KiwiSaver funds operated by AMP, the country's fourth largest provider of the retirement savings plans, have under-performed over a 10-year period relative to their peers, irrespective of whether savers are choosing conservative or high-risk investment approaches.
The December quarter KiwiSaver Survey from research house Morningstar shows that anyone who has had their KiwiSaver savings with AMP over the last decade has received lower than average returns compared to competitors.
AMP was early to the market as a provider for KiwiSaver, which was established in 2007 as a long term savings scheme to augment retirement savings, with employers matching employees' contributions. Its customers have an average balance of $26,202 in their KiwiSaver schemes, compared with an industry average of $21,827.
AMP now has $5.9 billion of assets under management and is the fourth largest KiwiSaver provider, with just six providers controlling around 80 per cent of the $63.5b of funds under management at the end of December. ANZ has 24 per cent of the market, ASB 18.3 per cent, Westpac 11.4 per cent, AMP 9.3 per cent , Fisher Funds 8.5 per cent and KiwiBank's Kiwi Wealth 7.5 per cent.
Investors seeking the best long term investments are encouraged to higher risk investment classes because historical experience shows that higher risk investments, while more volatile on a year-to-year basis, tend to offer the highest returns over time. Reflecting this, some 37.6 per cent of all KiwiSaver funds are invested in either 'growth' or 'aggressive' funds.
AMP's default, conservative, moderate, balanced, growth and aggressive funds all showed lower returns after fees and before tax than the industry average over the 10 years to December 2019.
The performance of the default fund - a low-growth, conservative option used for savers who fail to make a choice of where to put their money - earned a 5 per cent return over 10 years, compared with an industry average of 5.7 per cent. The same default fund is also the only AMP offering with a 10-year history among the funds offering a 'conservative' investment strategy, where the industry annual average return over 10 years was 6.1 per cent.
Among 'moderate' risk investment funds, as defined by Morningstar, the industry annual average return was 6.5 per cent over 10 years, while AMP's LS Conservative and LS Moderate funds earned 5.2 per cent and 5.9 per cent respectively.
In the 'balanced' category, where savers are willing to take a little more risk, the industry average annual return over the decade was 8.1 per cent. The AMP Mercer Balanced, AMP LS Balanced and AMP LS Moderate Balanced funds returned an average annual 7.5 per cent, 7.1 per cent and 6.4 per cent respectively.
Among 'growth' funds, where higher long term returns are the goal, the AMP ANZ Balanced Plus fund returned an average 9.1 per cent a year over the decade, AMP Nikko AM Balanced returned 8.4 per cent, and the AMP LS Growth fund returned 8 per cent - all below the 9.8 per cent industry average annual return over the decade.
In the most risky category of funds, dubbed 'aggressive', there are only four funds that have offered options for a full decade. They returned an annual average 9 per cent. AMP's LS Aggressive fund returned an average 8.5 per cent annually over the same period.
With respect to fees, which typically attract most focus because they're one of the few controllable elements for investors. AMP compares favourably to its default and conservative peers. However, they were mostly above average in other categories.
In a statement to BusinessDesk, AMP acknowledged its relatively poor long term returns, saying "performance over the longer term is improving as a result of changes made to the investment approach for AMP Capital managed funds in 2015" and pointed to its funds making returns "in line with the market over a one and three year period."
Its default fund and AMP ASB Balanced funds were also the top performers over the most recent quarter - the measure most commonly noted when the regular Morningstar reviews appear.
Meanwhile, AMP continues to seek a buyer for its wealth management business, which includes the firm's KiwiSaver funds, which was placed on the market for sale last August.
That move was billed as the next logical step in a process that has seen the insurance and financial services provider attempt to exit its 170 years-plus in the Australian and New Zealand life insurance markets through a sale to Bermuda-based Resolution Life.
However, that deal stalled last July when the Reserve Bank of New Zealand required Resolution to ring-fence the New Zealand assets, which Resolution declined.
AMP said at the time that the RBNZ refusal of the original deal was "exceedingly disappointing" and it came up with a revised deal at a lower price.