by Susan Edmunds
The research house is producing a new set of data that considers investor returns, as well as fund managers’ performance.
This highlights the difference in what investors themselves receive as opposed to what the fund manager produces.
Director of manager research Tim Murphy said investor returns tended to fall short of time-weighted returns because the “fear and greed” cycle drove people to buy and sell at the wrong time.
The gap gets bigger the more volatility the asset class has.
In the US, Morningstar research shows there is a gap in almost all asset classes - although in US sector funds investors were outperforming the average annual fund returns.
In New Zealand, KiwiSaver members were doing better than investors in other managed funds, Murphy said.
Those in New Zealand equities via KiwiSaver had returns that were 0.86% per year lower than time-weighted returns over the past five years. There was also a lag in multi-sector aggressive and growth funds.
But managed fund investors lagged in Australasian equities, aggressive multisector funds and moderate multisector funds.
In aggressive multi-sector funds, investor returns were 2.4% less.
Murphy said the research was intended to look at funds at aggregate level across asset classes rather than focusing on individual funds.
He said investors in KiwiSaver funds were probably doing better because there was a lot less buying and selling happening and investments were made automatically from people’s salaries. “There’s a narrower gap, a consistent pattern over time.”
Murphy said he would continue to work on the New Zealand experience over the rest of the year.
Morningstar also released its latest sustainability ratings – revealing that six of 44 funds had received high ratings: Harbour’s Australasian Equity Focus Fund and Australasian Equity Income, AMP Capital RIL NZ Shares, Russell Investments NZ Shares, AMP Capital’s Global Listed Infrastructure and RIL Global Shares.
Murphy said there were pockets of investors seeking sustainable investments. The New Zealand contingent was “small but vocal”, he said.
He said Morningstar was working to develop data that would be meaningful at adviser level and add value to investors and advisers who were interested in the issue.
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