By Amanda Morrall
Evaluating your KiwiSaver fund is a tricky business.
For one there is currently no industry-agreed standard or government regulation governing how KiwiSaver funds report their performance. Changes are in the works but they won't likely take effect until 2012-2013.
Secondly, while some KiwiSavers might do so, there is no actual requirement for them to keep you posted about how your fund is doing beyond a basic annual report and statement. According to the KiwiSaver Act, the annual statement must set out the amount of each type of contribution received by the scheme during the year, and the value of the units in the scheme.
That's in contrast to other more mature international investment markets where the legal requirements are so strict, investor's letter boxes are clogged with quarterly reports and status updates whenever there's any portfolio restructuring.
In recognition of this gaping omission in New Zealand (where KiwiSaver funds have snowballed in four years to NZ$8 billion in value), there will soon be a compulsion for quarterly statements to be posted to websites. (See Amanda Morrall article on proposed disclosure changes here.)
That change won't likely come into effect until 2012 so in the meantime, the onus is on KiwiSavers to do their own homework.
The upside of having to be the information aggressor is, ostensibly, that it helps cultivate a better understanding of and interest in your KiwiSaver account. The regular delivery of statements, annual reports and prospectuses can have the unintended consequence of breeding indifference if they are never actual opened and given more than a passing glance.
KiwiSaver followers may have cottoned onto the research house MorningStar's quarterly performance reports on the national savings programme. (Click here for latest result). It provides a good, albeit industry-oriented, basis for comparison.
The providers themselves are another source, although you may be disappointed or overwhelmed by the content.
A more recent addition to the KiwiSaver tool-kit is the information and data provided by interest.co.nz in its new KiwiSaver section, launched in January.
The benefit of interest.co.nz's performance rankings (updated on a quarterly basis or as the data becomes available) is that we take into account the whole slate of fees that reduce returns. (For details see our section on fees here).
Our 'Adjusted Performance' figures deduct those fees and expenses not included in the Fund's reported returns, in a standard and consistent way. We also include the fixed dollar 'membership' fees that almost all funds charge. To turn this into a percentage fee we have used a balance of $10,000.
The 'extra return' effect of Government and employer contributions are not included in both reported and calculated returns.
The returns we show on our Funds summary pages are not necessarily the returns any individual investors will get as your own return depends on ...
- when you invested, and
- the level of income tax (based on your own PIR) that is deducted; see here for more on tax and PIR rates.
It is important to note that past performance is not indicative of future performance and is not guaranteed.
Here's the top performance funds ranked by their peer group as of March 31, 2011 showing annualised returns over one, two and three years.
For a complete ranking lists click here:
| Aggressive funds | Rank | 1 year | 2 year | 3 year |
| Fidelity Options | 1 | 9.4% | 20.3% | 12.4% |
| Fisher Funds Growth | 2 | 10.2% | 28.1% | 11.2% |
| Milford Aggressive | 3 | 5.3% | 13.6% | 11.2% |
| Aon Milford | 4 | 4.9% | 13.1% | 10.8% |
| Fidelity Aggressive | 5 | 5.8% | 18.4% | 5.8% |
| Growth Funds | Rank | 1 year | 2 year | 3 year |
| Aon OnePath Balanced | 1 | 7.5% | 16.6% | 6.5% |
| Craigs Balanced | 2 | 5.5% | 18.1% | 5.5% |
| Craigs Balanced SRI | 3 | 4.4% | 10.9% | 5.1% |
| Westpac Balanced | 4 | 8.0% | 12.9% | 4.8% |
| OnePath SIL Balanced Growth | 5 | 7.6% | 15.7% | 4.1% |
| Balanced Funds | Rank | 1 year | 2 year | 3 year |
| Fidelity Balanced | 1 | 4.7% | 11.2% | 5.4% |
| Aon Russell LifePoints (moderate) | 2 | 7.8% | 16.2% | 5.0% |
| Mercer Super Trust Moderate | 3 | 4.5% | 13.9% | 4.8% |
| Grosvenor Balanced | 4 | 4.4% | 11.3% | 4.7% |
| OnePath SIL Balanced | 5 | 7% | 13.1% | 4.6% |
| Moderate Funds | Rank | 1 year | 2 year | 3 year |
| Aon Russell LifePoints Conservative | 1 | 7.5% | 13.5% | 6.3% |
| Mercer Conservative | 2 | 4% | 10.4% | 5.5% |
| Aon Russell LifePoints 2015 | 3 | 7.7% | 15.5% | 5.4% |
| Fidelity Conservative | 4 | 5.1% | 9.0% | 5.4% |
| Grosvenor Conservative | 5 | 5.1% | 8.6% | 5.4% |
| Conservative Funds | Rank | 1 year | 2 year | 3 year |
| Mercer Super Trust Fixed Interest | 1 | 2% | 10.7% | 6.9% |
| OnePath SIL International Fixed Interest | 2 | 4.1% | 4.0% | 6.2% |
| OnePath SIL NZ Fixed Interest | 3 | 7.5% | 7.6% | 6.0% |
| Mercer Cash | 4 | 4.5% | 3.8% | 5.0% |
| Mercer Super Trust Cash | 5 | 4.2% | 3.6% | 4.8% |
*Story corrects requirement for disclosure on current KiwiSaver regulations. There is a legal requirement for providers to supply an annual report as well as a member statement.
