Morningstar questions Huljich in latest survey

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Morningstar questioned the performance of Huljich Wealth Management in its latest survey of KiwiSaver funds, saying the provider wouldn’t have posted as strong returns without extra payments from the owner.

Wednesday, February 24th 2010, 7:11AM 2 Comments

Morningstar co-head of fund research Chris Douglas said it was difficult to make peer-relative assessments of the performance of the Huljich funds due to Peter Huljich's payments to prop up the returns. Douglas said it was clear that without these payments, performance would have been considerably worse on an absolute basis, and much more in line with peers.

"This is yet another reminder of why investors need to approach all past returns with caution," he said. "Whenever you see a star performer, there are a number of questions to ask."

Last week, Huljich Wealth Management updated its prospectus and corrected the performance numbers amid allegations it transferred assets into the funds at prices below fair value. The Securities Commission is investigating the matter.

Douglas said where fund assets have grown substantially, investors should be cautious from two perspectives.

"Firstly, fund managers may not be able to manage the money in the same way as the assets grow; this applies primarily to share funds," Douglas said. "Secondly, one-off stock picks can have a disproportionate impact on returns when assets are low."

Many of 2008's worst-performing KiwiSaver funds rebounded to be the best performers in 2009, Morningstar said.

Among the default providers, Mercer KiwiSaver Conservative was easily the best performer in 2009, which also helped it come out on top over two years.

"Last year proved to be a terrific time for growth assets, illustrating how quickly markets can turn," said Douglas. "Investment markets were highly volatile in 2009, continuing to slide downhill in the first quarter before staging a significant recovery over the following nine months. All the major asset classes generated positive returns over the last 12 months, growth-oriented fund overweight equities and listed property delivering superior returns over more conservative counterparts."

Douglas said of the 128 fund managers surveyed, the majority of KiwiSaver options in the Multi-Sector Growth and Aggressive categories delivered double-digit returns over the past year.

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