“Morningstar captures all the data across the entire KiwiSaver ecosystem and is incredibly in-depth, showing who’s up and who’s down,” says Reidy.
“Every single multi-sector fund was down. The returns were negative for the three-month period, between -1 per cent and -5 per cent.”
The funds that performed better were generally on the conservative end of the investment profile.
“They had a bit more fixed income to buffer the equity losses,” says Reidy.
The more aggressive funds tended to have higher losses because they were more exposed to the equity market, which has proven incredibly volatile in the last year.
New Zealanders, particularly those on the younger side, have long been encouraged to shift their KiwiSaver to more aggressive funds given the gains that can be made long-term. But with the market now taking a turn, should more Kiwis be thinking about switching to more conservative funds?
“I’m not allowed to give [financial advice], but if you look over the past 10 years, aggressive funds are still absolutely giving investors a much higher return compared to a default conservative fund. Obviously, if you have the time to be in KiwiSaver, then you could be weighted towards more risky assets because the data [suggests] this pays off in the long run.”
Many fund managers point to the mistake made during Covid that saw some KiwiSaver members switch to conservative funds when account balances took a major hit.
“They went down by so much and all of these investors, especially KiwiSaver investors, freaked out because they looked at their balances and went: ‘Oh my gosh, my money has just been control-alt-deleted. I need to protect it’.
“So everyone moved into these cash funds, which are less risky... But what that did was effectively make those investors lock in their losses.”
These are all calculations that individual KiwiSaver members will have to make as they continue to go on this journey over the coming decades.
For more on KiwiSaver and what investors should be paying attention to, listen to the full episode of The Front Page podcast.
The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am. It is presented by Damien Venuto, an Auckland-based journalist with a background in business reporting who joined the Herald in 2017.
You can follow the podcast at iHeartRadio, Apple Podcasts, Spotify, or wherever you get your podcasts.
