Choosing the right aggressive fund has resulted in turbo-charged results. But others have performed poorly. We review these funds' track records over the past nine years

By David Chaston

Q: Why would you choose an aggressive KiwiSaver fund? A: To grow your retirement savings the fastest.

But that aggression comes with risks.

Standard investment theory says that over the long run, taking an aggressive stance should return you the highest returns.

The long run is essentially over two business cycles - often thought to be about 25 years or so.

But KiwiSaver has only been going for 10 years.

So all we can test at this point is an interim track record.

And the 'best' aggressive fund so far has returned $12,895 more than if you had chosen the best default fund. (Or, not chosen anything and just left your money in a default fund).

Or your advantage would have been $13,606 compared to the average of the top five default funds. That is, you would have been almost +40% better off.

Or, if you just compared based on what these funds earned, the aggressive fund would have earned more than 3¼ times as much. (The contributions from yourself, your employer, and the Government is the same in either type of fund).

In anyone's language, that is significant.

And knowing this type of track record, you are better placed to assess your risk tolerance.

But the risks are real. A business cycle downturn can wreak havoc with your strategy, especially if you are the worrying kind and start thinking short term and feel you need to abandon your long-term strategy.

Still, think of it like this: If a major correction came now (and you have been in KiwiSaver since April 2008 and have had an income profile similar to our median benchmark), you could suffer a -25% drop in value and still be better off than being in a default fund - if it didn't suffer. (Of course, an economic correction could well reduce the value of a default fund too).

So the risk you might like to prioritise is how long it is until your retirement. If it is less than one or two business cycles (say 12 or so years), you should think twice about using an aggressive fund. As you get near the end of your income earning years, you won't have the same ability to start over if something untoward befalls your life.

Of course, if you won't need your KiwiSaver funds exactly on retirement, your calculations might be different again. Remember, you are likely to be a long time retired - possibly 20 years or more - so that fact too may affect your thinking.

Anyway, here is the track record of the KiwiSaver funds, which are in the highest risk category there is.

Aggressive 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.
$
                 
ANZ OneAnswer Australasian Share A G AE 28,260 19,636 11.0 47,896 9.6
ANZ OneAnswer Australasian Property A A P 28,260 19,186 10.8 47,445 9.5
ANZ OneAnswer International Share A G IE 28,260 15,559 9.3 43,819 10.2
ANZ OneAnswer Growth A G G 28,260 14,764 8.9 43,024 8.1
ANZ Growth A G G 28,260 14,580 8.8 42,840 8.1
Fisher Funds Growth A A A 28,260 13,751 8.4 42,011 7.5
ANZ Default Growth A G G 28,260 13,503 8.3 41,762 8.2
ANZ OneAnswer International Property A A P 28,260 13,446 8.3 41,706 6.4
ASB Growth A G A 28,260 12,904 8.0 41,163 8.4
Mercer High Growth A A A 28,260 12,853 8.0 41,113 8.9
Westpac Growth A G G 28,260 12,581 7.9 40,840 7.7
Kiwi Wealth Growth Fund A A A 28,260 12,438 7.8 40,697 8.0
Aon Milford A G AE 25,392 15,054 11.1 40,447 9.0
Fisher Funds Two Equity A A IE 28,260 11,494 7.3 39,753 7.6
AMP Aggressive A A A 28,260 10,060 6.6 38,320 6.3
Booster High Growth A A A 28,260 9,876 6.5 38,136 7.3
and for those funds that have not been going for the whole period ...
ANZ OneAnswer Sustainable Growth A A IE 27,391 9,433 6.6 36,824 7.4
Booster Geared Growth A A A 24,947 9,859 8.2 34,806 9.3
Milford Active Growth A G AE 22,945 11,793 11.1 34,738 8.1
Booster International Share A A IE 22,714 8,216 8.5 30,930 8.2
QuayStreet Equity A A   24,057 6,224 6.0 30,281 5.8
QuayStreet NZ Equity A A   20,163 9,620 12.2 29,784 11.7
Booster Socially Responsible Growth A A AE 22,714 6,052 6.6 28,765 7.1
Booster Trans-Tasman Small Companies A A AE 22,714 3,905 4.5 26,619 6.6
QuayStreet Australian Equity A A   20,163 2,549 3.9 22,712 3.9
Generate Focused Growth A A A 15,309 2,771 7.3 18,080 7.6
Amanah KiwiSaver Plan A A   12,218 186 0.9 12,404 1.0
Booster KiwiSaver AC Growth Fund A G A 10,958 1,217 6.6 12,175 ...
Booster KiwiSaver Options A A Mi 10,958 805 4.4 11,763 ...
Mercer Shares A A IE 9,038 1,142 9.0 10,180 ...
--------------
Column X is inte8.5rest.co.nz definition, column Y is Sorted's definition, column Z is Morningstar's definition
A = Aggressive, AE = Australasian Equities, G = GrowthIE = International Equities, P = Property, MI = Miscellaneous. Booster was formerly Grosvenor and QuayStreet was formerly Craigs Investment Partners

