I recently looked at my latest KiwiSaver update. I am with a provider (in an active growth fund) that has won a few awards and consistently advertises that it has the best long-term returns.

As part of this update, it provides returns across a raft of time periods as well as comparisons with key indexes.

Interestingly, the S&P/NZX 50 Gross Index has outperformed this fund in the short and long term. Is this surprising?

Given my KiwiSaver provider has consistently received awards for its performance, I am surprised and disappointed that most funds would be delivering less than an index fund.

It's great — at least in principle — to see KiwiSaver providers showing their investors how well they have performed compared to an index.

In active growth funds like yours, the managers choose which investments to buy and sell. Comparison with an index tells you whether your fund grew or fell because of the managers' decisions or whether it was just because the whole sharemarket rose or fell.

But your letter raises an important issue. Is the right index — in this case one that measures how well the biggest 50 New Zealand shares have performed — being used?


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