Our comprehensive review of Conservative KiwiSaver fund performance to June 30, 2017, identifying who has the best long-term returns

By David Chaston

If you are in a Conservative KiwiSaver fund, you have clearly made a choice to prioritise low risk, even lower than for the Default funds. (We reviewed the Default fund performances here.)

Low risk as a priority can be important if you cannot tolerate your fund balance decreasing due to financial market volatility.

Often that is important if you are contemplating needing the value for retirement living expenses soon. Or you have a view that the future may not be positive.

But, at this end of the risk spectrum, you need to be sure that keeping your retirement savings in these types of vehicles is better than in a bank term deposit (or a guaranteed Kiwi Bond deposit). Here are how these Conservative KiwiSaver funds have performed since inception, and over the last three years:

Conservative Funds
 
 
 
Cumulative$
contributions
(EE,ER,Govt)
=+Cum net gains
after all tax,fees
Effective*
cum return
=Ending Value
in your account
Effective
last 3yr
return%p.a.
Since April 2008
X
Y
Z
to June 2017
 
 
 
$
%p.a.
$
                 
Kiwi Wealth Conservative C C C 28,260 5,364 3.8 33,624 3.6
ANZ OneAnswer New Zealand Fixed Interest C C FI 28,260 4,613 3.3 32,873 3.3
ANZ OneAnswer International Fixed Interest C C FI 28,260 4,425 3.2 32,685 2.9
Lifestages Capital Stable C C C 28,260 4,411 3.2 32,670 3.2
Fisher Funds Two Preservation C D Ca 28,260 2,617 2.0 30,877 1.9
Mercer Cash C D Ca 28,260 2,569 1.9 30,828 1.9
ANZ Default Cash C D Ca 28,260 2,496 1.9 30,755 1.9
Westpac Cash C D Ca 28,260 2,460 1.9 30,719 1.9
Booster Enhanced Income C D C 28,260 2,453 1.9 30,712 1.7
Aon Nikko AM NZ Cash C D Ca 28,260 2,447 1.9 30,707 1.8
ANZ OneAnswer Cash C D Ca 28,260 2,418 1.8 30,678 1.9
ASB NZ Cash C D Ca 28,260 2,404 1.8 30,664 1.9
AMP Cash C D Ca 28,260 2,222 1.7 30,482 1.6
Aon ANZ Default Cash C D Ca 28,260 1,986 1.5 30,246 1.5
                 
ANZ Cash C D Ca 27,391 2,338 1.9 29,729 2.0
Quaystreet Fixed Interest C D Ca 24,057 2,358 2.5 26,415 2.9
Milford Conservative C C C 16,487 2,808 6.4 19,295 5.7
Kiwi Wealth Cash Plus Fund C D Ca 17,217 932 2.1 18,149 2.2
Kiwi Wealth Cash Fund C D Ca 16,684 791 1.9 17,474 2.0
BNZ Cash C D Ca 15,702 632 1.7 16,333 1.8
Booster KiwiSaver AC Conservative C B M 10,958 649 3.6 11,607 ...
Booster KiwiSaver Capital Guaranteed C D Mi 10,958 225 1.3 11,183 ...
                 
---------------                
Column X is interest.co.nz definition, column Y is Sorted's definition, column Z is Morningstar's definition
C = Conservative, D = Defensive, Ca = Cash, FI = Fixed Income, M = Moderate, Mi = Miscellaneous Booster was previously known as Grosvenor

You have to conclude that most of these are not very good if you use the "bank term deposit" benchmark. Those returned an average of 3.3% gross, or after-tax 2.7%.

And the main reason is that fees are paid on any managed fund, whereas they are not charged for a straight bank deposit. Paying someone to 'manage' a cash fund that returns anything less than that is hard to fathom - and that applies to all but about half a dozen of the funds listed above.

Further, you might also want to know where these fund managers have invested your KiwiSaver monies. These details are set out in each of our fund pages, and here is a summary:

Conservative Funds
------ how allocated, approx. ------
at June 2017
Cash
NZ fixed
income
Intl fixed
income
Equities Property Other
  % % % % % %
Kiwi Wealth Conservative 12 19 53 15   1
ANZ OneAnswer New Zealand Fixed Interest   100        
ANZ OneAnswer International Fixed Interest     100      
Lifestages Capital Stable 65   15 20    
Fisher Funds Two Preservation 35 65        
Mercer Cash 100          
ANZ Default Cash 100          
Westpac Cash 100          
Booster Enhanced Income 3.5 96.5        
Aon Nikko AM NZ Cash 100          
ANZ OneAnswer Cash 100          
ASB NZ Cash 100          
AMP Cash 100          
Aon ANZ Default Cash 100          
             
ANZ Cash 100          
Quaystreet Fixed Interest 10 59 31      
Milford Conservative 11 28.5 46.5 9 5  
Kiwi Wealth Cash Plus Fund 65 10.5 24.5      
Kiwi Wealth Cash Fund 100          
BNZ Cash 100          
Booster KiwiSaver AC Conservative 2   61 27.5 6  
Booster KiwiSaver Capital Guaranteed 52 41 1 6    

That list shows why you need to do some homework on them. Just relying on their 'name' or their risk class may not reveal where the manager has the fund allocated. There is a surprisingly wide variety.

