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

By David Chaston

A year ago, the 'best' moderate KiwiSaver funds were outperforming the default funds benchmark.

But in the year to September 2018 that advantage seems to have disappeared. Performance between all the funds in this category has tightened up.

You may have got less variability in these returns, but that has come at a cost that you are no better off for the extra risk - small though it is - by being in this fund category.

Essentially managers of these funds can't deliver returns that are 'worth it'.

True, some of the weaker performers have shored up their results, but they are still weaker. The 'best' managers haven't seen their advantages improve at all.

You might like to reassess why you are in this risk category in the first place, especially if you have a long investment horizon ahead of you.

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 2018      
% p.a.
ANZ OneAnswer Conservative Balanced M B M 33,253 10,909 5.5 44,161 4.6
ANZ Conservative Balanced M B M 33,253 10,854 5.5 44,107 4.6
Aon Russell LifePoints Conservative M C C 33,253 10,578 5.4 43,831 4.1
ANZ Default Conservative Balanced M B M 33,253 10,503 5.3 43,756 4.6
Fisher Funds Two Conservative M C M 33,253 8,852 4.6 42,104 4.5
AMP Moderate M B M 33,253 8,791 4.6 42,044 4.9
Westpac Conservative M C M 33,253 8,550 4.5 41,803 4.0
Booster Moderate M B M 33,253 8,432 4.4 41,685 4.6
ANZ OneAnswer Conservative M C C 33,253 7,933 4.2 41,186 3.3
ANZ Conservative M C C 33,253 7,869 4.2 41,122 3.3
QuayStreet Conservative M C   33,253 7,598 4.0 40,851 4.2
AMP Conservative M C M 33,253 7,030 3.8 40,283 3.6
Fisher Funds Conservative M C C 30,163 6,569 4.4 36,732 4.0
BNZ Moderate M B M 20,695 3,655 5.6 24,350 6.0
Generate Conservative M C M 20,302 3,227 5.2 23,529 5.0
Westpac Moderate M B M 15,951 1,717 4.7 17,668 4.9
Mercer Moderate M B M 14,031 1,211 4.4 15,242 4.6
Column X is interest.co.nz definition, column Y is Sorted's definition, column Z is Morningstar's definition
B = Balanced, C = Conservative, M = Moderate

Both the tables on this page 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 are only a tiny handful of moderate funds that outperform in both the lifetime (since 2008) and the past three year analysis, and that includes the BNZ Moderate fund which seems unique in being able to consistently deliver after-all-fees, afetr-all-taxes long run returns well above 5% and more recent results above 6%.

For a fuller discussion of the risks, rewards and strategies of moderate KiwiSaver funds, our review of a year ago is one place to start.

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

Moderate Funds ------ how allocated, approx. ------
to September 2018 Cash NZ fixed
Intl fixed
Equities Property Other
  % % % % % %
ANZ OneAnswer Conservative Balanced 20 14 31 29 6  
ANZ Conservative Balanced 20 14 31 29 6  
Aon Russell LifePoints Conservative   16 64 20    
ANZ Default Conservative Balanced 20 14 31 29 6  
Fisher Funds Two Conservative 21 35 19 18 7  
AMP Moderate 24 18 20 35 3 1
Westpac Conservative 21 24 30 18 4 2
Booster Moderate 16 28 21 29 4 1
ANZ OneAnswer Conservative 22 18 40 17 3  
ANZ Conservative 24 17 39 17 3  
QuayStreet Conservative 22 40 17 19 1  
AMP Conservative 29 22 24 22 3 1
Fisher Funds Conservative 24 33 25 15 3  
BNZ Moderate 12 13 40 35    
Generate Conservative 6 69   12 13  
Westpac Moderate 12 22 27 29 5 5
Mercer Moderate 28 13 22 25 3 8


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.

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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Who is guaranteeing that these forward bets are underwritten?

Looking at the future medium term horizon, the period of a bull run for KiwiSaver growth/ aggressive funds heavy in equities returning 10% pa are most likely gone and there will be many thinking that is the norm. QE has provided fuel to global sharemarkets - just as it did to the housing market - and even before events of the past month, over the past year markets with the tightening of QE were not showing the same levels of a bull run as for the past 8 years or so.
IF (note "if") the current "bear run" on global markets continues, then 5% might seem too bad compared to growth funds which may be showing negative returns for the next year.
Cash / conservative funds returning little more than 2% aren't that attractive.
I am currently happy with my BNZ moderate fund 6% at present in these volatile times and will review when I move to a more agressive/growth fund.

NZX enters correction territory with a fall of over 10% since 28th September - 999 points down now in a little less than a month. Quesitons are is that the end of the correction? The beginning of the correction? or just the end of the beginning?

I give up - what is the answer? : )
We live in interesting times as our and the global economies go through transition post QE.
Over the past 8 years QE has fuelled the asset markets (housing and equities). Many talk about about a sustainial correction in the housing market but not equities.
At the moment - for NZ - the low OCR (and consequentlyy low mortgage rates) and contiuing historical levels of immigration provide support to housing and a degree of protection from collapses as seen in some overseas housing markets.
I do not see similar positives for equities; factors such as the ongoing trade war seems to suggest negative support.
But there again anybody's guess is as good as mine.

Over the past 8 years QE has fuelled the asset markets (housing and equities). Many talk about about a sustainial correction in the housing market but not equities

Actually, as an owner of and monhtly buyer of Smartshares (FNZ, DIV) since their inception, I noted the strong outperformance a number of times on interesr.co.nz Gvien that most NZers are not directly buying shares or ETFs themselves, I think there is an emotional disassociation. Quite different from houses.

By the way, I recommend you watch this video about Australia, particularly from 2:00 where Chris Weston shows the correlation between auction clearance rates and the ASX Financial sector. Nobody is really talking about this in NZ but I think it's very interesting and something to be aware of as I cannot see how NZ will be immune if it all turns to custard.

The single most important data point in Australia


Difficult to conceive of a scenario where fixed interest is a disaster but equities do well. A meltdown in the bond market will cause a massive re-pricing in equities.

I have been involved with stockmarkets for over 40 years,as both investor and adviser-in the UK and here. i can even remember the crash of 73/74 in the UK.
For the past couple of years,I have been very gradually increasing my cash to around 15% of my portfolio-shares and rental property-in anticipation of a substantial correction. I am happy to admit that our market rose significantly above what I had expected.I have no idea how far this correction will go;could it become a full bear market with a drop of over 20%? I rather hope so,as I would then expect to start buying back very selectively and always into the good dividend orientated stocks.
It could be a rough ride,but bring it on.

Good sense here. I like the strategy, so let it snow, let it snow.......

Length and extent of drop seems uncertain at this stage. However the drivers for this fall seem reasonably deep seated and nothing currently seems to be apparent to stop slide. The Chinese government intervention earlier this week seems to have only had a very temporary effect on what has been a fairly long term slide of the Shanghai.
There were signals regarding this drop / volitility; the bottom will be far harder to pick (there may well be a number of dead cat bounces).

Feels terminal. The people saying it's just a correction look as though they are praying that all their sell orders are going through.

Or Cash Fund for those hitting 65 Within 10 years?

This is a good way to run out of money early into your retirement. At 55, you still have a 30 year investment horizon for some of your money. Not getting enough long-term growth is a bigger risk than short-term volatility.