KiwiSaver returns pull back in March quarter

Conservative KiwiSaver funds plunged into the red during the March quarter. Photo / 123RF

KiwiSaver returns have pulled back in the first three months of this year but the amount of money invested in the retirement savings scheme continued to grow, closing in on $79 billion.

Research from Morningstar shows most conservative funds plunged into the red during the March quarter after bond yields rose, resulting in capital losses for many bond investments.

Conservative funds typically have the highest percentage in bond investments.

The average return for conservative funds was negative 0.6 per cent with the worst performing fund - Simplicity's conservative fund - falling 2 per cent over the quarter.

The top conservative fund for the quarter was the Pathfinder conservative fund which rose 0.6 per cent.

Balanced KiwiSaver funds averaged a rise of 1.4 per cent over the quarter, although the bottom performer, AMP's Income Generator fund, fell 1.2 per cent. AMP's ethical balanced fund topped the sector with a return of 3.7 per cent.

The average return for the growth sector was 2.4 per cent with the AMP Nikko AM Balanced fund the worst performer at negative 1.5 per cent. The top fund for the quarter was the Aon Milford fund which rose 5.9 per cent.

Tim Murphy, director of manager research at Morningstar Asia-Pacific, said KiwiSaver funds generally reflected the underlying market conditions.

"Funds with larger exposure to defensive and domestic growth assets generally struggled over the three-month period."

Bond index the Bloomberg Barclays Global Aggregate Index fell 3.8 per cent over the quarter while the S&P/NZX investment grade corporate bond index was down 1.9 per cent.

The NZX 50 index also fell 4.1 per cent over the quarter pulled down by energy stocks Meridian and Contact as well as well as a big drop from A2 Milk.

But Australian and global share investments fared better with the ASX200 up 4.3 per cent and the MSCI World Index up 4.9 per cent in US dollars and 7.9 per cent in New Zealand dollars.

Murphy said it was most appropriate for KiwiSaver investors to evaluate fund performance over the last 10 years.

The average return for conservative funds is 5.8 per cent a year with the Aon Russell Lifepoints 2015 fund and the Aon Lifepoints Conserve fund jointly topping the performance table with a return of 6.8 per cent.

Balanced funds averaged 8.2 per cent per annum over 10 years with the Milford Balanced fund topping the sector with a return of 10.8 per cent per annum.

The average return for the growth sector was 9.9 per cent per annum over 10 years with the top performer the Milford Active Growth fund with a return of 13.4 per cent per annum.

Total assets under management rose from $76.3b at the end of December to $78.8b.

ANZ remains the largest provider with $17.9b and a 22.7 per cent market share followed by ASB with 13.6b and 17.3 per cent.

Westpac is the third largest with $8.7b.