Wide disparity in KiwiSaver performance

AUCKLAND: The performance of the top and bottom KiwiSaver funds showed wide disparity last year, a year in which sharemarkets plunged in March before bouncing back to hit record highs.

The top KiwiSaver fund rose more than 30% in 2020, but the worst was down over 25%, figures from research and ratings firm Morningstar show.

Nikko Asset Management’s KiwiSaver option scheme fell 25.9% over the year — fortunately it only had $700,000 invested in it.

On the other hand, the Juno growth fund rose a startling 30.4% over the year to December 31.

It had 89.6% of its funds invested in growth assets (shares and property) — the highest level for all diversified growth funds monitored by Morningstar.

Its performance was well above the average return for growth KiwiSaver funds of 10.7%.

Tim Murphy, director of manager research, AsiaPacific at Morningstar, said it all came down to what the underlying investments of the funds were.

‘‘In Juno’s case they had heavy exposure to US growth companies and that was more or less the bestperforming sector in all of last year. Their far higher allocation to that led to outperformance of equivalent funds last year.

‘‘On the flipside of that, Nikko . . . had an offshore strategy that went horribly wrong, looking at the performance profile in the Covid period of FebruaryMarch last year.’’

Mr Murphy said a 30% return was unusual.

Many KiwiSaver funds, particularly those in the growth category — which means they have more money invested in shares and property — had doubledigit returns in 2020.

‘‘It was a strong year for most KiwiSaver investors looking at where the bulk of the money is.’’

Mr Murphy warned investors not to expect a repeat of that any time soon.

‘‘You shouldn’t expect doubledigit returns to happen too often through the cycle,’’ he said.

Investors are advised against chasing KiwiSaver funds based solely on returns, as past performance does not guarantee future performance.

Performance data should be looked at over as long a timeframe as possible.

One factor that had stood out in the KiwiSaver numbers for 2020 was that a poor year economically did not mean there would be bad investment returns, he said.

‘‘They are obviously two very different things and people often confuse the two — there has been no better example than 2020 on that front.

‘‘It was one of the worst years on record if you look at economic data points globally, but one of the best for investments despite a very sharp drawdown in February and March.’’

KiwiSaver investors who stuck out the market turmoil and stayed in the right fund for them had been rewarded, he said.

Over the year, the topperforming fund for the balanced category was also a Juno fund, which was up 20.9% compared with the average for the sector of 8.8%. The Simplicity conservative fund was top in the conservative category, up 8% over the year compared with the average of 6.1%.

— The New Zealand Herald