Fees still too high: Morningstar

Morningstar has just finished its latest round of research, covering nine KiwiSaver providers managing the bulk of the country’s KiwiSaver funds.

Chris Douglas said overall, New Zealanders should be optimistic about KiwiSaver’s ability to help them save for their retirements.

Morningstar’s research assigns funds with ratings of gold, silver, bronze, neutral or negative. The funds are ranked on their people, process, parent, price and performance.

Douglas said it had never handed out a gold rating to a KiwiSaver fund in the three or four years it had been researching them.
He said part of that was due to the large amounts of movement among the decision-makers in each scheme.

Another issue was fees. “They’re still a bit too high in some cases, especially for a conservative fund. In many cases, you’re paying more than 1% for a conservatively managed KiwiSaver product looking to get mid to high single digit returns. That’s a decent chunk out of someone’s savings.”

Douglas said that was an increase from the last review and an indication of Morningstar’s increased conviction in them.“We believe there are very good reasons for New Zealanders to be optimistic about KiwiSaver's ability to help them save effectively for their retirement income."

AMP KiwiSaver and ANZ KiwiSaver (including OnePath and OneAnswer) were given Morningstar Analyst Ratings of silver, the highest ratings of the strategies covered.

Douglas said Morningstar analysts were impressed by AMP KiwiSaver's strong investment team, close relationship with the firm's Australian investment team, and widely-diversified portfolios of assets.

“We believe these characteristics should provide the foundation for strong future performance. The AMP KiwiSaver assets are managed by the former AXA KiwiSaver team, which had an Analyst Rating of bronze before it was closed following its acquisition by AMP.”

Mercer KiwiSaver, Milford KiwiSaver (Conservative and Balanced), and Westpac KiwiSaver received Analyst Ratings of bronze.

Douglas said none was given a negative rating. He said there were likely some KiwiSaver schemes in the market that deserved one, but not those in Morningstar’s database.

Comments from our readers

On 22 March 2014 at 9:10 am bw said:

And yet..... Milford's international equity fund - part of the kiwisaver schemes - has a performance fee of OCR +5%, possibly the greediest performance hurdle ever seen in NZ for an equity fund. And Morningstar say we don't rate funds in NZ highly because fees are high and then give Milford a silver award. There's gotta be some logic in there somewhere.....

Fees still too high: Morningstar

KiwiSaver funds’ fees stand in the way of them being given a gold rating in Morningstar’s research, its Australasia co-head of fund research says.

Friday, March 21st 2014, 11:57AM 1 Comment

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