Sharemarket lift makes KiwiSaver funds fly

Photo / NZ Herald

A major turnaround in the New Zealand and international sharemarkets in the past six months has boosted the performance of KiwiSaver growth funds, according to a survey by research house Morningstar.

Growth funds, which mainly invest in assets like shares and property, were hammered by the global financial crisis during 2007 and 2008 but for the six months to September 30 their average performance has been nearly triple that of the average conservative fund, which invests mainly in cash and bonds.

The average conservative fund was up 6.26 per cent while the average growth fund was up 17.24 per cent and the average for more aggressive growth funds was 21.83 per cent over six months.

Morningstar fund analysis manager Chris Douglas said the past six months showed how quickly markets could turn around.

Douglas said anyone who had decided to switch into a more conservative funds would have missed out on the rally which had seen the New Zealand share market rise 22 per cent and the Australian market up 35.5 per cent in the past six months.

Over the two years since fund managers began investing KiwiSaver money conservative funds have had an average return of 3.63 per cent per annum.

The top conservative fund over two years was the tiny $3.6 million Grosvenor KiwiSaver Enhanced Income fund which had an average of 6.97 per cent per annum followed by the $232 million ING Conservative fund which had 4.16 per cent per annum and is one of the Government's six default schemes. Huljich Wealth Management, which has been in the spotlight recently for its KiwiSaver selling practises topped the performance tables for the moderate, balanced and growth categories.

Brook Asset Management's Growth fund was the top performer in the aggressive growth funds with 4.57 per cent per annum.

The top performing fund for all KiwiSaver funds was the Aon Milford Aggressive fund which invests in Australian and New Zealand shares and had a return of 12.94 per cent pa.

Mr Douglas said the fund had benefited from having a high level of investment in cash which meant it had fended off the worst of the global financial crisis but its performance had not been able to compete in the past six months with those who had more money invested in growth assets.

The worst performer was the ING SIL International Property Fund, which fell 24.05 per cent per annum over the two years.

Mr Douglas said the fund's performance reflected the hammering of global property assets over that time.

But there were also some surprises in those at the bottom end.

Gareth Morgan's funds, which were included in a KiwiSaver survey for the first time, came out at the bottom or close to it in every category they are in over one year.

Gareth Morgan's conservative KiwiSaver fund was 13th out of 14 conservative funds over one year with a return of 3.69 per cent and bottom out of 21 funds in the balanced sector with a return of -0.20 per cent.

In the aggressive growth fund category Gareth Morgan's fund was third from the bottom on -5.03 per cent per over one year behind AMP's aggressive fund, which was -9.76 per cent and First NZ Capital's Aggressive Kiwi Fund, on -8.66 per cent.

GMK KiwiSaver director Andrew Gawith was surprised at the performance of its funds relative to peers.

"I never expect our funds to be at the top for any length of time but I would expect them to be above average over the medium to long term."

He believed the three funds had done that over two years and put the firm's conservative fund at 3.77 per cent per annum over two years, beating the average of 3.63 per cent for that sector, its balanced fund at -0.65 per cent - better than the -1.85 per cent sector average and growth fund at -5.62 per cent, up on the -6.29 per cent average.

Mr Gawith admitted its funds had probably been slow to come back into the sharemarket because of a conservative approach and had also been hit by the rising New Zealand dollar.

TOP PERFORMERS

KiwiSaver performance over two years to September 30

CONSERVATIVE
* Grosvenor Enhanced Income Fund: 6.97 per cent per annum

MODERATE
* Huljich Conservative Diversified KiwiSaver Fund: 11.34 per cent p/a

BALANCED
* Huljich Balanced Diversified KiwiSaver Fund: 8.24 per cent p/a

GROWTH
* Huljich Growth Diversified KiwiSaver Fund: 7.7 per cent p/a

AGGRESSIVE GROWTH
* Brook Professional Growth Fund: 4.57 per cent p/a

Full performance charts at www.morningstar.net.nz