KiwiSaver funds across the board showed "impressive" returns in the six months to June 30, research firm Morningstar says in its quarterly review of KiwiSaver funds performance and growth, boosted by higher returns from foreign shares and property caused by a 2 per cent fall in the value of the New Zealand dollar over that period.

"Virtually all asset classes posted positive returns during the quarter, with Australian equities and listed property and infrastructure the place to be," said Morningstar director of manager research ratings, Chris Douglas.

Global shares, where the MSCI World Index made a modest 1.3 per cent gain over the three months, posted a 5.5 per cent gain when translated to New Zealand dollars.

Australian equities showed an 11.3 per cent return over the same period, while New Zealand commercial property gained as fears of higher interest rates dissipated.


Offshore commercial property showed a "very strong" 12.9 per cent return in NZ dollars over the quarter. The kiwi fell 2 per cent in trade-weighted terms over the quarter and from US71 cents to US67.8 cents, reflecting US dollar strength, and 6.2 per cent depreciation against the Japanese yen.

Across the whole KiwiSaver market, some 5.5 per cent of funds are invested in Australian shares, 1.4 per cent in international listed property, 29.4 per cent in international shares, and 18.4 per cent in international bonds. New Zealand cash, bonds and shares make up 44.4 per cent of the total funds employed.

The scheme celebrated 10 years in operation last year and funds under management at June 30 stood at $48.766 billion, from $45.819b last December and $36.735b in December 2016.

The now-available 10-year performance statistics show a significant gap between Australian-owned AMP, the fourth largest KiwiSaver provider with $5.219b under management, and the relatively strong performance by ANZ KiwiSaver funds, also owned from Australia, which dominate the market share at $12.267b of funds under management.

No ANZ fund, bar one relatively small growth fund, returned below its category average on a 10 year comparison basis, while no AMP fund in any category bettered its category average on a 10 year basis. ANZ KiwiSaver "has been a notable performer," said Morningstar.

Of all funds, Morningstar said: "Milford Active Growth KiwiSaver tops the performance across all multi-sector categories over 10 years," with the fund delivering a 13.4 per cent return over the last decade against a sector average annual return of 8.4 per cent.

It also singled out Aon Russell Lifepoints as "one of the most consistent KiwiSaver performers across all multi-sector categories over the long term. Most of their options appear at or near the top of our multi-sector categories."

On a long term return basis, the results found 'growth' funds, where risk appetite is high, did better over 10 years than even more risk-tolerant 'aggressive' funds. The 10 year average annual return from aggressive funds was 8.4 per cent, compared to 6.7 per cent for aggressive portfolios. For the quarter under review, returns across the categories ranged from 13.1 per cent for aggressive portfolios to 4.73 per cent for conservative funds.

Investment theory says that more aggressive, risky investments will deliver higher returns over the very long term, even if returns are volatile in the short term, whereas more conservative funds earn less but are more stable.

The Morningstar tables show the lion's share of funds being invested with low-fees KiwiSaver newcomer Simplicity is going into its aggressive fund, where some $278.8 million is under management, with $70.5m in a balanced portfolio and just 19.5 million in the Simplicity conservative fund. It does not offer 'moderate' or 'growth' options and has taken 0.8 per cent market share to rank 13th of the 16 KiwiSaver providers by funds size.