Leading KiwiSaver funds thrive on weakening dollar

Currency had a big part to play in funds' returns. Photo / Brett Phibbs

The best-performing KiwiSaver funds were those that bet on the New Zealand dollar falling against foreign currencies in the three months to June 30, according to Morningstar.

The research and ratings agency has released its latest survey on KiwiSaver funds and found currency had a big part to play in which funds had the highest returns.

Tim Murphy, director of manager research at Morningstar Australasia, said the depreciating New Zealand dollar was a key driver of performance for KiwiSaver investors during the quarter.

"Currency positioning played a key role and resulted in significant disparity in returns within each category, particularly the growth-focused categories," Murphy said.

"KiwiSaver funds with unhedged exposures to Australian and international equities benefited the most."

An unhedged fund is one that does not take out a future or options contract to try to negate a fall in the New Zealand dollar.

While the value of a share in Apple may not change during the quarter, because investors own the shares in US dollars and convert them to New Zealand dollars when sold there is a gain if the US dollar has strengthened against the kiwi.

The Kiwi dollar fell against major currencies during the quarter, dropping 8.1 per cent against the US dollar, 12.1 per cent against the euro, 13.4 per cent against the British pound and 9 per cent against the Australian dollar.

Morningstar's research found Forsyth Barr and Generate's funds were the top performers in the aggressive growth and growth categories while Aon KiwiSaver Russell and Grosvenor KiwiSaver Socially Responsible Investment topped the balanced category and Kiwi Wealth came first in the conservative category. Over the longer term the research found Aon KiwiSaver Russell had been the standout performer as it was either at or near the top for performance in all five multi-sector categories over five years.

The Kiwi Wealth fund was top for the aggressive growth category over five years while the Milford Balanced fund was the best performer in the balanced category.