Milford Asset Management and the Aon Russell Lifepoints aren't the cheapest or the biggest KiwiSaver providers, but they have generated the best performances over the past decade, Morningstar research shows.
The research house prefers long-term returns as the best measure for fund performance, with Milford's active growth fund the best across all categories over a 10-year horizon, with annual returns after fees of 13.8 per cent.
Of the fund's $1.1 billion of assets, some 42.1 per cent are held in New Zealand-domiciled assets and 70.5 per cent are in growth assets. Fees of 1.6 per cent are higher than the 1.27 per cent average.
Tim Murphy, Morningstar's Asia Pacific director of manager research, said Milford's fund initially focused on Australasian equities but has diversified over the past decade as it's grown.
"Performance has stacked up favourably against peers, the strong return has come from a bias to growth assets and exposure to Australasian credit," he said.
The other provider singled out for long-term performance was Aon Russell Lifepoints, which Murphy called one of the most consistent performers across all categories.
Aon Russell schemes were the best in the conservative, moderate, and balanced classes, with after-fees returns of 7.5 per cent, 8.2 per cent, and 8.9 per cent respectively.
Milford is the 10th biggest provider with $1.4b under management; Aon is 12th with $537.8 million.
At the other end of the scale, AMP has been one of the worst performing providers. Over a 10-year horizon it generated the lowest annual returns among conservative, moderate, balanced, growth, and aggressive classes. In all but the conservative option, its fees were above average.
AMP's assets under management still grew to $5.43b as at September 30 from $5.08b at the start of the year, although its market share shrank to 10.5 per cent from 12.1 per cent.
ANZ Bank New Zealand is the largest provider with $12.92b under management, or 24.9 per cent. Its after-fees returns beat the average in most classes, with the conservative scheme being the exception. Its fees were also cheaper than average in most classes, except for the conservative fund, which charged a higher average fee.
ASB Bank is the second biggest provider with $9.41b under management, or 18.2 per cent of the market. Its 10-year performances are largely middle-of-the-pack, although it offers the lowest fees among default providers, and among moderate and growth schemes. In balanced and conservative schemes, its fees are higher only than Simplicity.
Industry disruptor Simplicity was founded by former Tower Investments head Sam Stubs and is run as a not-for-profit. It pitches itself as a much cheaper alternative and talks up the benefits of passive investing. Since its launch in 2016, Simplicity has built $453.5m of assets under management, or 0.9 per cent of the market, ranking 13th in size out of 16 providers.
Meanwhile, in a separate report, fund manager AMP Capital noted the resilience of local equities due to the traditional dividend focus of NZX investors, which has helped attract yield-hungry, exchange-traded funds.
Head of investment Greg Fleming said steady inflows from KiwiSaver funds promoted bargain-hunting and also supported the local market. Rising interest rates may have a disproportionate impact on NZX-listed stocks, by undermining the attraction of those dividend yields, he said.
"The domestic market is expensive on traditional measures and has been seen as a suitable destination for global yield-seeking investors," he said. "Cuts to the dividends paid by major New Zealand corporations would only risk reinforcing the signal that critical fundamentals are changing."
New Zealand's benchmark S&P/NZX 50 index hit a record in the September quarter. The new quarter has seen heightened volatility across international financial markets as investors question the pace of global growth and as the world's major central banks start raising interest rates.
The NZX 50 is the best performing major index across Asia Pacific in the year-to-date, up 2.6 per cent, although Fleming doesn't expect New Zealand equities to keep outperforming their international peers over the next three years.