23 Comments
I'd steer well clear of GMK when they have lines this this in their fine print, well away from the glossy website and TV appearances.
"In certain circumstances the Trustee may be reimbursed for certain costs, charges, or expenses it incurs in relation to the Scheme, in addition to the annual fee. There are also circumstances where third party charges may be deducted from your members account or the Scheme. These circumstances are set out in the Gareth Morgan KiwiSaver Scheme Investment Statement. For the avoidance of doubt, the Trustee will not be reimbursed for any ordinary costs, charges and expenses incurred by the Manager in the management and administration of the Scheme"
If you read the investment statement, GMK's fees consist of a single fee covering both management and trustee fees, plus recovery of the other costs you mentioned above, which boil down to: one-off costs incurred by the trustee, and costs such as brokerage that are part of the cost of investment. Regular ongoing costs such as audit/legal fees, custodial fees, etc are specifically excluded from the "other costs" category. For comparison I looked at (at random) the Fisher Funds investment statement. They charge: an admin fee; a management fee; a performance fee; a trustee fee; a custodial fee; and then the manager may recover, via the trustee, additional costs such as brokerage, printing, legal and taxation advice, audit fees, third party research (!), etc. So GMK compares fairly well from what I can see.
What fund would you suggest as an example of one with a better fee structure?
As a former GMK member I thought the "all up" 1% fee sounded nice and tidy. What Morgan doesn't tell you unless you ask is that it does not include the costs of investing in the other funds he uses so the actual cost will be much higher. More smoke and mirrors from the next Alan Hubbard.....
Actually the statement was that GMK would change its currency hedging policy, if I'm not mistaken. If you care to judge the performance of a superannuation scheme after 2.5 years of what for many could be a 50+ year excercise, that is your prerogative, and in my view, short sighted. I will concede that should deceitful happenings of Huljich nature emerge I shall have been proven wrong.
What cult? If you mean Gareth Morgan, let's not forget as an individual he was fiercely against any form of kiwisaver scheme, and only introduced GMK as yet one more alternative. I think you'll find he would much rather we all had our own 'cult' and did away with the Government sponsored scheme entirely! Or perhaps you are more referring more to Carmen Fisher, when you speak of a cult following? After all aren't they buying the disgraced Huljich 'cult' fund?
@Not Dr Evil
I agree that the disclosure of what I call "submarine" costs is severly lacking. However you will find that a lot of the schemes subcontract the management of their funds to other managers, so singling out GMK is perhaps unwarranted.
I will be looking at this issue in my next installment of Investment Management 101 - here is the last one.
Kevin
Almost all the schemes have a similar fee structure to Fisher's. The only ones that have flat percentage fee are GMK, Smartshares and Medical Assurance.
You can see the fee burdens for different types of fund by going to our Funds home page and clicking through to the type of fund (Aggressive, Growth etc) and at the bottom is a chart that shows the distribution of fees.
Hope this helps. Kevin
To be fair to GMK, all KiwiSaver schemes have similar language which ensures that they can raise fees or charge expenses in the future. You can access all the investment statements from this page.
Kevin : Correct me if I'm wrong , but doesn't Fisher Funds charge performance fees in the same manner as US hedge funds do ? ..
