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Westpac's KiwiSaver results show Alternative exposure drags on performance; manager remains committed to allocation

Westpac's KiwiSaver results show Alternative exposure drags on performance; manager remains committed to allocation

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

Westpac has been one of the fastest growing scheme managers for the past 12 months, having added in excess of $500 mln to their total funds under management (FUM) at the beginning of 2012.

The latest numbers show Westpac is the third largest KiwiSaver scheme provider behind OnePath (ANZ) and ASB. Westpac's total percentage of the KiwiSaver market is approximately 12.4% and are the largest non-default provider in the KiwiSaver market.

Westpac would rank fourth on a FUM basis if you combine the AXA and AMP KiwiSaver schemes to reflect the merger between these two providers.

It will be interesting to see if Westpac can keep up the FUM growth momentum with rivals BNZ entering into the market on February 25. We are expecting intense competition between all the banks as they look to "poach" each others clients. 

There have been some staff changes behind the scenes with two key staff members (Chief Investment Officer and Fixed Interest Manager) leaving Westpac's funds management business (BT Funds) in late 2012.

These departures had the potential to be incredibly disruptive and impact on the returns for the various funds.

It is hard to gauge whether there has been any noticeable fall-off in returns due to the departure of the key staff members as the various strategies performed well in the later part of 2012.

Time will tell what impact, if any, these departures have had on Westpac's KiwiSaver performance. 

Looking closely at the latest return data provided by Westpac we see they have performed well across the board with the highest one-year returns coming from the Capital Protected products which are no longer open to new investment. The Capital Protected products also showed excellent five year returns.

Of those funds open for new money the Growth Fund was the star performer with a return of 13.1% for the past 12-months. Compared to other funds in the Growth category Westpac's Growth Fund ranks 14/26 over one-year and 8/24 over five years.

Westpac's other funds (Conservative and Balanced) both rank reasonably well over five years compared to their peers.

The Cash Fund continued to tick along with a return above the 90-day Bank Bill Index for the last 12-months. On an after fees basis the Cash Fund is delivering a return below 90-day Bank Bills but we must keep in mind the index does not have fees deducted.

On a comparative before tax and fees basis the returns are generally ahead of the benchmark over the past three years and in-line with the benchmark index over five years.

2012 has been a year of two halves with negative contributions coming from manager selection and asset allocation tilts away from the benchmark in the first half, and strong performances in the second half of the year as Westpac's strategy and portfolio positioning started to pay dividends.

The allocation to alternative assets has been one of the more disappointing aspects across the diversified portfolios.

The hedge fund exposure has not rewarded investors in the same way equities and bonds have and this has tempered the returns to investors.

Westpac still have conviction in their alternative asset allocation strategy and hope to see some improvement in the returns from this sector during 2013.

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
(December 31 2012)

1 year
5 year

Since inception (1 Oct 2007) (p.a.)

Cash fund 2.8% 3.5% 3.6%
Conservative fund 8.8% 4.9% 4.6%
Balanced fund 11.6% 3.6% 3.0%
Growth fund 13.1% 2.8% 2.2%








More detailed performance reporting can be found here ».

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