KiwiSaver funds had a sound start to 2011, although the good performance was fading by March.
Mercer's KiwiSaver survey found that in the first three months of the year the median return among default funds was 1.6 per cent, while for the year to March it was 5.3 per cent.
For conservative funds the quarterly median return was 1.8 percent and the 12-month return 5.8 per cent.
The balanced fund median was 2.5 per cent for the quarter and 7 per cent for the year, while for growth funds the quarter was 3.8 per cent and the 12 months 7.7 per cent.
The best performing fund for the quarter was the Fidelity Life aggressive growth fund, which returned 5.6 per cent for the quarter.
Mercer New Zealand head Martin Lewington said funds were faring well given encouraging economic data and a robust corporate earnings season, but the upward movement was not without bumps during the quarter.
"Gains from January and February were given back in March as a result of investor nervousness around recent events in Japan and the Middle East and re-emerging concerns about Europe's sovereign debt crisis. Volatility is far from over, and could impact on returns in the upcoming quarter," Lewington said.
Volatility of investment returns might continue to be elevated in the short term, while in the medium to long term investors would have to face the challenge of investing in inflationary times.