.... They take a huge whack , if they get above certain benchmarks , say a 10 % fee on profits above the 90 day money market rate .... which is mindbogglingly incomprehensible , when the funds are invested in the stockmarkets ...... Why not benchmark against an NZX or an ASX index ?
Yet in the years that they underperform , they don't re-imburse the investors for the fund managers' incompetence ........ Cream it on the upside , no recourse on the downside .....Nice work if you can get it ...
....... And given the trend of stockmarkets , occassional massive run-ups , such as 2009 , Fisher Funds managers are going to make out like highway robbers when the markets do a 50 or 100 % run up .
[ ..... Gummy is no " Rocket Scientist " , correct these assertions if they're wrong ...... ]
@gummy bear hero
Hedge fund fees are known as "2 and 20" which means 2% of assets and 20% of performance although they have been falling.
Fisher Funds has a performance fee on its growth fund of 10% of the return in excess of the cash rate but it is subject it a a "high water mark" which means that if the fund declines and then goes back up it can't recharge for performance.
So it is not really a hedge fund type structure.
Milford's Aggressive Fund has a performance fee as well: 15% of outperformance of 10% per annum, again subject to a high water mark condition, although it can be reset every 3 years at the trustee's discretion.
However any scheme that uses external managers may be paying performance fees to external managers that don't get disclosed (the exception being Fidelity).
Cheers, Kevin
I hope we don't see any breathless press releases from the top ranking companies listed here with attaching blurb about how they have outperformed over three years because, actually, they haven't. The unit price on 31 March 2011 versus the unit price on 1 April 2008 is only relevant to the investor if they paid in money (or withdrew it) on those specific dates.
Even a day either side will see the rankings change. Interesting though they are, such stats say very little to me about my KiwiSaver (or anyone's for that matter).
This is because such reporting does not take on board the notion of regular contributions - which is the way KiwiSaver works for most of us.
If I was with the top performer, my 1 April 2008 contribution may have grown by that much, yes, but the other 80-odd contributions since then will have had different levels of growth. Note the fluctuating comparitive rankings over the three years.
The industry standard over performance reporting is to pretend that someone invests a lump sum at X date and we'll see how it grows. KiwiSaver is fundamentally different. I would love to see internal rates of return based on someone earning $50K p.a. paying contributions fortnightly. That would give a better idea of who is really performing and will reflect what is really happening to people's money in KiwiSaver.
It's really confusing keeping track of what's going on even though I log into my provider's page pretty regularly to stare at the total.
I have my kiwisaver with ANZ in their "Lifetimes Option" fund which means according to my age the distribution of assets automatically changes. (See http://www.anz.co.nz/personal/investments-advice/kiwisaver-scheme/optio…)
At the moment I'm in the "Balanced Growth Fund" option because of my age.
What makes it confusing when comparing is 1)The name "Balanced Growth Fund", I often can't find it on charts under ANZ (it's not the same as the balanced fund OR the growth fund)
2) ANZ changed the name of the fund; it used to be managed by ING, then ING changed the name to OnePath and I can never figure out (or it seems to vary) if it's listed under OnePath or under ANZ. There are a lot of OnePath funds.
I've been meaning to call my bank and express my frustration with this and get them to tell me exactly what the darn thing is now called.
As far as I can tell in comparison with every other fund it seem to be performing slightly above average, but as I said, I find it hard to know if I am comparing the right funds!!!
Maybe you could have a look and let me know what you think it's called on that kiwisaver survey chart. I think it must be the "ANZ Balanced Growth" one on that particular chart, which is one of the few times I've found a name that actually seems to acurately list it.
How does it look like it's doing to you?
I'm just a poor PAYE person trying to figure all this stuff out.
Heree are some links that should help, JD
Our page on ANZ Balanced Growth Fund
ANZ's investment options page (click on the Growth Funds tab)
And finally this page is has a table that compares all growth funds. You can acess it from our main Funds home page. If you go down to the bottom there are a couple of charts that allow you to see where your fund sits on both fees and perfomance. On a 3 year basis with our adjusted return of 3.6% p.a, the ANZ Balanced Growth Fund is in the missle of the pack.
The change of manager name from ING to OnePath did not affect the fund's name.
Hope this helps, Kevin
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