tmmonline.nz  |   landlords.co.nz        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Last Article Uploaded: Sunday, July 5th, 11:02AM

News

rss
Latest Headlines

Weaker markets may make fees harder sell

It may become harder for fund managers and advisers to justify their fees if markets aren’t delivering the hot returns of the past few years, MJW says.

Friday, January 24th 2020, 6:00AM

It has released its latest investment survey, which shows the average KiwiSaver balanced fund delivered 16.3% in 2019, the best result since the actuarial firm’s KiwiSaver survey began in 2009.

The top balanced fund was ANZ’s Balanced Growth Fund, returning 19.8% after fees. This fund also has the top ranking over ten years.

Amongst growth funds, ANZ again took the top ranking. In this category, ANZ has a similar asset allocation to its peers (although it does have a large weight towards property and infrastructure). Thus, its high ranking is perhaps due more to strong performance within asset classes – particularly global equities.

Milford’s Active Growth Fund was seventh over the year but had returned 12.6% a year after fees over a 10-year period.

The survey said that indicated that its higher fees had been justified.

“We can summarise the 2010s as a decade that saw remarkably strong returns from equity markets, while bond returns continued their trends downwards. While it would be disingenuous to suggest a market crash is around the corner simply because of strong recent results, it is sensible to expect the 2020s to prove more challenging.

“Interest rates are much lower than in previous decades, seemingly capping the upside for bond and cash returns. Additionally, central bankers appear near the limits of stimulus they can provide. This may remove the ‘gimme’ in equity markets – making active management more important.”

At the same time, investment managers were being challenged to provide more efficient, lower-cost solutions and more socially responsible investment options.

Actuary Ben Trollip said it would be hard for KiwiSaver and other managed funds to deliver the returns they had of recent years into the future.

There had been a long period of very strong growth in equity markets, he said. Now, central bankers and policy makers were nearing the end of what they could do to provide stimulus to markets, he said.

“We have to expect returns to be lower.”

He said, when returns were running in double-digits the difference between active and passive fees was less important as a proportion of total return. But if they dropped to 4% the difference in fees would be a much bigger proportion of overall return.

Investment advisers will also have to work harder to justify their fees if returns are flat or even negative.

“The same can be said for active management, it becomes more important,” Trollip said. “If you’re outperforming the index by 1% or 2% when markets are up 20% it’s not much but if they are flat or down that’s a big deal.”

He said many investors, particularly KiwiSaver members, were not ready to see their balances drop.

Trollip said there had been a move into stocks and markets that were high-yielding as interest rates fell globally. If that started to change, there could be an impact on the stock prices themselves and markets, such as New Zealand’s, more generally.

Tags: fees KiwiSaver Markets MJW

« [The Wrap] Financial advice: mainly male drinkers ... really?Gold prices soar on back of tensions »

Special Offers

Comments from our readers

No comments yet

Sign In to add your comment

 

print

Printable version  

print

Email to a friend
News Bites
Latest Comments
Subscribe Now

Weekly Wrap

Previous News

MORE NEWS»

Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 3.19 3.19 3.49
AIA Special - 2.69 2.69 2.99
ANZ 4.44 3.15 3.25 3.85
ANZ Special - 2.65 2.75 3.35
ASB Bank 4.45 3.19 3.19 3.49
ASB Bank Special - 2.69 2.69 2.99
Bluestone 4.44 4.44 4.44 4.44
BNZ - Classic - 2.65 2.69 2.99
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.25 3.29 3.59
Lender Flt 1yr 2yr 3yr
BNZ - TotalMoney 4.55 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union South 5.65 4.75 4.75 -
First Credit Union Special 5.85 3.35 3.85 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Heretaunga Building Society 4.99 4.35 4.45 -
HSBC Premier 4.49 2.60 2.65 2.80
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 3.99 2.58 2.68 2.79
Kainga Ora 4.43 3.29 3.39 3.85
Kiwibank 3.40 3.40 3.54 4.00
Kiwibank - Capped - - - -
Kiwibank - Offset - - - -
Kiwibank Special 3.40 2.65 2.79 3.25
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Lender Flt 1yr 2yr 3yr
Resimac 3.49 3.45 3.39 3.69
SBS Bank 4.54 3.29 ▼3.19 ▼3.49
SBS Bank Special - 2.79 ▼2.69 ▼2.99
The Co-operative Bank - Owner Occ 4.40 2.79 2.79 3.39
The Co-operative Bank - Standard 4.40 3.29 3.29 3.89
TSB Bank 5.34 3.59 3.49 3.79
TSB Special 4.54 ▼2.65 2.69 2.99
Wairarapa Building Society 4.99 3.75 3.99 -
Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
Westpac Special - ▼2.65 2.69 2.79
Median 4.55 3.22 3.22 3.44

Last updated: 3 July 2020 8:15am

About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox
 
Site by Web Developer and eyelovedesign.com