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Higher fee KiwiSaver managers delivering superior returns

The government and the Financial Markets Authority (FMA) want lower KiwiSaver fees but some of the best after-fees returns are being delivered by managers that charge well above the average.

Monday, October 11th 2021, 3:04PM 1 Comment

by BusinessDesk

Analysis by consulting actuaries Melville Jessup Weaver (MJW) showed Milford Asset Management pocketed the most fees per member in the year ended March at $921 when most providers received less than $500.

Fisher Funds, one of the providers that will lose default fund status from Dec 1, received $500 per member.

However, the best returning funds after fees in the five years ended March have been those managed by Milford, which has never been a default provider, and Fisher.

Over 10 years, "the standout performer over this period is Milford, with its growth fund returning 13.5% per annum after fees. In fact, Milford's balanced fund has outperformed other large providers' growth funds," MJW's analysis showed.

Notably, the Milford balanced fund outperformed AMP's growth fund – AMP is the fourth largest provider with $6.47 billion in funds under management while Milford is the eighth largest with $3.31b under management.

Excluding a couple of very small providers, Milford's members had the highest average balance.

The analysis indicates performance doesn't necessarily pay off in attracting new members.

MJW charted performance after fees versus membership gains over the three years ended March.

"Fisher Funds has not seen its good performance translate into as much member growth as would be expected, while SuperLife has marginally positive member growth despite the weakest performance," MJW said.

Lower fees

Fisher is the sixth-largest provider with $3.75b in funds under management.

SuperLife and Simplicity are the two new managers to gain default status from Dec 1 and their fees will be between 0.2% and 0.4% a year.

The average KiwiSaver fees paid per member in the year ended March 2021 was $217 with default providers charging $173 per member and non-default providers charging $293.

In aggregate, KiwiSaver managers collected more than $650m in fees in the latest year.

However, fees as a percentage of assets have been trending lower from 1.56% on average in 2009 to 0.93% now, although non-default providers are currently charging 1.16% on average to default providers' 0.78%.

"Clearly, there exists a wide range of fees across KiwiSaver providers. However, even the highest fees may be reasonable if these schemes are providing good value for money," MJW said.

The seven largest providers maintained their rankings at March 31 compared with a year earlier while Milford moved up the rankings to the eighth-largest provider at March 31 from 10th a year earlier with its KiwiSaver assets growing from $1.96b to $3.31b.

ANZ and ASB were the two largest providers at March 31 with $18b and $13.6b in funds under management and were, therefore, the biggest earners of fees in the latest year, but both will lose their default provider status on Dec 1, as will AMP.

ANZ accounted for 22% of the KiwiSaver market at March 31.

Tags: KiwiSaver

« Manager salts up its fund menuKiwiSaver in colour: why it shouldn’t be the new black »

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Comments from our readers

On 13 October 2021 at 8:40 am Gordon Gecko said:
Excellent report from MJW firstly.

What this report also shows is that many high fee products are performing poorly. I think too much emphasis in the reporting to date has not highlighted this fact.

There are only a small number of managers who I would suggest are actually earning their fees (Milford and Fishers for example) and good on them. They have been star performers for a long time.

However, performance does not guarantee you members as Fisher's are discovering under chart 6.3 - Simplicity and Generate are killing it in that area, BNZ less so.

I would like to see some after fee risk-adjusted return work done to show who is actually adding value and who is just pretending to be a fund manager.

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Cash Funds

Institution Rate 33% 39%
ANZ 0.10    0.10    0.11
ASB Bank 0.15    0.16    0.17
ASB Bank 0.15    0.16    0.17
ASB Bank 0.15    0.16    0.17
ASB Bank 0.15    0.16    0.17
ASB Bank 0.15    0.16    0.17
BNZ 0.10    0.10    0.10
Heartland Bank 0.40    0.40    0.40
Kiwibank 0.05    -    -
Kiwibank 0.25    -    -
Nelson Building Society -    -    -
SBS Bank -    -    -
TSB Bank 0.25    0.25    0.26
Westpac 0.20    0.21    0.23
Westpac 0.05    0.05    0.05
Westpac 0.25    0.26    0.27

Term Funds

Institution Rate 33% 39%
ANZ Term Fund - 90 days 0.50    0.51    0.53
ANZ Term fund - 12 months 1.40    1.44    1.50
ANZ Term Fund - 120 days 0.60    0.61    0.64
ANZ Term fund - 6 months 1.10    1.13    1.18
ANZ Term Fund - 150 days 0.70    0.72    0.75
ANZ Term Fund - 9 months 1.20    1.23    1.28
ANZ Term Fund - 18 months 1.40    1.44    1.50
ANZ Term Fund - 2 years 1.60    1.64    1.71
ANZ Term Fund - 5 years 2.10    2.17    2.26
ASB Bank Term Fund - 90 days 0.45    0.45    0.47
ASB Bank Term Fund - 6 months 1.00    1.02    1.07
ASB Bank Term Fund - 12 months 1.30    1.33    1.39
ASB Bank Term Fund - 18 months 1.45    1.49    1.55
ASB Bank Term Fund - 2 years 1.60    1.65    1.73
ASB Bank Term Fund - 5 years 2.15    2.23    2.33
ASB Bank Term Fund - 9 months 1.20    1.23    1.28
BNZ Term PIE - 120 days 0.55    0.56    0.57
BNZ Term PIE - 150 days 0.70    0.71    0.75
BNZ Term PIE - 5 years 2.15    2.23    2.33
BNZ Term PIE - 2 years 1.60    1.65    1.73
BNZ Term PIE - 18 months 1.45    1.49    1.55
BNZ Term PIE - 12 months 1.40    1.44    1.50
BNZ Term PIE - 9 months 1.30    1.33    1.39
BNZ Term PIE - 6 months 1.10    1.13    1.18
BNZ Term PIE - 90 days 0.45    0.45    0.47
Co-operative Bank PIE Term Fund - 6 months -    -    -
Heartland Bank Term Deposit PIE - 12 months 1.30    1.33    1.39
Heartland Bank Term Deposit PIE - 6 months 1.00    1.02    1.07
Heartland Bank Term Deposit PIE - 9 months 1.50    1.54    1.61
Heartland Bank Term Deposit PIE - 18 months 1.15    1.18    1.23
Heartland Bank Term Deposit PIE - 2 years 1.80    1.86    1.94
Heartland Bank Term Deposit PIE - 5 years 1.75    1.81    1.89
Kiwibank Term Deposit Fund - 90 days 0.35    0.36    0.37
Kiwibank Term Deposit Fund - 6 months 1.05    1.08    1.12
Kiwibank Term Deposit Fund - 12 months 1.20    1.23    1.28
Kiwibank Term Deposit Fund - 150 days 0.60    0.61    0.64
Kiwibank Term Deposit Fund - 120 days 0.45    0.46    0.49
Kiwibank Term Deposit Fund - 9 months 0.95    0.97    1.00
Westpac Term PIE Fund - 150 days 0.60    0.61    0.64
Westpac Term PIE Fund - 120 days 0.45    0.46    0.47
Westpac Term PIE Fund - 18 months 1.35    1.38    1.45
Westpac Term PIE Fund - 12 months 1.30    1.32    1.38
Westpac Term PIE Fund - 6 months 0.80    0.81    0.84
Westpac Term PIE Fund - 9 months 1.00    1.02    1.07
Westpac Term PIE Fund - 90 days 0.35    0.36    0.37
Westpac Term PIE Fund - 2 years 1.60    1.64    1.71
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