Look closely at KiwiSaver reports - research company

An Australian investment research company is warning KiwSaver investors to look closely at their providers following a Securities Commission probe into a high profile investment fund's statements.

Morningstar Australasia today released its quarterly KiwiSaver Performance Survey, designed to help New Zealand investors assess the performance of their KiwiSaver superannuation options.

Co-head of fund research, Chris Douglas, said it was still publishing performance figures for Huljich Wealth Management funds, as they had been signed off by auditor PricewaterhouseCoopers and independent trustee Trustees Executors.

Huljich, which has over $117 million invested on behalf of more than 70,000 members, is chaired by former National leader Don Brash and has Auckland City mayor John Banks on its board.

As part of a Securities Commission probe, it has rewritten its investor statements for retirement fund returns after previous returns did not show managing director Peter Huljich had made two payments totalling $150,000 in 2008 and 2009 as compensation for investment decisions he made.

Mr Huljich said he felt morally responsible for the investment decisions and there was no intention of boosting the funds' performance, and said they made no difference to performance ranking of the company's KiwiSaver scheme.

"The additional payments made by Peter Huljich make it difficult to make peer-relative assessments of the performance of the Huljich funds," Mr Douglas said.

"But it is clear that without these payments, performance would have been considerably worse on an absolute basis, and much more in line with peers."

Mr Douglas said it was yet another reminder of why investors need to approach all past returns with caution.

Star performers needed to be analysed over what contributed to their returns, were those factors likely to be repeated and were the people and processes that generated the returns still in place.

Where assets had grown substantially, investors should be cautious.

Firstly, fund managers may not be able to manage the money in the same way as the assets grow and one-off stockpicks can have a disproportionate impact on returns when assets are low.

After a poor year in 2008, last year proved much better for KiwiSaver options invested mainly in growth asset classes, Morningstar said.

Mr Douglas said performance-chasers would have had an average result in 2009, as many of the worst-performing fund managers in 2008 were top of the table for 2009.

"Last year proved to be a terrific time for growth assets, illustrating how quickly markets can turn."

Investment markets slid downhill in the first quarter of 2009 before staging a significant recovery over the following nine months.

All the major asset classes generated positive returns over the last 12 months, growth-oriented funds overweight equities and listed property delivering superior returns over more conservative counterparts.

The majority of KiwiSaver options in the Multi-Sector Growth and Aggressive categories delivered double-digit returns over the past year.

However, the outlook for global growth is far from settled, and investors should be prepared for further volatility in returns, he said.

"We continue to believe that investors with a number of decades until retirement age are best-served by the diversified KiwiSaver options with overweights to growth assets.

Among the default providers, Mercer KiwiSaver Conservative was easily the best performer in 2009 which also helped it to come out on top over two years.

"AXA and Mercer deserve a mention for strong results across many categories in 2009. It's worth noting that AXA and Mercer's options were both among the worst-performing conservative funds in 2008, illustrating how quickly the rankings can change.

"Other fund managers worthy of mention for peerbeating results included Asteron KiwiSaver Balanced Growth, and Fisher Funds Growth KiwiSaver, which was among the worst-performing options in 2008.

Grosvenor KiwiSaver also did well across multiple categories over the two-year period, while Brook was the quiet performer in the Multi-Sector Balanced and Aggressive categories over the past two years.

The survey report is available on the company's website: www.morningstar.com.au/s/documents/kiwisaver_survey100223.pdf