KiwiSaver loses $1b on negative returns - best and worst funds revealed

The total value of KiwiSaver slipped by $1.3 billion to $96.2b as most mixed funds booked negative returns in the September quarter.

Morningstar research showed most multi-sector KiwiSaver funds made returns of between -1 per cent in the conservative category and -4 per cent in aggressive, compared with positive returns across the board and as high as 7 per cent in the previous quarter.

That could mean slightly less to be earned in fees for providers, with their projected total annual fees falling 2 per cent to $761 million.

The worst-performing fund remained Kernel’s global clean energy fund, down 18 per cent in the quarter, while the best performer was the InvestNow Smartshares growth fund, up almost 3 per cent.

“Equity markets sold off in the September quarter as prospects for interest rates set in, which also saw a sharp repricing in bond markets.” Morningstar’s survey report said.

“These risks are being accentuated by geostrategic and geopolitical shifts.”

Morningstar said recent Middle Eastern tensions and higher oil prices were adding complexity to the required disinflation process.

“With the sticky inflation dynamic more embedded in interest-rate expectations, the outlook, particularly for risk-based assets, is becoming more challenging.”

Despite that, the allocation to riskier assets did not change in the three months to September.

The majority, 56 per cent, of KiwiSaver funds remained in growth assets, with the largest allocations in the September quarter held in international shares ($36.1b), cash and New Zealand bonds ($23.8b), international bonds ($18.2b) and New Zealand shares ($9.6b).

The total return on the New Zealand stock exchange Top 50 index was -5 per cent in the quarter, but positive by 2 per cent for the year.

Highlighting volatility in quarterly returns, Morningstar said it was best to assess returns over a 10-year period.

Over the past decade, the aggressive category has given investors an average annualised return of 8 per cent, followed by growth with 7.6 per cent, balanced with 6 per cent, moderate with 4 per cent and conservative with 3.9 per cent.

Most of the KiwiSaver pie, 68 per cent, was held by the top five providers.

ANZ has the leading market position, holding almost 20 per cent of funds, while Fisher Funds has bumped up to second with 15 per cent of the market after acquiring Kiwi Wealth.

ASB has now dropped to a close third, BT is the fourth-largest with 10 per cent market share, and Milford is fifth with 7 per cent of the market.