Fidelity's KiwiSaver Scheme was named KiwiSaver Provider of the Year by members of the Professional Advisers Association

Fidelity's KiwiSaver Scheme was named KiwiSaver Provider of the Year by members of the Professional Advisers Association

The latest data released for KiwiSaver performance as at June 30, 2013 is from Fidelity Life (our story covering the December 31, 2012 results can be found here.)

As reported in early July Fidelity's KiwiSaver scheme has been purchased by fellow KiwiSaver and NZ owned company, Grosvenor Financial Services Group. As far as the two company's are concerned it is business as usual and Fidelity KiwiSaver investors should have received notification of the pending changes by now.

Fidelity KiwiSaver Scheme was named KiwiSaver Provider of the Year by members of the Professional Advisers Association at its conference in Auckland in May. The  Scheme currently has over $300 million in funds under managment and approximately 65,000 members.

Since we last reviewed Fidelity's KiwiSaver scheme some unexpected volatility hit markets and has seen a softening in returns over the past one and three month periods. Consequently some of the returns across the entire KiwiSaver spectrum have retreated from their previous heady heights.

All of Fidelity's funds recorded negative returns over the past month with the range being from -0.6% to - 2.9% and four of the funds carried these negative returns into their quarterly results with the worst performer being the Options Fund with a return of -3.1%. Fidelity's Ethical Fund was the best performer over the last quarter recording +2.4%.

The last 12-months has seen some pretty good returns coming from funds with high equity components as markets have rallied strongly reflecting investors are more upbeat about the future of the global economy. As a result Fidelity's Aggressive Fund returned +16.8% and the Ethical Fund did +16.0%. The Growth Fund was the next best performer with +15.9% over the last year.

As we know focusing on short term returns is not the best approach to assessing a KiwiSaver manager, so looking at the funds with at least a five year track record, all the funds had positive long term performance. The Options Fund, this quarters worst performer, was the best of the bunch over the last five years providing an average annual return of +6.5%. The worst five year return was +4.5% p.a from the Growth Fund.

Examining the current asset allocations we see one of the drivers behind the poorer short term returns has been the reasonably high allocation to Fixed Interest (domestic and global) across the funds. Comments from the US Fed regarding widing back their US$85 bln per month bond buying program was not taken well by the markets. Bonds were sold off and capital values fell as a result, hence why many fixed interest funds have recorded losses recently. 

Holding Cash as part of the overall asset allocation will have dampened the loses for the Capital Guaranteed and Conservative Funds however the lack of equities has meant the funds had little positive momentum to pull them out of negative territory.

Approximately one quarter of the Aggressive Fund is invested into the Tyndall Option Fund and the returns from this fund will have been considerably higher had the options strategy not suffered a reasonably significant hit. As a result compared to their peer group this fund is languishing near the bottom of the field over the past three years, some 7% p.a behind the lead runner. This position can be reversed quite quickly as the options strategy can be quite volatile as we have stated on many occassions before.

The allocations to bonds across the strategies is fairly evenly split between NZ and offshore bonds. Many other managers have a bias towards global for many reasons including diversification, lower volatility, hedging premium pick up and general liquidity. We note the fixed interest exposure within the Asset Class Conservative and Growth Funds which Fidelity have recently launched is solely allocated to global bonds. We are not aware of too many diversified funds (if any) who have snubbed NZ bonds completely within their strategies.

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

FidelityLife KiwiSaver Scheme
(30 June 2013)
1 year
(p.a.)
5 year
(p.a.)
Since inception
(Oct 2007)
(p.a.)
Capital Guarantee 5.7% 4.5% n/a
Conservative 8.9% 5.6% n/a
Balanced 13.0% 5.5% n/a
Ethical 16.0% 4.8% n/a
Growth 15.9% 4.5% n/a
Aggressive 16.8% 4.8% n/a
Options 8.1% 6.5% n/a

 

 

 

 

 

 

 

 

More detailed performance reporting can be found here ».

The various fund asset allocations as at 30 June, 2013 are shown below.

Fidelity KiwiSaver
(30 June 2013)

Cash
(%)
NZ Bonds (%) Global Bonds
(%)
Property    (%) NZ & AU  Shares
(%)
Global  Shares
(%)
Alternative Assets
(%)
Capital Guarantee 51.4 16.8 17.2   4.9 9.8  
Conservative 10.5 31.8 28.7 4.6 12.3 12.0  
Asset Class Conservative 9.0   61.9 5.0 12.0 12.2  
Balanced 0.5 24.8 19.4 5.5 19.0 30.8  
Ethical   37.8     19.2 43.0  
Growth 0.5 11.4 9.8 9.1 29.3 39.9  
Asset Class Growth 4.6   9.9 5.2 40.0 40.4  
Aggressive 0.8     5.0 28.0 42.5 23.7

 

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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