KiwiSaver funds plunge into red

Stock markets around the world plunged in the September quarter sending KiwiSaver returns downwards. Photo/Bloomberg.

Most KiwiSaver funds plunged into the red last quarter - the first time in four years there has been a widespread negative impact on people's retirement savings.

Figures released by Morningstar show only conservative funds escaped negative performance in the three months to September 30 when global share markets reeled over concerns about China's slowing growth.

The average performance for conservative funds was just 0.2 per cent while the average for the worst affected category - aggressive growth - was -4.47.

The worst performing fund - the AMP LS Aggressive fund - was down 7.2 per cent for the quarter.

Find out how your KiwiSaver fund is doing here.

Elliot Smith, manager research analyst at Morningstar, said conservative funds had held up better because of their higher exposure to cash and fixed interest investments.

But over the longer term growth funds still remain the better performers with growth category up 9.5 per cent per annum on average over the last five years compared to 6.2 per cent for the conservative category.

The negative whitewash is the worst to hit KiwiSaver funds since the 2011 September quarter when the markets were being impacted by the European debt crisis.

Smith said the last quarter could have been worse if not for the fall in the New Zealand dollar.

"Over the quarter the depreciating dollar did mitigate some of the fall."

The good news is that since the end of the quarter share markets around the globe had bounced back.

"The New Zealand share market is pretty much back to where it was pre the slump and the US market is nearly back up.

"Given most KiwiSaver equity exposure is to New Zealand, Australia and the states there would have been a big claw-back in the last few weeks."

But Smith said the negative returns were also a wake-up call to savers.

"It's a bit of a wake-up call that they shouldn't expect double digit returns over the next while."

It's a bit of a wake-up call that they shouldn't expect double digit returns over the next while.

Elliot Smith

Smith said the last few years had been a unique situation with strong performance from both global share markets and bond yields because of the level of quantitative easing going on around the world.

The local share market had also had a very good run boosting returns.

But he said expectations were that annual returns would now be in the mid-to-high single digits for KiwiSaver funds.

Smith said there was little people could do about the lower average returns.

"As long as individuals are in the most appropriate fund for their risk profile there is not a lot they should."

Figure out what would be the right KiwiSaver fund for you here.

See the Morningstar research here: