Our comprehensive review of KiwiSaver Growth funds to September 30, 2015 identifies the top performers in a world of contracting returns

The September quarter has proven to be a difficult one for KiwiSaver managers. The long run regular savings returns in excess of 10% have disappeared and are now predominately in the 8% to 9% range.

On an after tax and fees basis the returns posted by the top performers is acceptable given the additional risk and exposure to growth assets.

Fewer funds have achieved a 9% plus return compared to the past review but a majority of the peer group managed to produce returns over the last three year period that were in excess of their long run return.

Many of the global market indices performed poorly over the past quarter and some twelve month returns are also negative.

The highlights among the various bond and global indices over the past quarter and twelve months were:

  • NZ Shares
  • NZ Property
  • NZ government and corporate bonds (A rated or above)
  • Un-hedged global government bonds
  • Un-hedged global equities or global equities with a hedging of below 50%

Funds with a bias towards these particular securities will be among the strongest performers in our ranking table.

We have observed over a few quarters that funds with a tilt towards NZ shares over Australian shares and NZ bonds over global bonds have performed better.

The NZ stock and bond markets have proven very resilient to global market stresses and rewarded those managers who have taken the extra risk to allocate more funds towards New Zealand as opposed to larger and more diversified markets.

Also managers that have preferred the more defensive government bond securities have outperformed corporate bonds.

The standout fund over the last three years has been the Staples Rodway Balanced Fund with a return after tax and fees of 11.8% based on our regular savings methodology.

Although the Staples Rodway Balanced Fund has delivered superior shorter term performance it did not receive our best in class award.

ANZ OneAnswer Balanced Growth Fund takes out the best in class award as it is the top performer over the long run and has also produced a three year return that is either equal to or greater than its long run return.

Last quarter's best in class fund was the Aon Russell LifePoints Growth Fund, which is now ranked number 2 based on our return methodology and is only beaten out of the top spot by a whisker.

On our regular savings basis, investing in the top funds you would have earned an average of $12,852 more than you have contributed. Previously this figure was $13,694.

While that may not seem a lot based on an average ending fund value of $37,816 it is very significant when you realise that $24,968 is what you, your employer and the Government contributed.

The average Growth fund earnings after-tax and after-fees is $4,987 more than the $7,865 you would have earned in a Default fund.

ANZ, Aon and Staples Rodway continue their dominance of this category and are extending their lead on the rest of the pack with some above average three-year return numbers. AMP have slipped out of the top five for this quarter.

SmartKiwi Balanced Fund is now closed to new investors so we have have removed this fund from our performance ranking tables.

Here are the full comparison as at September 30, 2015 for Growth Funds.

Growth Funds      
Cumulative
contributions
(EE, ER, Govt)
+ Cum net gains
after all tax, fees
Effective
cum return
= Ending value
in your account
Effective
last 3 yr
return % p.a.
since April 2008 X Y Z
to September 2015      
$
% p.a.
$
                 
  ANZ OneAnswer Balanced Growth G G G 24,968 13,113 9.3% 38,082 10.1%
Aon Russell LifePoints Growth G G G 24,968 12,981 9.2% 37,949 10.0%
ANZ Balanced Growth G G G 24,968 12,970 9.2% 37,938 10.1%
Staples Rodway Balanced G B G 24,968 12,825 9.1% 37,793 11.8%
Aon Russell LifePoints 2035 G G G 24,968 12,373 8.9% 37,341 9.3%
AMP ANZ Default Balanced G B G 24,968 12,960 8.7% 37,928 8.4%
Aon Russell LifePoints Balanced G B B 24,968 12,171 8.7% 37,139 9.0%
ANZ Default Balanced Growth G G G 24,968 12,020 8.6% 36,988 9.5%
Aon ANZ Default Balanced G B B 24,968 11,463 8.3% 36,431 8.5%
ASB Balanced G B B 24,968 11,271 8.2% 36,240 9.0%
Mercer Balanced G G G 24,968 10,699 7.8% 35,667 8.0%
Craigs Growth G G   24,968 10,375 7.6% 35,343 9.0%
Westpac Balanced G B B 24,968 10,367 7.6% 35,335 8.0%
Fisher Funds Two Growth G G G 24,968 10,056 7.4% 35,024 6.9%
Craigs Balanced G B   24,968 9,678 7.1% 34,646 7.9%
Craigs Balanced SRI G B   24,968 8,841 6.5% 33,809 7.5%
AMP Balanced G B B 24,968 8,493 5.7% 33,461 4.7%
-------------------        
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
contributions
(EE, ER, Govt)
+ Cum net gains
after all tax, fees
Effective
cum return
= Ending value
in your account
Effective
last 3 yr
return % p.a.
since April X Y Z
to September 2015      
$
% p.a.
$
                 
Grosvenor Balanced Growth G G G 18,246 5,565 7.1% 23,810 7.2%
BNZ Growth G G G 8,487 1,743 5.2% 10,230
n/a
Generate Growth G G G 8,265 2,191 6.9% 10,455
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.

Across the industry there is currently no consistency on how funds are categorised. We have found that sometimes the fund name can be misleading and it is important to completely understand what drives the funds performance (asset allocation, investment philosophy etc) and be aware of how the underlying portfolio of securities is made up and where the potential variability in monthly or annual returns may come from.

To learn more about how we categorise the various funds click 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 your life stage. You should move only with appropriate advice and for a substantial reason.

Our September reviews of the Default, Conservative, Moderate, and Balanced funds can be found here, here, here, and 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?

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1 Comments

There have been no assets yielding anywhere near 10% since 2010 .

There have however been capital gains in every asset class ( property, equities and bonds) , but that money is 'dead" until you cash in and take the profit , and can easily be lost too