Whether investments were in growth or income funds made little difference in the quarter – across the five categories average returns ranged from 1.12% to 1.54%.
Funds under management on the Morningstar KiwiSaver database increased to $18.75 billion at March 31.
The balanced category returned the strongest average return in the quarter, of 8.3% per annum on a one-year basis.
Morningstar said there was not one provider that stood out as a top performer.
Smartshares had good results in the conservative and balanced categories because of its New Zealand bias. While global equities were the best performing asset class in 2013, returning 26.98%, returns fell in in the first three months of 2014, while New Zealand equities came to the fore, posting an 8.51% return.
Fisher TWO topped the aggressive category.
Mercer and Milford topped the league tables in the growth and moderate categories respectively.
Morningstar’s report said: “It is more appropriate to evaluate the performance of a KiwiSaver scheme by studying its long-term returns. The story here is very similar from previous quarters. Looking at performance over three and five years indicates that Aon Russell and Mercer KiwiSaver have been the top-performing fund managers across the board.”
It said boutique providers were also doing well: Fisher Funds’ Growth Fund has been the top performer in the aggressive category over five years and Milford has been the top performer in the balanced category.
Morningstar said diversification was key – fixed interest markets had experienced a similar ebb and flow of local versus international dominance as equities had. Listed property and fixed interest mostly provided low single-digit returns in the first quarter of 2014. Global listed property was one of the few bright spots, up 7.5%.
“We see this time and again – asset classes don’t move in harmony and will ebb and flow in reaction to short-term factors. But over the long-term there are similar return expectations. So having a range of drivers in your KiwiSaver portfolio can help you achieve strong performance but with lower volatility,” the report said.
Morningstar Australasia co-head of fund research Chris Douglas said: "The performance differential between the various asset classes was more pronounced this quarter. The Kiwi sharemarket notched up a healthy 8.52% gain, while international shares was down 3.95%. This was a significant turnaround on 2013, and a timely reminder of the value of a diversified portfolio."
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