The latest data released for KiwiSaver performance as at March 31, 2013 is from Brook. Our story covering the returns to December 31, 2012 can be found here.
Brook continues to deliver superior long-term performance for investors in their Growth Fund with returns of 12.1% over the past 12-months and 4.8% p.a. over the past five years. The Growth Fund is the jewel in the crown for Brook.
The Growth Fund made a strong return of 5.6% for the March quarter. A large portion of the quarterly return was from the 38% exposure to NZ & Australian shares via the non-KiwiSaver Brook Tasman Fund which returned 9% for the last three months. Just over 50% of the portfolio is exposed to global equities which also had reasonably strong returns also.
Currently ranked third in its peer group over a five year period, the Brook Growth Fund is cementing its position as one of the "go to" funds for those seeking to maximise their returns over the long-term.
The Conservative KiwiSaver Fund made a return of 2.1% for the March quarter. The Fund invests a majority of investor's funds via Brook's non-KiwiSaver fund (70% of portfolio is in the Brook Income Fund).
This particular fund (The Conservative KiwiSaver Fund) is in its infancy and the performance data to date has been solid but not spectacular. The fund sits around the middle of its peer group based on data for the last three months to March 31.
The Balanced Fund had a strong March quarter, posting a return of 3.9%. This was largely driven by strong performance in Australasian equities. This fund invests approximately 15% of its current assets into the non-KiwiSaver Brook Tasman Fund. The Brook Tasman Fund returned 9% for the quarter. In addition to the exposure to the Brook Tasman Fund a further 48% was invested via another non-KiwiSaver fund, Brook Income Fund.
The Balanced Fund's performance currently trails the better perfoming funds over most time periods. Over five years the Balanced Fund is ranked in the bottom half of the peer group and the returns are marginally below sector averages.
All of the returns as at 31 March for the one year, five year, and since inception were above the same period returns posted in the previous quarter to December 31, 2012. This shows the managers returns on a rolling basis are improving. Some of the pick up will be as a result of improving market sentiment and also their portoflio positioning.
One of the interesting observations from the asset allocations of each fund is the preference for NZ bonds over global bonds. The fixed income portion of the fund is invested via the non-KiwiSaver Brook Income Fund and this has a bias to NZ bonds.
The manager also has a negative view on global fixed income markets. In particular they see there is potential for higher inflation and/or stronger economic growth in the US which would push up interest rates. Brook sees there is greater potential for capital losses to be incurred if interest rates rise sharply and this is magnified because they are starting off a low base.
They do not see the same risk in NZ as the market is already pricing in more rapid interest rate increases and is starting from a higher base. Over time the manager may look to decrease their holding in NZ bonds.
Within the NZ holdings the managers have added retail bonds to their wholesale portfolio for diversification purposes and to exploit some 'mis-pricing' opportunities that have presented themselves in the domestic retail market.
Brook also has a competitive advantage in the domestic market as they know the corporate issuers very well and can better assess the company’s earnings profile compared to fixed income specialists. This advantage allows Brook to add companies from different sectors that would not make it into a wholesale investors portfolio due to restrictions in their mandates on credit rating exposure.
This is not the first time this quarter we have seen a manager favour domestic bonds over global and it will be interesting to see if more KiwiSaver managers move away from their current global slant and invest more money in the domestic market.
Brook's funds under management (FUM) is growing slowly as currently sits at just over $7.9 mln. The Growth Fund makes up over 75% of the total KiwiSaver FUM and it continues to surprise us more money is not being switched from the under-performing growth managers to those who are consistently in the top quartile of the peer group.
We recommend investors review and monitor their KiwiSaver accounts regularly to ensure they are in the right fund for their tolerance to risk but are also maximising the returns available to them.
Below is a table of the longer term performance of the Brook funds. The return data is before tax and after fees and is as published by the managers. (No adjustments have been made to take into account those additional fees which scheme providers may charge and which are not included in calculating the fund performance. We do make such adjustments, but they will not be included until the full benchmarking is published.)
|
Brook KiwiSaver Scheme (31 March 2013) |
1 year (p.a.) |
5 year (p.a.) |
Since inception (1 Oct 2007) (p.a.) |
| Conservative Fund* | n/a | n/a | 4.5% |
| Balanced Fund | 8.2% | 4.1% | 4.5% |
| Growth Fund | 12.1% | 4.8% | 5.0% |
* This fund started in July 2012 so the data is for the period to 31 March 2013.
More detailed performance reporting can be found here ».
The underlying asset allocations as at 31 March 2013 for the individual funds are outlined below.
|
Brook KiwiSaver Scheme (31 March 2013) |
Cash (%) |
NZ Fixed Income (%) |
Global Fixed Income (%) |
Property (%) |
NZ & AU shares (%) |
Global Shares (%) |
| Conservative Fund | 25.4 | 39.7 | 5.2 | 19.2 | 10.6 | |
| Balanced Fund | 8.7 | 27.7 | 3.7 | 25.6 | 34.3 | |
| Growth Fund | 5.4 | 3.9 | 0.5 | 38.9 | 51.3 |
Story updated with additional information from the manager regarding outlook for offshore fixed income markets and investment strategy
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