KiwiSaver survey shows conservative funds winning out

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A Morningstar KiwiSaver survey shows default schemes have averaged annual returns of 4.56 per cent during the past three years.

Among the default schemes the Mercer Conservative fund has averaged a 5.18 per cent return a year since KiwiSaver was introduced in 2007.

Among the other default funds the ING Conservative fund on 5.12 per cent was next followed by the ASB Conservative on 4.7 per cent.

Just under 40 per cent of KiwiSaver assets are in the default funds.

Conservative funds that were selected by savers averaged 4.65 per cent.

See the survey results here.

Across all multi-sector options, Aon Russell Lifepoints Conservative topped the conservative table with average growth of 6.04 per cent, AMP Conservative was the top moderate fund on 5.26 per cent, Brook Balanced was the top balanced fund on 4.1 per cent, Fidelity Growth was top growth fund on 1.25 per cent and Brook Growth the top aggressive fund on 3.8 per cent.

The ASB fund is by far the largest with $741.4 million under management, almost twice that of the nearest rival, AXA Income Plus.

Westpac Conservative was the largest non-default KiwiSaver option with $323.30 million invested.

Morningstar said sharemarkets had rebounded from the lows of last year but had run out of steam for most of the year, only picking up in the last quarter. Fixed income by contrast has continued to deliver consistently strong returns, and has consistently outperformed equities over the past three years.

The return from global shares during the three years to September 30 was -7.46 per cent and the domestic sharemarket returned -9.37 per cent.

New Zealand fixed income, on the other hand, produced a return of 8.98 per cent, while international fixed income was up 10.28 per cent.

"This was good news for most KiwiSaver investors, who are still favouring more conservative options with higher allocations to income assets."

The outlook was mixed, and with yields and credit spreads under further pressure, it was another reminder of the dangers of "performance chasing" and the importance of maintaining a balanced exposure to multiple asset classes, Morningstar said.

THE SIX SCHEMES

Average annual returns of KiwiSaver default funds over three years:

* Mercer Conservative: 5.18 per cent
* ING Conservative: 5.12 per cent
* ASB Conservative: 4.7 per cent
* Tower Cash Enhanced: 4.61 per cent
* AXA Income Plus: 4.02 per cent
* AMP Default: 3.74 per cent