, Douglas said.
‘‘Default funds make up around 20 per cent of all assets on our database and by design, investors are getting a cash-like return from these products. We think they could be missing out.’’