KiwiSaver fees: Paying for performance

What’s your view when it comes to fees?

There’s been a lot of discussion in the media lately about fees. We continue to believe that members should look at returns after fees. Net returns are what grow one’s retirement balance. At ANZ, we absolutely believe that active management can add value over time. We probably refute the point, 10 years on, that we should just be focusing on fees. We no longer need to just theorise on this, 10 years on. There’s enough data out there. We did an exercise the other day, and pulled the data for the last 10 years’ performance across the default funds. They’ve all been there for 10 years. We know there are some actively managed default funds and some passively managed default funds. It’s reasonably scary that, over 10 years, there’s a 247-basis point difference in performance after returns after fees. Remember, 100 basis points gives you $100,000 increase in your retirement outcome. I guess if we’re saying 247-basis point difference for two people, in two different growth funds, we’re talking about nearly a quarter of a million dollars difference in their nest egg at the age of 65.

Is it misleading when people are focused on fees alone, rather than the bigger picture?

I think that’s right. Fees is just one lever. Certainly, looking at the comparison across the 10 years, those which are a little bit more expensive have given greater returns after fees. That’s where I think the discussion needs to go. We need to help New Zealanders understand that.