We review regular savings returns to September 30, 2014 for aggressive KiwiSaver funds, identifying who has the best long-term returns

We review regular savings returns to September 30, 2014 for aggressive KiwiSaver funds, identifying who has the best long-term returns
Regular contributions change the way you should look at your KiwiSaver returns. Image sourced from Shutterstock.com

Aggressive KiwiSaver schemes have been turning in cracking returns.

Using our unique 'regular savings' model to calculate fund returns, it is clear that the Aggressive fund category has been largely delivering excellent high long term after-tax, after-fee returns.

Our review looks at returns from April 2008 which is now a six and a half year stretch. We also look at the past three years, to try and see whether funds are falling off the pace and relying on earlier results.

But what we have found is that most of the managers of this group have maintained an excellent, consistent standard.

For funds that have been operating for most of the period, the top ten have averaged a +12.5% return per year, after tax and after fees. In anyone's book, that is very good.

If we look at just the past three years, two funds who are not in that top 10 stand out. In other words they are pushing their way up in terms of track record.

KiwiWealth Growth Fund, and ANZ OneAnswer International Shares Fund both delivered +17.3% per annum, after tax and after fees. Again in anyone's book, that is outstanding.

Both are international equities funds, benefiting from well-targeted share portfolios. The best of these funds are delivering returns not too dissimilar to the Cullen Fund.

But not all are starring. 

A handful can't even make 5% and the fund managers involved in these funds involve some 'big names', like Craigs Investment Parners and Grosvenor (a newly appointed default fund manager).

The Mercer SuperTrust Real Assets fund is one of two that has generated lower returns in the past three years than over the full period (based on our return calculation methodology). This fund invests in listed & unlisted property, infrastructure, alternative assets including natural resources. The returns from these types of assets may vary significantly from year to year.

And Craigs have the odd distinction of topping the list for long-term results (+13.7% in their Craigs NZ Equity fund), while also coming in second to bottom (+4.3% for their Craigs Australian Equity fund). They know New Zealand it seems, but are lost in Australia.

Past returns are no guarantee of future results. But a strong consistent track record is something investors should value.

Other analysts make a big deal about fee levels. We know the international research (mainly based on American markets), but our analysis focuses on after tax and after fees. We think if you are getting superior returns after fees, obsessions about fee levels are unnecessary. The key however is the long term view, and New Zealand KiwiSaver funds now have track records well over five years so it is relevant to start looking at these longer term achievements by managers. (The past three year view is only a qualifier to show whether they are 'still' earning their keep.)

Here are the full comparison as at September 30, 2014 for Aggressive Funds.

Aggressive Funds      
Cumulative $
+ Cum net gains
Effective
= Ending Value
Effective
Since April 2008 X Y Z
contributions
after all tax, fees
cum return
in your account
last 3yr
to September 2014      
(EE,ER,Govt)
$
% p.a.
$
return % p.a.
Craigs NZ Equity A A  
11,358
3,728
13.7%
15,086
13.4%
Milford Active Growth A AG IE
19,862
12,587
13.6%
32,449
16.6%
Aon Milford A AG IE
19,862
12,471
13.5%
32,333
16.5%
Mercer SuperTrust TransTasman A A AE
19,862
12,377
13.4%
32,239
14.8%
Grosvenor International Share A A IE
13,456
4,782
12.5%
18,238
14.6%
ANZ OneAnswer Aust Share A A AE
19,862
10,845
12.2%
30,707
15.0%
Mercer SuperTrust Shares A A AE
19,862
10,822
12.1%
30,684
14.9%
Mercer SuperTrust Global Shares A A IE
19,862
9,941
11.4%
29,803
14.7%
ANZ OneAnswer Intl Share A A IE
19,862
9,660
11.1%
29,522
17.3%
ANZ Default Growth A G G
19,862
8,295
11.0%
28,157
14.5%
ANZ OneAnswer Aust Property A A P
19,862
9,580
11.0%
29,442
12.3%
ANZ OneAnswer Growth A G G
19,862
9,338
10.8%
29,200
14.7%
ANZ Growth A G G
19,862
9,251
10.7%
29,113
14.6%
Aon Russell LifePoints 2045 A G A
19,862
8,809
10.3%
28,671
13.9%
ANZ OneAnswer Intl Property A A P
19,862
8,679
10.2%
28,540
15.4%
Mercer High Growth A A A
19,862
8,661
10.2%
28,523
13.5%
Mercer SuperTrust High Growth A A A
19,862
8,636
10.2%
28,498
11.4%
ASB Growth A G G
19,862
8,295
9.8%
28,157
13.8%
Fisher Funds Growth A A A
19,862
8,595
9.8%
28,457
12.2%
Kiwi Wealth Growth Fund A G  
19,862
8,111
9.7%
27,973
17.3%
ANZ OneAnswer Sustainable Growth A A IE
18,340
6,683
9.5%
25,024
14.0%
Westpac Growth A G G
19,862
7,864
9.4%
27,726
12.3%
Grosvenor Geared Growth A A A
16,250
4,882
9.1%
21,132
12.0%
Staples Rodway Growth A G G
19,862
7,276
8.8%
27,138
10.9%
Craigs Equity A A  
14,858
3,924
8.8%
18,782
10.7%
AMP Aggressive A A A
19,862
7,261
8.8%
27,123
12.8%
Mercer SuperTrust Real Assets A A P
19,862
7,176
8.7%
27,038
8.0%
Fidelity Options A A Misc
19,862
7,111
8.7%
26,973
12.2%
Fidelity Aggressive A A A
19,862
6,828
8.4%
26,690
12.8%
AMP Growth A G G
19,862
6,811
8.4%
26,673
11.6%
Grosvenor Socially Responsible A A AE
13,456
2,901
8.1%
16,358
8.8%
Fisher Funds TWO Equity A A IE
19,862
6,456
8.0%
26,318
13.0%
Lifestages Growth A A  
14,333
3,140
7.8%
17,473
10.1%
SmartKiwi Growth A A IE
19,862
5,948
7.5%
25,810
12.7%
Grosvenor High Growth A A A
19,862
5,750
7.3%
25,612
11.6%
Craigs Australian Equity A A  
11,358
1,039
4.3%
12,396
5.5%
Grosvenor Trans-Tasman Small Companies A A AE
13,456
559
1.7%
14,015
3.9%
                 
