The Morningstar report shows that, as expected, the cash and fixed interest sectors have provided the best returns, while equity based strategies have taken a hiding on the back of substantial falls in world sharemarkets.
It says the best-performing sectors and the only funds to escape the decline over the year to September 30 were cash and fixed interest.
The best-performing KiwiSaver funds have therefore been the cash-heavy or conservative options, including the Multisector – Conservative peer group where the Default KiwiSaver options sit. Four of the five default options in this survey posted positive returns over the year to September 30. AMP and Tower were the best of the five.
Moving through the different multi-sector risk profiles – from Conservative to Aggressive – the dispersion in returns widens considerably. The Multisector – Aggressive category (the KiwiSaver options with the highest underlying weightings to local and international shares) was by far the worst-hit.
The top-performing KiwiSaver fund was Fidelity KiwiSaver - Options Kiwi Fund, returning 23.28%. Tthe underlying investment strategy is built around derivatives contracts written on movements in 10-year government bond rates, an approach with the potential for substantial volatility.
Looking across the categories, Brook Asset Management, Fidelity Life, AMP, and Tower were the fund managers with the best-performing funds. Milford Asset Management (offered through AonSaver) was the only equities strategy to post a positive return over the year, largely on the back of an ultra-high weighting in cash and some good stock picks. All the other equities-based KiwiSaver options were down sharply.
The timing of the launch of KiwiSaver has enabled Brook and Milford in particular to hold back from investing fully in the market, and their funds high cash weightings have given them a buffer against market volatility.
Although the payoff from a decision like this can be significant if switching of this kind is achieved successfully, making these types of macro calls can also erode potential returns on the upside. Few fund managers have demonstrated the ability to add value consistently this way.
This survey groups KiwiSaver options according to their mix of income and growth assets, known as their 'asset allocation'. This is one of the most important decisions to make when saving for retirement income.
The survey does not include all KiwiSaver providers. Organisations like Mercer, Gareth Morgan Investments and Huljich did not participate.
Click to view the KiwiSaver Performance Results Table
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