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KiwiSaver growth funds rebound after horror year

Growth funds were the star performers in Mercer’s KiwiSaver Funds survey for the September quarter, with new entrant Fisher Funds the standout in this category.

The survey measures four categories of KiwiSaver funds: default, conservative (20-39% growth assets), balanced (40%-60% growth assets) and growth (61%-100%).

For the second straight quarter growth funds achieved the best return, with a median return of 10.8% in the three months to September 30.

This median return was 7.8% for balanced funds, 5.0% for conservative funds and 4.0% for default funds.

Despite the recent turnaround growth funds were the worst performers over the whole year, achieving a median return of only 1.2% in the 12 months to September 30 as the financial crisis hit portfolios hard.

The results for the full year were in inverse order to those seen in the last quarter- the median return was highest for default funds (5.9%), followed by conservative funds (4.8%) and balanced funds (3.1%).

Fisher Funds Growth Fund, which was a new addition to the survey, achieved the highest return out of all funds in the second quarter (15.2%) and over the whole year (20.3%).

Mercer was the top performer in the other three fund categories in the September quarter.

The Mercer KiwiSaver Conservative Fund was the top default fund in the quarter with 6.5% return and was the best performer over the full year with 9.3% return.

The Mercer Conservative Fund was the top conservative fund in the September quarter with 7.3% return and the Mercer Active Balanced Fund was the top balanced fund with 10.9% return.

Over the full year the Axa Conservative Fund was the top conservative fund with 8.5% return and the Mercer Moderate Fund was the best of the balanced funds returning 7.4%.

The survey showed that in line with the improved returns in growth funds there has been a notable shift to growth assets (shares and property) across all KiwiSaver fund categories.

Martin Lewington, head of Mercer in New Zealand, said balanced and growth funds were well on the way to reclaiming the losses experienced through the global financial crisis.

“In the last six months balanced and growth funds have pegged back approximately half the losses experienced through the global financial crisis.”

He said this result was in “stark contrast” to the previous twelve months in which only conservative funds, on average, provided a positive return for KiwiSaver investors.

“This return to positive growth territory is good news for investors, particularly those with a long term horizon who can afford to ride out the short term volatility.”

More by Niko Kloeten

Comments and questions

I am continually amazed how well Mercer do in those Mercer surveys.

I just wish the survey would cover all Kiwisaver providers, just to make sure the Mercer funds are the best funds, in Mercers opinion of course.

I think it must be very hard to compare performances of funds, as each has a different strategy. I would suggest that looking at fees paid, by using the sorted website would sort the wheat from the chaff.

I just asked my provider, Gareth Morgan why my account had performed so badly and lost capital. Also asked for some detail on interest rate % agreed with borrowers for the smaller cash portion of the investment. No reply yet.
Great article and very timely.