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

We review regular savings returns to September 30, 2014 for Growth 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

Growth fund returns may not be as stellar as the aggressive KiwiSaver schemes but they are still pretty good nonetheless, at present.

The top quartile Growth funds are achieving returns comparable with a mid-pack Aggressive fund, so in theory, by investing in top echelon Growth funds you are getting the same return as an average Aggressvie fund but for less risk, which is always a positive thing.

Using our unique 'regular savings' model to calculate fund returns, we can see many of the funds have achieved returns over 9% per annum for the six and a half year period since April 2008.

Over the shorter three year period a majority of the funds have exceeded double figures which in turn is bolstering the longer term numbers.

There are clear leaders and stragglers in this sector.

The leaders include regulars such as Mercer, AON, AMP, and ANZ. Included in the top echelon of the sector are accounting firm Staples Rodway who keep punching above their weight. Across the entire sector the average return is 8.5% per annum after tax and fees. All of these funds have added considerable value to investor accounts since 2008.

Those funds falling well off the pace compared with their peers include three funds from Craigs Investment Partners, one from Mercer (managed by AMP) and a SmartKiwi fund which is owned and operated by the NZ Stock Exchange.

Fidelity, Grosvenor (who now owns Fidelity and was recently appointed as a default scheme provider) and AMP's in-house Balanced fund are not too far above the aforementioned five cellar dwellers.

For investors in the schemes at the rear of the field the returns you have received are poor returns when taking into consideration the additional risk you are accepting compared to a more conservative fund (or even a bank term deposit). Past returns are no guarantee of future results but a strong consistent track record is something investors should value.

It is worth noting however that the Fidelity Growth fund which sits near the bottom of our table below does appear to be a fast improver. Returns in the past three years are up with the top-half funds and with that recent improvement this Fund may start rising up our list fairly quickly.

On the other hand, the Mercer SuperTrust Active Balanced fund, which is also in the bottom half, is the only fund to have worse three-year performance than its lifetime results.

Also keep in mind when reviewing the sector performance that in some cases the lack of exposure to shares will be a major contributor to a fund languishing below the competitors. If we were to see a reversal in stock market performance these bottom dwellers could start to rise up the rankings.

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

Growth 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.
Mercer SuperTrust Growth G G A
19,862
9,781
11.2%
29,643
13.0%
Aon Russell LifePoints Growth G G G 19,862 8,599 10.1% 28,461 13.2%
AMP ANZ Default Balanced G B   19,862 8,342 9.9% 28,204 11.6%
ANZ OneAnswer Balanced Growth G B B 19,862 8,257 9.8% 28,119 12.7%
Staples Rodway Balanced G B G 19,862 8,141 9.7% 28,003 12.3%
ANZ Balanced Growth G G G 19,862 8,136 9.7% 27,998 12.6%
Aon Russell LifePoints 2035 G G G 19,862 8,004 9.6% 27,866 12.2%
Aon Russell LifePoints Balanced G B B 19,862 7,783 9.3% 27,645 11.5%
ANZ Default Balanced Growth G G G 19,862 7,374 8.9% 27,236 11.0%
Aon ANZ Default Balanced G B B 19,862 7,273 8.8% 27,135 10.5%
ASB Balanced G B B 19,862 7,202 8.8% 27,063 11.3%
Mercer SuperTrust Active Balanced G G G 19,862 7,147 8.7% 27,009 8.5%
Mercer Balanced G G G 19,862 7,134 8.7% 26,996 10.5%
Mercer Super Trust ANZ OneAnswer Balanced G B   19,862 7,018 8.6% 26,880 11.1%
Fisher Funds TWO Growth G G G 19,862 6,977 8.5% 26,839 11.6%
Westpac Balanced G B B 19,862 6,732 8.3% 26,594 10.4%
Mercer AMP Capital Balanced G B   16,600 4,397 8.0% 20,997 9.4%
AMP Balanced G B B 19,862 6,277 7.8% 26,139 9.8%
Grosvenor Balanced Growth G G G 13,808 2,910 7.8% 16,718 9.1%
Fidelity Growth G G G 19,862 6,098 7.6% 25,960 11.0%
Craigs Growth G G   19,862 5,577 7.1% 25,439 9.0%
Craigs Balanced G B   19,862 5,280 6.7% 25,142 8.1%
Craigs Balanced SRI G     19,862 5,189 6.6% 25,051 8.9%
SmartKiwi Balanced G B B 19,862 4,810 6.2% 24,672 9.2%
Mercer AMP Capital Balanced G B   19,862 4,672 6.1% 24,534 8.3%
-------------------                
Column X is interest.co.nz definition, column Y is Sorted's definition, column Z is Morningstar's definition  
G = Growth, B = Balanced, A = Aggressive        

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

Growth 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.
Generate Growth G G G 4,663 369 9.3% 5,032 n/a
BNZ Growth G G   4,849 373 8.7% 5,222 n/a
-------------------                
Column X is interest.co.nz definition, column Y is Sorted's definition, column Z is Morningstar's definition  
G = Growth, B = Balanced, A = Aggressive        

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

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.

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 returns to September in the Balanced Funds category as part of our updated monitoring of regular savings KiwiSaver returns. Our September review of Aggressive Funds is here.

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?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

1 Comments

" by investing in top echelon Growth funds you are getting the same return as an average Aggressvie fund but for less risk, "
 
It would be helpful if you would include in the article the list of funds that will be the top echelon funds over the coming 12 months.  I would hate to invest in one that turned out to be mid or bottom ranked, and end up paying less for even less.
 
 

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Days to the General Election: 34
See Party Policies here. Party Lists here.