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KiwiSaver funds go downhill as market turns

KiwiSaver funds went backward for the first time in over a year in the June quarter, with negative returns across all fund types, according to Mercer’s latest KiwiSaver survey.

Since share markets bottomed out last March KiwiSaver funds have experienced strong returns, with growth funds rising rapidly after suffering big losses during the peak of the financial crisis in late 2008 and early 2009.

But as share markets struggle, growth funds are again leading the way down; the median KiwiSaver growth fund fell 6.1% in the June quarter, cutting the return of growth funds down to 10.4% in the last year.

The top performer in this category in the last quarter was the Grosvenor Balanced Growth fund, returning 0.4%.

Fisher Funds Growth fund has achieved the highest return over the past year at 18.1%.

Balanced funds dropped by a median 3.2% in the June quarter but were still up 9.7% over the past year.

ASB Moderate fund, down 2.2%, achieved the best result in the quarter while the Mercer Balanced Fund returned 13.7% over the year.

Conservative funds dropped 0.8% in the quarter, headed by Asteron Conservative with a 0.2% return, but returned 8.3% for the year, led by the Mercer Super Trust Conservative fund at 12.1%.

Default funds edged down 0.2% in the quarter and were up 7.4% for the year, led in both timeframes by the Mercer KiwiSaver Conservative fund, which returned 0.7% in the quarter and 12.3% in the last year.

Mercer New Zealand boss Martin Lewington said global sharemarket volatility had stalled the run of positive KiwiSaver fund returns achieved over the past year.

“Stock markets, which had risen strongly for the past 12 months and fuelled the run of positive returns for KiwiSaver, went into reverse during the past quarter as fears over European sovereign debt default sparked concern about the outlook for the euro and the global economic recovery.

“In particular funds with the highest allocation to growth assets (shares and property) felt the impact most severely,” Mr Lewington said.

The “choppiness” in the markets could continue for some time, “but we’re not expecting a repeat of the economic slowdown of 2008,” he said.

“We believe we are still heading in the direction of recovery, even if it is at a slow pace. Therefore shares and property still have a place in KiwiSaver funds.”