The latest data released for KiwiSaver performance as at September 30, 2012 is from Westpac.
Westpac offers a range of multi-manager diversified portfolios. Westpac's KiwiSaver scheme ranks third in terms of total funds under management (FUM) which is extraordinary considering they are not a default provider and therefore not guaranteed the same large regular cashflows.
In addition to the four main diversified strategies, Westpac had until recently also offered a series of capital protected products. We note these are no longer provided under the current investment statement and Westpac have advised they are no longer making these portfolios available to new money but will continue to manage existing member's funds.
The manager has elected to adopt a multi-manager approach within their strategies recognising other managers who are better at managing money than they are. Some money however is invested into their own funds management business (BT Funds Management) and this is mainly in local investments. Some of the external managers used by Westpac include: Franklin Templeton Investments, Standish Mellon Asset Management, Wellington International Management, AQR Capital, Lazard Asset Management, MFS Investment Management, Trilogy Global Advisors, Tradewinds Global Investors, Schroders Investment Management, Grosvenor Capital Management and PIMCO.
The funds themselves are your run of the mill diversified funds so we are struggling to see how Westpac is gaining market share, even ahead of many default providers. Examining the latest data it is clear that none of these Westpac KiwiSaver funds are market leaders from a performance perspective.
Looking at the last 5 years results the only fund which shows any resemblence of being a top performer is the Growth Fund (ranked 6th in the latest Morningstar survey). The Conservative and Balanced strategies are middle of the pack runners in their respective peer groups. The Cash fund return would have it languishing near the bottom of its sector too.
Over a 12-month period, the Conservative fund is near the bottom of its group, the Balanced fund ranks 17/23 (according to Morningstar), the Growth fund appears in the lower half of its sector and the Cash fund ranks 12/16.
Looking solely at the return data we conclude that it is not the performance that is driving the growth KiwiSavers into the Westpac funds.
Children who invest into Westpac's KiwiSaver scheme are not charged fees and this could be a contributing factor to its popularity but it certainly would not explain most of the funds flow. Other factors we consider may be responsible for driving the rapid growth are the sale skills of the frontline staff (that is, sales staff cross-selling to customers - the McDonald's "do you want fries with that" model); the levels of service being offered; and the attraction of being able to doing all your banking and investing under one roof.
Below is a table of the longer term performance of the Westpac funds. The return data is before tax and after fees and is as published by the managers. (No adjustments have been made to take into account those additional fees which scheme providers may charge and which are not included in calculating the fund performance. We do make such adjustments, but they will not be included until the full benchmarking is published.)
Westpac KiwiSaver Scheme
Since inception (1 Oct 2007) (p.a.)
* The fund manager does not publish five year returns yet so these have been calculated from unit price data.
More detailed performance reporting can be found here ».