Some readers will be interested to note that there are aggressive funds returning quite low returns. Their investment strategy hasn't worked - so far. There are even some returning less than default or conservative funds.

And here is where your contributions will be allocated, by fund.

Aggressive Funds ------ how allocated, approx. ------
since April 2008 Cash Fixed
Interest
NZ / AU
Equities
Intl
Equities
Listed
Prop
Unlisted
Prop
Other
to June 2017              
               
ANZ OneAnswer Australasian Share     100        
ANZ OneAnswer Australasian Property         100    
ANZ OneAnswer International Share       100      
ANZ OneAnswer Growth 7 16 19 49 12    
ANZ Growth 7 14 19 48 12    
Fisher Funds Growth 12 15 26 41 4   3
ANZ Default Growth 7 13 19 48 12    
ANZ OneAnswer International Property         100    
ASB Growth 1 17 35 41 5    
Mercer High Growth 5 4 16 56 2 4 12
Westpac Growth 9 15 24 36 9   8
Kiwi Wealth Growth Fund 8 1   85     7
Aon Milford 26 5 51 13 4   1
Fisher Funds Two Equity 11   33 56      
AMP Aggressive 9 1 24 58 7   1
Booster High Growth 6 11 22 55 6    
and for those funds that have not been going for the whole period ...
ANZ OneAnswer Sustainable Growth 3     97      
Booster Geared Growth 3   32 57 9    
Milford Active Growth 26 5 51 13 4   1
Booster International Share 3     97      
QuayStreet Equity 5     95      
QuayStreet NZ Equity 12   86   2    
Booster Socially Responsible Growth 6 11 21 55 6    
Booster Trans-Tasman Small Companies 4   96        
QuayStreet Australian Equity 6   87   7    
Generate Focused Growth 10   16 60 14    
Amanah KiwiSaver Plan 12     88      
Booster KiwiSaver AC Growth Fund 1 13 16 64 5    
Booster KiwiSaver Options 1           99
Mercer Shares 3   23 73      

 


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

The right fund type for you will depend on your tolerance for risk and importantly on your 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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5 Comments

The performance and composition of these "aggressive" funds doesn't seem to match the aggressive model at in a number of cases. Lots of them have a lot of cash or fixed interest instruments (I'd expect only a small percentage for incoming cash/dividends that's not yet allocated).

Of the funds listed as "since 2008", all show cumulative contributions of $28,260 except Aon Milford, with $25,392. Why?

The risk period isn't the time to retirement as much as the time in retirement. I'm seeing many 50 somethings encouraged into low risk portfolios, when they will need to draw on savings for up to 30 years - in other words through at least another couple of cycles. Their big risk is low yield and inflation through that time. Most retirement savings advice assumes our parents lifespans. Growth portfolios are actually lower risk than so called conservative over that sort of time period.

Does anyone know what sort of returns Simplicity have had? A lot of hype there around fees... hopefully they are also delivering.

As far as I'm aware they provide local packaging and access to Vanguard funds, primarily.