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Our comprehensive review of moderate KiwiSaver fund regular savings returns as at September 30, 2017, identifying who has the best long-term returns

Our comprehensive review of moderate KiwiSaver fund regular savings returns as at September 30, 2017, identifying who has the best long-term returns

By David Chaston

If you are like me, when considering KiwiSaver risk profiles it is not obvious what the differences are between the "moderate" and "balanced" fund categories.

In fact, "moderate" funds are funds with an asset allocation of a generally conservative style, but at the least conservative end of the scale.

You should expect some variability in returns including losses; however these would be expected to be few and far between over the life of your investment. There are price risks in bonds and other fixed income components of these funds, (although funds that are straight cash have little). In return for the low risks, you can expect fairly modest returns however - lower risk for lower reward.

("Balanced" funds are more properly labelled "balanced growth" funds, and are the next step along the risk-reward spectrum).

In assigning our risk categories to the full range of KiwiSaver funds, we took these things into consideration:

- the target asset allocation (that is, where the manager plans to invest the funds),
- the current asset allocation,
- the exposure to smaller or mid sized companies,
- liquidity of the underlying investments,
- exposures to derivatives or alternative assets and
- potential for wide variability in monthly and annual returns.

Here are the asset allocations for the funds we class as "moderate":

Moderate Funds ------ how allocated, approx. ------
to September 2017 Cash NZ fixed
Intl fixed
Equities Property Other
  % % % % % %
Aon Russell LifePoints Conservative   16 64 20    
ANZ OneAnswer Conservative Balanced 19 14 32 29 6  
ANZ Conservative Balanced 19 14 32 29 6  
ANZ Default Conservative Balanced 19 14 32 29 6  
Fisher Funds Two Conservative 15 42 19 17   7
Westpac Conservative 22 24 30 18 4 2
ANZ OneAnswer Conservative 23 17 40 17 3  
AMP Moderate 24 18 18 36 3 1
ANZ Conservative 23 17 40 17 3  
Booster Moderate 13 33 25 26 3  
QuayStreet Conservative 27 35 20 18    
AMP Conservative 30 22 22 23 2 1
Fisher Funds Conservative 18 41 23 13 3 2
BNZ Moderate 10 14 41 35    
Generate Conservative 8 65 15   12  
Westpac Moderate 13 22 27 29 4 5
Mercer Moderate 28 13 22 25 4 8

You can see that many are not labelled 'moderate'. Fund managers can label their offerings anything they like, and they do. But looking over this list, you can get a broad understanding of why we categorise them this way. There is (usually) a good allocation of cash for defensive reasons, the fixed income portion dominates, but there is also something less than a third of the allocation in equities. What you can't see in this list is the types of companies in the equities portion - they will tend to the blue-chip end however, and tend to be good dividend payers. As such, the price upside of these equities will be more limited than the usual assumption about general equities.

And true to form, returns are modest.

The best in this category do "quite well" when benchmarked against conservative or cash funds. 5.5% pa after tax, and after all fees, is a good moderate return compared with bank deposits.

Sadly, few funds can achieve that level. And of more concern, almost all funds in this category have struggled to get anywhere near that in the past three years, a period when yields and interest rates have been especially low (and dividend yields have also been low in the equities markets). To be in this category, you need to be positive about the reliability of these income streams.

The other point to note is that 'moderate' funds are rarely better than default fund performance. The top four or five in this category do give slightly better returns, but most don't. Your reasons for shifting from a default fund to a moderate fund would need to be pretty well articulated, and that is best done with the assistance of a qualified financial adviser you trust. A slip-up in that decision might not bring any material benefits.

But there is another issue you should be aware of. Getting in to yield-based funds when yields are already low is problematic. Asset (fund) prices are the inverse of yields. When yields are low, asset prices are high. But if yields rise, the underlying price of the assets backing your fund will fall. And if that happens, the overall value of your fund will fall (that is, you will take losses). It won't alter the income stream, but your fund value will be lower.

As an investor you need to have a view about future interest rates. If you decide they will likely stay low, then your asset backing will likely hold. But if you judge that interest rates will likely rise in the future, you may be in for a period of asset price losses. (The third option is that interest rates fall further than their already record low rates, even go 'negative'. In that case the asset prices will rise and you will profit from that rise).

Moderate Funds      
(EE, ER, Govt)
+ Cum net gains
after all tax, fees
cum return
= Ending value
in your account
last 3 yr
return % p.a.
since April 2008 X Y Z
to September 2017      
% p.a.
Aon Russell LifePoints Conservative M C C 29,554 9,547 6.0 39,101 4.9
ANZ OneAnswer Conservative Balanced M B M 29,554 8,974 5.7 38,528 4.9
ANZ Conservative Balanced M B M 29,554 8,933 5.7 38,487 4.9
ANZ Default Conservative Balanced M B M 29,554 8,586 5.5 38,140 4.9
Fisher Funds Two Conservative M C M 29,554 7,140 4.7 36,694 4.5
Westpac Conservative M C M 29,554 6,983 4.6 36,537 4.2
ANZ OneAnswer Conservative M C C 29,554 6,751 4.4 36,305 3.8
AMP Moderate M B M 29,554 6,742 4.4 36,296 3.9
ANZ Conservative M C C 29,554 6,692 4.4 36,246 3.8
Booster Moderate M B M 29,554 6,380 4.2 35,934 4.2
QuayStreet Conservative M C   29,554 5,732 3.9 35,286 4.2
AMP Conservative M C M 29,554 5,601 3.8 35,155 3.2
Fisher Funds Conservative M C C 26,464 5,094 4.4 31,558 4.1
BNZ Moderate M B M 16,996 2,592 5.9 19,588 5.7
Generate Conservative M C M 16,603 1,872 4.6 18,476 4.7
Westpac Moderate M B M 12,252 950 4.5 13,203 4.5
Mercer Moderate M B M 10,332 671 4.4 11,003 ...
Column X is definition, column Y is Sorted's definition, column Z is Morningstar's definition
B = Balanced, C = Conservative, M = Moderate

Both the above tables are split into two sections. The first section is for funds that have been in our review from the beginning (April 2008). They are all reviewed consistently over the same business cycle. The second set started later and have hit the business cycle in a different way, so a strict comparison with the first set is not truly fair.

But it is notable that there is only one moderate fund that is outperforming in both the lifetime (since 2008) and the past three year analysis, and that is the BNZ Moderate fund.

Some changes and updates

We have reviewed and updated some of the processes in our regular savings analysis of all KiwiSaver funds on and as a result the numbers may differ from previous releases. The key changes are a downward revision to the monthly contributions a person on an average income and 28 years old in 2008 would have made, and an enhancement to the way in which tax liability for the funds was calculated. These changes affect all funds analysed equally, so there is no material change to the relative positioning.


Across the industry there is currently no consistency on how funds are categorised so readers will see funds with different risk descriptors (i.e. conservative, conservative balanced & moderate) appearing in the performance table. To learn more about how we categorise the various funds click here.

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 your life stage. You should move only with appropriate advice and for a substantial reason.

Our September review of default funds can be found here.

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These conservative and moderate funds have unsurprisingly poor returns. Unfortunately I know people in their 20s that are in default conservative funds. There's going to be a big difference in their potential retirement and what they'll end up with at 65.