The KiwiSaver fund that has returned nearly 400%

By Susan Edmunds of RNZ

A dollar invested in the best performing KiwiSaver fund from the start would now be worth nearly $5, new data shows.

Morningstar data shows the best performing funds since their inception.

Top performer is Milford’s KiwiSaver active growth fund, which had annualised growth since inception of 11.65% a year, and cumulative growth of 385.67%.

Morningstar data director Greg Bunkall said that would mean every $1 invested at the start of the fund would be worth $4.85 now.

It was followed by the OneAnswer KiwiSaver Sustainable International Share Fund at 375.06% and QuayStreet’s KiwiSaver NZ equity fund.

On an annualised basis, Superlife’s KiwiSaver United States large growth fund was top of the list at 16.2% a year.

Bunkall said Milford’s active growth fund was a strong performer because it had a flexible asset allocation mandate, which allowed it to make calls about the level of risk it felt was appropriate for the state of the market.

“And for the most part it has worked out pretty well for the fund. That combined with some good stock selection has meant strong performance over the long term. As to the future, the investment mandate is largely unchanged but it’s impossible to know the level of success they can have implementing that into the future.”

Bunkall said he was not surprised to see the strength of the funds in recent years.

“A lot of them have had a long history, they’ve gone through a very large equity bull market over that time.”

He said the funds that topped the list tended to be aggressive and heavily invested in equities.

“One of the good things about KiwiSaver is all the dividends of the companies get invested… there’s no distribution out to investors... I’m not taking that money and buying a car with it. It’s being put back into the market and reinvested.”

He said the data showed the power of being invested for a long period of time.

“We’re really starting to see the impact of compounding in these numbers... there’s a saying that ‘money makes money and the money money makes makes money’. We’re seeing that in action.”

Bunkall said it was likely that strong returns would continue for equities in an environment of falling interest rates.

Murray Harris, head of KiwiSaver at Milford Asset Management, said the fact that growth funds had performed well over a long period of time was what should be expected.

“If you look at the profile of returns from KiwiSaver funds from cash, conservative through to growth and aggressive, it’s exactly as you’d expect. Your average aggressive and growth fund has done better than your balanced and balanced has done better than conservative.

“That’s exactly what you’d expect with a medium to long-term time horizon. That’s exactly why we tell people not to panic and switch funds from growth to conservative when we have sell-off like we saw a couple of weeks ago when Japan had that big dip.”

Harris said people needed to let their funds do what they were designed to over time. “Don’t panic when there’s a wobble and move your money if your time horizon is more than 10 years. For most people KiwiSaver is saving for retirement which is 20, 30, 40 years out.

“[This data is] proof that it works. Long-term investing works. Diversified exposure across a range of assets works, investing in higher-risk growth assets works over the long-term.”