Inside Money: Funds up as flow-on effect builds momentum

Michael Cullen. Photo / File

It's been a good year for New Zealand's fund managers, according to the latest figures supplied by Australian research firm Plan for Life, with total funds under management (FUM) up more than 17 per cent in the 12 months to September 30.

With $33 billion under management the retail funds sector has almost escaped its pre-KiwiSaver malaise, where total FUM, I recall, was languishing around the $12 billion mark.

And as the Plan for Life figures reveal, KiwiSaver has been the main source of growth for retail fund managers with flows up 35 per cent over the year to September compared to only 10 per cent for non-KiwiSaver managed funds (while 'other' superannuation funds actually declined 1.5 per cent over the same period).

"Gross Inflows jumped 22.7 per cent to $2.6bn during the September quarter due to the usual KiwiSaver cashflow seasonality factor. Over the past year Inflows were up 7.7 per cent," the Plan for Life report says. "Year on year Inflow increases were experienced by Milford (88.6 per cent), Devon Funds Management (85.7 per cent), BT/Westpac (58.2 per cent) and Fisher (10.3 per cent) while AMP (-20.8 per cent), TOWER (-14.5 per cent) and Mercer (10.1 per cent) saw theirs decline."

Somewhere during the year the KiwiSaver sector also officially asserted its dominance in the retail sector, now accounting for over 44 per cent of all FUM while non-KiwiSaver funds (excluding other retail super schemes) make up 40.8 per cent. Last September the positions were reversed with KiwiSaver making up 38.4 per cent of retail FUM and non-KiwiSaver 43.4 per cent.

From here on in KiwiSaver as a proportion of the retail funds market will only increase further, given its government-mandated growth. Naturally, that gulf will widen even more quickly if Michael Cullen's proposal to compulsorise and lift KiwiSaver contribution rates to 8 per cent (rising to 12 eventually) comes to fruition.

(In his quite interesting speech Cullen says his proposals would lift KiwiSaver contributions to "a level far closer to that planned in Australia". Australia's version of Cullen in a superannuation sense, and possible role model, former Labor Prime Minister Paul Keating, has upped the game by calling for contributions there to rise to 15 per cent.)

As the chief KiwiSaver 'architect' Cullen speaks in broad design terms rather than actual construction details.

Meanwhile, the builders or retirement income sub-contractors are getting on with the job.

According to Plan for Life, over the 12 months to September 30 "Milford Asset Management (93.0 per cent), Gareth Morgan (37.3 per cent), BT / Westpac (28.5 per cent), Fisher Funds (21.8 per cent), OnePath (19.7 per cent), ASB (16.2 per cent), Mercer (15.8 per cent), Fidelity Life (15.4 per cent) and TOWER (11.3 per cent) all managed to report significant double digit funds growth rates".