Miserable year as funds post losses
The panicky end to 2018 on global sharemarkets left six in 10 KiwiSaver funds posting losses.
In all, 61 of the 103 KiwiSaver funds tracked by research group Morningstar ended last year in negative territory, according to its latest quarterly KiwiSaver report.
‘‘International equities had gone through some squalls throughout 2018, particularly at the very start of the year when there had been heightened fears about the outlook for the global economy, but nothing compared with the sharp sell-off that occurred in the final quarter,’’ Morningstar’s Tim Murphy said.
Rises and falls in international sharemarkets are becoming more significant for New Zealand households as the total amount in KiwiSaver funds topped $50 billion at the end of 2018.
The only bright points in the year for KiwiSavers were when the New Zealand sharemarket delivered a positive return, and when the weakening of the United States dollar provided some insulation against falls in the value of US shares.
‘‘Despite a difficult year for many other equity markets, New Zealand shares delivered a positive return of 4.9 per cent and was one of the best-performing developed-economy equity markets last year,’’ Murphy said.
The falls in global share prices were prompted by investor concerns at the end of 2018 that global growth could be hit by a trade war between China and the US.
The MSCI World Index of developed markets ended 2018 with a 8.7 per cent overall loss.
Murphy said the kiwi’s decline against the greenback ‘‘was a mitigant . . . but the end result was still a loss of over 3 per cent in New Zealand dollar terms’’.
KiwiSavers are encouraged to invest in the kind of fund that suits their needs best, with the main choices being conservative, balanced and growth funds.
The average KiwiSaver growth fund delivered a loss during 2018 of 2.1 per cent. Only four growth funds, operated by Milford, Fisher Funds and Generate, delivered positive returns.
Of the 26 balanced funds that Morningstar tracks, 22 delivered negative returns.
All the conservative and cash KiwiSaver funds delivered positive returns.
Murphy cautioned KiwiSavers to judge their fund over longer time periods than a single year.
Milford’s KiwiSaver Active Growth fund topped the performance across all multi-sector categories over 10 years, he said.
Over the 10 years to the end of 2018, the KiwiSavers who received the lowest returns were those invested in cash funds.