Tower's KiwiSaver results show that deviating from market expectations requires patience and conviction

Tower's KiwiSaver results show that deviating from market expectations requires patience and conviction

The latest data released for KiwiSaver performance as at December 31, 2012 is from Tower. Our story covering the results to September 30, 2012 can be found here.

Tower has a relatively new look team after some of the original Wellington based team declined to relocate to Auckland back in 2010. Although some of the team are 'new' to their respective positions they are vastly experienced.

Tower utilises all this knowledge with all sector heads sitting on the Asset Allocation committee. The committee is chaired by Sam Stubbs, Tower's Chief Executive.

The asset allocation team at Tower are not sheep when it comes to investing.

They are not afraid to deviate from market expectations in the pursuit of superior returns for investors.

One such example was the decision to increase the level of hedging on their global equities exposure to 70% (ASB in contrast has a 20% hedge on global equities).

Recently Tower moved to manage their Global equities strategy in-house. The strategy is very much in its infancy and some of the tactical decisions made by Tower have yet to show in their returns.

Another illustration of Tower's different approach is the substantial exposure to unlisted property. The team use this exposure to offset some of the volatility from the equity portions.

As unlisted property does not trade frequently the volatility is very low compared to say listed property or equities. One down side to investing into bricks and mortar is the lack of liquidity and being able to offload the investment quickly.

Tower's strongest performing sectors over the past 12-months have been in global fixed interest and domestic equities. Like their rivals, the best performing strategy was the Growth Fund which has approximately two-thirds of the portfolio in shares (Trans-Tasman 31% & Global 36%).

The past five years has seen the Cash Enhanced and Conservative funds the best performers with returns of 4.9% per annum. Since inception these two funds have returned 5% per annum.

One possible issue for Tower which has been highlighted in the media is their substantial shareholder GPG is selling down its holding. It is understood all the major banks and KiwiSaver providers are sniffing around and doing due diligence.

Although there is no clear suitor (yet), we would speculate this could be an ideal opportunity for BNZ to purchase an established provider with substantial funds under management and the prestigious default status.

Below is a table of the longer term performance of the Tower 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.)

Tower KiwiSaver Scheme

(31 December 2012)

1 year

(p.a.)

5 year

(p.a.)

Since inception

(1 Oct 2007) (p.a.)

Cash Enhanced Fund (default) 7.6% 4.9% 5.1%
Preservation Fund 3.3% 4.2% 4.4%
Conservative Fund 8.7% 4.9% 4.9%
Balanced Fund 11.2% 3.3% 3.5%
Growth Fund 13.9% 1.0% 0.8%
Equity Fund 11.6% -2.4% -3.1%

 

 

 

 

 

 

 

 

 

More detailed performance reporting can be found here ».

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