KiwiSaver funds rise despite weak NZ sharemarket

KiwiSaver funds with a higher investment in international shares did well in 2021. Photo / NZME

KiwiSaver funds with a higher exposure to international shares had the strongest performance in the last quarter of 2021 as the New Zealand share market had a weak end to the year.

Tim Murphy, director of manager selection Asia-Pacific with Morningstar, said that at the end of the December quarter, international shares made strong gains with a return of 8.6 per cent and were up 28.1 per cent over the year in New Zealand dollar terms.

"World equity markets continue to be optimistic about the global economy despite the arrival of the Omicron variant impacting businesses via worker shortages and increasing supply chain disruptions."

But New Zealand shares missed out, falling 1.8 per cent over the quarter and 0.4 per cent over the year, heavily influenced by large losses in some of the top 10 stocks like a2 Milk and Meridian.

Murphy said KiwiSaver funds generally reflected the resilient underlying market conditions experienced over the December quarter, with the majority of multisector funds experiencing a return of greater than 1 per cent.

"Funds with larger exposures to international growth assets generally outperformed over the three-month period."

The average returns for funds in multisector categories ranged from 0.7 per cent for the conservative category to 4 per cent for the aggressive category over the quarter.

Top performers over the quarter were the ANZ Default Conservative fund which returned 1.5 per cent in the conservative category, the ASB Positive Impact fund which rose 4.1 per cent in the balanced category and Pathfinder Growth, which was up 5.1 per cent, topping the growth category.

But Murphy said it was most appropriate for investors to evaluate the performance of their KiwiSaver fund over the longer term.

Over 10 years the aggressive category has had the highest average return at 11.6 per cent per annum, followed by the growth category at 11.3 per cent per annum. The average return for funds in the balanced category has been 9.1 per cent and conservative 5.8 per cent per annum.

Over 10 years the Aon Russell Lifepoints 2015 fund is the top performer for the conservative category up an average of 6.9 per cent per annum. The Milford Balanced fund tops the balanced category with a return of 11.9 per cent per annum and in the growth category the Milford Active Growth fund is top with an average of 14.6 per cent per annum.

Total KiwiSaver assets on Morningstar's research database rose from $77.3 billion in December 2020 to $88.9b at the end of 2021 across the 21 providers it analyses data from.

ANZ remains the largest provider with $19.28b, although its market share fell from 22.7 per cent to 21.7 per cent over the year.

The second-largest provider, ASB which manages $14.5b, also saw its market share fall from 17.3 per cent to 16.3 per cent.

Westpac is third-largest with $9.2b and saw its market share fall from 11 per cent to 10.3 per cent.

AMP, BNZ, FAANZ, Mercer, Nikko AM and Smartshares all saw their rankings fall in 2021 while Aon, Booster, Juno, Kiwi Wealth, Medical Funds Management and Simplicity have seen a rise in their ranking.

In early December last year around 230,000 KiwiSaver members changed schemes as five providers - ANZ, ASB, AMP, Fisher Funds and Mercer - lost their default provider status.

Members and their assets have been transferred to reappointed providers - BNZ, Booster, BT Funds Management (Westpac) and Kiwi Wealth, and newly appointed providers Simplicity and Smartshares (NZX).

Investors' money has also been invested in balanced funds now rather than conservative.

AMP Wealth Management NZ reported today as part of its annual result that it had seen a net outflow of $700 million in the second half of 2021 as a result of losing the default mandate.

The company said in a statement that it remained a substantial participant in the overall KiwiSaver market with $6.1b in assets under management.

AMP Wealth, which is part of ASX-listed AMP, made a net profit after tax of $42m, up 11 per cent on 2020.

Blair Vernon, chief executive of AMP Wealth Management New Zealand, said it was a solid result amid a challenging year for many Kiwis and businesses against the backdrop of the impacts of Covid-19.

Its total assets under management fell $400m to $12.9b with total net outflows of $1.1b.

Controllable costs of $38m were down 5 per cent due to lower employment and IT costs as the business continued to simplify and transform its operating model, as well as lower property costs due to a reduction in its office footprint.

"Looking ahead we will continue to innovate our business including further enhancing and
simplifying our products and services to deliver more value for clients.

"In the first half of the year this includes our intention to deliver a new digital-only managed fund product, leveraging our state-of-the-art technology and our sustainable investment approach to help our clients continue to grow their investments," Vernon said.