I accept that the 10 year track record of any fund is not a certain basis for forecasting what it will be in the future. But a track record is not something that should be ignored either.

Now, compare that with the Default funds.

Only you can decide your tolerance for risk. Nothing in life is truly risk-free, so understanding it better can help you target where you have your KiwiSaver invested. And a qualified professional adviser can help with that too.

If you are invested in the top Conservative fund, you would be $1,377 worse off than being invested in the top Default fund. Comparing the average of the top five in each, you would be $1,744 worse off over the whole period.

Default Funds      
Cumulative $
contributions
(EE, ER, Govt)
+ Cum net gains
after all tax, fees
Effective
cum return
= Ending value
in your account
Effective
last 3 yr
return % p.a.
since April 2008 X Y Z
to June 2017      
$
% p.a.
$
       
 
 
 
 
 
Mercer Conservative C C C 28,260 6,741 4.7 35,001 4.6
ANZ Default Conservative C C C 28,260 6,296 4.4 34,556 4.2
ASB Conservative C C C 28,260 5,992 4.2 34,252 4.3
FisherFunds2CashEnhanced C D C 28,260 5,943 4.2 34,203 4.2
AMP Default C C C 28,260 5,179 3.7 33,439 3.8
                 
BNZ Conservative C C C 15,702 1,619 4.3 17,321 4.2
Westpac Defensive C C C 10,958 554 3.1 11,512 ...
Kiwi Wealth Default C C C 10,958 540 3.0 11,498 ...
Booster Default Saver C C C 10,958 514 2.9 11,472 ...
---------------                
Column X is interest.co.nz definition, column Y is Sorted's definition, column Z is Morningstar's definition
C = Conservative, D = Defensive

Capital Guaranteed Funds

In addition to the mainstream Conservative KiwiSaver funds, Westpac has five capital 'guaranteed' funds that were previously offered in this category. The funds are no longer open to new investments but we have continued to gather and report on their performance so you can compare these to the funds above.

Westpac has five plans and they all start at different times:

Capital protected      
Cumulative $
contributions
(EE, ER,
Govt)
+ Cum net gains
after all tax, fees
Effective
cum
return
= Ending value
in your account
Effective
last 3 yr
return
% pa
since April 2008 X Y Z
to June 2017       $ % p.a. $
                 
Westpac CP Plan 1 C A Mi 25,852 13,645 9.9 39,496 9.6
Westpac CP Plan 2 C A Mi 24,280 11,381 9.7 35,660 9.6
Westpac CP Plan 3 C A Mi 21,555 8,669 9.9 30,224 9.5
Westpac CP Plan 4 C A Mi 18,826 6,617 10.3 25,443 9.5
Westpac CP Plan 5 C A Mi 16,487 4,467 9.7 20,954 9.4
---------------                
Column X is interest.co.nz definition, column Y is Sorted's definition, column Z is Morningstar's definition
C = Conservative, A = Aggressive, Mi = Miscellaneous

Some changes and updates

We have reviewed and updated some of the processes in our regular savings analysis of all KiwiSaver funds on www.interest.co.nz and as a result the numbers may differ from previous releases. The key changes are a downward revision to the monthly contributions a person on an average income and 28 years old in 2008 would have made, and an enhancement to the way in which tax liability for the funds was calculated. These changes affect all funds analysed equally, so there is no material change to the relative positioning.


For explanations about how we calculate our 'regular savings returns' and how we classify funds, see here and here.

There are wide variances in returns since April 2008, and even in the past three years, and these should cause investors to review their KiwiSaver accounts especially if their funds are in the bottom third of the table.

The right fund type for you will depend on your tolerance for risk and importantly on you life stage.

You should move only with appropriate advice and for a substantial reason.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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2 Comments

Given most KiwiSavers balances are in the 10s of thousands and older savers have only a few years until 65, does it really matter whether you are getting 4% or 5% or whatever? Once you deduct tax at 28% of earnings as well - most KS are unlikely to gain much from investment income.
The main benefit is really the forced saving, the Govt contribution, the employer contribution, and the locked in aspect.

Well summarised. Balances would grow a lot quicker if these funds were left untaxed until withdrwal at retirement. Power of compound interest works best