-------------------            
 
 
Column X is interest.co.nz definition, column Y is Sorted's definition, column Z is Morningstar's definition
A = Aggressive, AE = Australian Equities, G = GrowthIE = International Equities, P = Property

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.

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

The following Aggressive funds have not been going long enough to be included in the above table.

Aggressive Funds      
Cumulative $
+ Cum
net gains
Effective
= Ending
Value
Effective
Since April 2008 X Y Z
contributions
after all
tax, fees
cum
return
in your
account
last 3yr
to September 2014      
(EE,ER,Govt)
$
% p.a.
$
return %
p.a.
Amanah KiwiSaver Plan A A  
1,869
268
13.7%
2,154
n/a
Generate Focused Growth A A A
4,663
451
11.3%
5,114
n/a
Fidelity AC Growth A G A
5,222
338
6.8%
5,560
n/a
                 
-------------------            
 
 
Column X is interest.co.nz definition, column Y is Sorted's definition, column Z is Morningstar's definition
A = Aggressive, AE = Australian Equities, G = GrowthIE = International Equities, P = Property

 

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.

Our next review will look at Sepetmber returns in Growth funds as part of our updated monitoring of regular savings KiwiSaver returns.

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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4 Comments

Excellent info. Thankyou.

I don't understand the table. 
Firstly how  come the cumulative contributions ot all but 3 of the funds are identical?
What are "Cum net gains after all tax, fees"? On an investment of how much?
"Effective* cum return % p.a." - over what period? My guess in six and a half years but I shouldn't have to guess.  I can't find the note that I presume the * refers to. 
"Ending Value in you account" - on an investment of how much?
"Effective last 3 yr return % p.a."  What is the difference between this return and the "cum" return in the third-to-last column? In what sense is this one not cumulative?
 

To understand our analysis you should first read this.
 
We don't like the official way to compare KiwiSaver returns. That is a point-to-point calculation from a fund manager point of view. It assumes a steady invested fund base.
 
But people in KiwiSaver are not saving like this. They are making small contributions each payday, and their contributions are building up steadily over time. That means the returns on the earlier and smaller level of accumulated contributions will be less in $ terms than the later, larger accumulation. Our method of assessing returns takes this reality into account.
 
To do our analysis, we have developed a 'standard KiwiSaver', someone who was 28 in April 2008 (about the 500,000th member). We assume they are making standard contributions and their employer is making their required matching payments. We use the LEEDs income tables, and as they age their income rises (or falls) depending on the LEEDs data (LEEDs data is essentially the median pay levels from the IRD's PAYE data set.)
 
This gives us the Cumulative Contributions. Employee+Employer+Government.
 
But not all Funds were in operation from April 2008. Those that started later mean that members could not have saved the same amount. That is why there are differences in Contributions.
 
The Effective Cumulative Return, % p.a. is the annualised return since the start of the analysis (usually April 2008). It represents the % annual return you would have earned if you had that stream of contributions, to get to today's final fund balance. (that is, contributions + earnings = end Fund Balance. It answers what those earnings are p.a. on those contributions.)
 
But because this is now a six and a half year view, it is possible for a Fund to do well in an earlier period and rest on its laurels, still showing good returns even though more recent results are poor. That is why we also add the returns for the past three years to our table. If these are above the long-term returns, the fund is improving its performance; if not, it isn't. We use a three-year standard because we think it is unwise to take too short a view. Anyone can pump short-term results and that could be to the detriment of long term returns. And KiwiSaver is a longterm savings plan.
 
Finally, note that we are not hung up on Fees (as say, Sorted is). All our analysis is after-tax and after-fees (all fees, including memeer fees). Good or bad returns after fees are good or bad irrespective of the fees, especially over the long run.
 
I hope that helps. Ask again if you have a followup question.

What is this a sales pitch?  what about some analysis of the level of and size of losses? that would be journalism, this is marketing.
I mean if I go down to TAB I can get great returns if I win or wiped out if I lose.
At least with TAB I know the odds and my eyes are open.  With this we cant tell if 12.5% v 15% is significantly safer for a small loss in return or not, it is meaningless. Take  a GFC mkII all these agressive funds are likely to extinguished, however the safer ones might do no better.
regards

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