By David Chaston
You are in an aggressive KiwiSaver fund to grow your retirement savings the fastest way possible and you are prepared to ride though the risks of longer term ups and downs.
For some 'risk' means opportunity. For most however, if you choose this strategy you will need to have a longer term investment horizon, perhaps over two full business cycles (25 years ?) to ensure you come out on top in the end.
In the meantime, it is hard to know whether current returns 'now' should be used to assess such long-term strategy and progress.
But you can benchmark your fund against other similar aggressive funds. To be satisfied, you would want confidence your fund manager was performing well on this benchmark.
And as these funds have been going almost ten years, that long term assessment can now start to be made.
The tables below rank the results since April 2008 on the basis that you are saving regularly into these funds and the fund managers are earning a tax-paid and all-fees-paid basis.
The variations are surprisingly wide. The table is ordered by the total amount in the fund since inception. But not all have been going for the full term, which is where a comparison based on the effective per annum cumulative return will help. And for funds that started later, remember they have hit the business cycle in a different way, so strict comparison with those that started in April 2008 is not truly 'fair'.
But despite all that, the variations are still surprisingly wide.
To understand that, you need to look at the second table, which gives a broad perspective of how each manager has invested the Fund. Mandates and portfolio component choices play a big role in the resulting returns. Managing this structure is the key skill you are paying for when you hire an investment manager by investing in their fund.
Some will get lucky in the way the investment cycle plays out; they will say it isn't luck but superior analysis and judgement about how markets will evolve in the future. And to be fair, you should expect them to be right about this - that is what you are paying for.
In our Default KiwiSaver fund review we set out a benchmark for the past year based on the really good investing conditions that have applied. We can use that same process to set a minimum for what these aggressive funds would have earned as a minimum in 2017*. That is 14.1% after-tax and after-all-fees. It is a bit academic for these funds because you won't be chopping and changing, but it will help understand the minimum a good fund manager should have been able to achieve. The good news is that most of them achieved this minimum (which is a gain of +$4,024 from investing activity in 2017 for funds that have been going since April 2008). But seven didn't. Seven; that's almost a quarter of funds with managers or strategies that couldn't meet a passive market benchmark in 2017.
The risks for being in an aggressive fund are real. A business cycle downturn can wreak havoc with your strategy, especially if you are the worrying kind and start thinking short term and feel you need to abandon your long-term strategy.
Still, think of it like this: If a major correction came now (and you have been in KiwiSaver since April 2008 and have had an income profile similar to our median benchmark), you could suffer a -25% drop in value and still be better off than being in a default fund - if it didn't suffer. (Of course, an economic correction could well reduce the value of a default fund too).
So the risk you might like to prioritise is how long it is until your retirement. If it is less than one business cycle (say 12 or so years), you should think twice about using an aggressive fund. As you get near the end of your income earning years, you won't have the same ability to start over if something untoward befalls your life.
Of course, if you won't need your KiwiSaver funds exactly on retirement, your calculations might be different again. Remember, you are likely to be a long time retired - possibly 20 years or more - so that fact too may affect your thinking.
Anyway, here is the track record of the KiwiSaver funds, which are in the highest risk category there is.
(EE, ER, Govt)
+ Cum net gains
after all tax, fees
= Ending value
in your account
last 3 yr
return % p.a.
|since April 2008||X||Y||Z|
|to December 2017||
|ANZ OneAnswer Australasian Share||A||G||AE||30,328||24,480||11.7||54,807||11.4|
|ANZ OneAnswer Australasian Property||A||A||P||30,328||22,928||11.2||53,256||10.0|
|ANZ OneAnswer International Share||A||G||IE||30,328||21,352||10.6||51,679||11.4|
|ANZ OneAnswer Growth||A||G||G||30,328||18,506||9.6||48,834||8.9|
|Fisher Funds Growth||A||A||A||30,328||17,257||9.1||47,584||9.1|
|ANZ Default Growth||A||G||G||30,328||17,120||9.0||47,448||8.7|
|Kiwi Wealth Growth Fund||A||A||A||30,328||17,057||9.0||47,384||8.7|
|Mercer High Growth||A||A||A||30,328||16,693||8.9||47,021||9.9|
|Fisher Funds Two Equity||A||A||IE||30,328||15,949||8.6||46,277||9.9|
|ANZ OneAnswer International Property||A||A||P||30,328||15,740||8.5||46,067||5.4|
|Booster High Growth||A||A||A||30,328||13,668||7.6||43,995||8.8|
|ANZ OneAnswer Sustainable Growth||A||A||IE||29,459||13,779||8.1||43,238||8.6|
|Booster Geared Growth||A||A||A||27,015||14,696||10.1||41,711||11.7|
|Milford Active Growth||A||G||AE||25,013||15,142||11.9||40,155||10.4|
|Booster International Share||A||A||IE||24,782||11,742||10.0||36,524||9.7|
|QuayStreet NZ Equity||A||A||22,232||13,001||13.3||35,232||13.7|
|Booster Socially Responsible Growth||A||A||AE||24,782||9,058||8.1||33,840||9.4|
|Booster Trans-Tasman Small Companies||A||A||AE||24,782||6,897||6.5||31,679||10.6|
|QuayStreet Australian Equity||A||A||22,232||4,809||5.9||27,041||6.6|
|Generate Focused Growth||A||A||A||17,377||4,741||9.6||22,118||9.6|
|Amanah KiwiSaver Plan||A||A||14,287||1,668||5.5||15,954||4.6|
|Booster KiwiSaver AC Growth Fund||A||G||A||13,026||2,559||9.7||15,585||10.1|
|Booster KiwiSaver Options||A||A||Mi||13,026||1,376||5.5||14,402||5.8|
|Column X is inte8.5rest.co.nz definition, column Y is Sorted's definition, column Z is Morningstar's definition|
|A = Aggressive, AE = Australasian Equities, G = Growth, IE = International Equities, P = Property, MI = Miscellaneous. Booster was formerly Grosvenor and QuayStreet was formerly Craigs Investment Partners|
Some readers will be interested to note that there are aggressive funds returning quite low returns. Their investment strategy clearly hasn't worked - so far at least. There are even some returning less than default or conservative funds.
And here is where your contributions will be allocated, by fund.
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.
* None of the calculations in this paragraph are in the tables below, but the data in the tables was used to set the passive earnings benchmark. And by the way, the fund with the fastest growth in 2017 was the ANZ OneAnswer International Share fund. It was the one-year stand-out performer even though it is only #3 lifetime, and third equal over the past three years. Still, be sceptical of single year results. The fund managers will shout their achievement but what matters most is long-term results - or more accurately, consistent long term results.