KiwiSaver scheme providers are starting to release their latest quarterly KiwiSaver data for the period ending June 30, 2013.
First cab off the rank is ASB. Our previous story covering the ASB and FirstChoice returns to December 31, 2012 can be found here.
Events over the past six to eight weeks have started to reflect in the last three month returns for providers.
The announcement by the US Federal Reserve they were preparing to wind back their bond purchasing program and reports that China was facing a possible financial crisis saw bond yields rise considerably.
ASB's predominately passive approach to managing their core portfolios means they are exposed to the markets and will have been unable to stem some of the losses.
Consequently many of the KiwiSaver funds which have a high concentration of fixed income assets (both domestic and offshore) in their portfolio will have suffered some capital loses over the last three months.
Since the end of the quarter global bond yields have continued to rise further compounding some of the losses made by managers in the last quarter. Investors have been bailing out of bond funds in large numbers with PIMCO, one of the world's largest bond fund managers, seeing nearly US$10 bln leave one of their funds.
Both ASB and the FirstChoice Conservative funds recorded negative returns for the last quarter ( -0.12% and -0.13% respectively). As we have mentioned previously the FirstChoice series is no longer open to new investment but continues to be managed on behalf of those existing investors.
The returns from the two providers (ASB & FirstChoice) across the same strategies is similar and my expectation is the FirstChoice portfolios will eventually be merged into the appropriate ASB core strategies in a similar way to what ANZ did with the old National Bank KiwiSaver scheme.
Year-to-date the ASB and FirstChoice funds have performed reasonably well across all portfolios. The strategies with higher exposure to equities (shares) have continued to provide high single digit to low double digit returns as global equity markets continue their upward trend.
During the quarter we note ASB have made some tweaks to their strategic long term asset allocations. Of interest is the reduction in allocation to cash within the more conservative portfolios; a move to increase the NZ Corporate Bond allocation while at the same time reducing their NZ government stock holdings in order to pick up some additional yield and a reduction in the global property allocation which reflects the managers view on the outlook for this sector as a whole.
We notice the FirstChoice Global Sustainability Fund continues to out-perform the core strategies offered under the ASB umbrella and the 12-month and five year returns are +24.8% and +7.1% p.a. respectively. It is a pity this fund is closed to new applications as with its sold track record it could be an attractive prospect for those seeking a more ethical or socially responsible investment alternative.
The next best strategy over the same time period has been the FirstChoice Active High Growth fund which returned +22.6% and 0.5% p.a. over the same period.
As a general observation, over the past five years, the passively managed investment strategies have out-performed the actively managed ones. The general under-performance of the actively managed strategies could be attributed to a combination of fees, asset allocation, lack of fund manager skill or inability to add value over the benchmark, and currency hedging and positioning.
Return data for the past five years has seen the more conservatively managed investments reigning supreme however the gap between the conservative and aggressive (high equity) portfolios has narrowed markedly as equity markets have continued their recent strong performance.
Across the board all the five-year returns are positive with only the FirstChoice Active High Growth fund still being underwater since its inception in April 2008 (-0.63% p.a.).
Although the manager does adopt a passive investment management style they take an active approach to currency hedging.
Previously ASB adopted the following strategy for their hedging; global equities partially hedged (20%); Australian equities 70% hedged and global bonds were fully hedged.
Below is a table of the longer term performance of the various 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.)
|
ASB KiwiSaver Scheme 30 June 2013 |
1 year (p.a.) |
5 year (p.a.) |
Since inception (p.a.) |
| NZ Cash Fund | 2.8% | 3.2% | 3.9% |
| Conservative Fund | 6.0% | 5.5% | 4.9% |
| Moderate Fund | 9.5% | 5.7% | 4.2% |
| Balanced Fund | 14.1% | 5.5% | 3.2% |
| Growth Fund | 18.3% | 5.0% | 2.0% |
|
FirstChoice KiwiSaver Scheme 30 June 2013 |
1 year (p.a.) |
5 year (p.a.) |
Since inception (p.a.) |
| NZ Cash Fund | 2.8% | 3.2% | 3.9% |
| Conservative Fund | 6.0% | 5.5% | 4.8% |
| Moderate Fund | 9.5% | 5.6% | 4.0% |
| Balanced Fund | 14.1% | 5.5% | 3.2% |
| Growth Fund | 18.3% | 4.9% | 2.0% |
| Active Conservative Fund | 8.9% | 5.6% | 4.2% |
| Active Balanced Fund | 14.2% | 4.9% | 2.7% |
| Active Growth Fund | 18.6% | 4.5% | 1.6% |
| Active High Growth Fund | 22.6% | 0.5% | -0.6% |
| Global Sustainability Fund | 24.8% | 7.1% | 6.5% |
More detailed performance reporting can be found here ».
The table below outlines the assset allocation for each ASB fund which is currently open for investment.
|
ASB KiwiSaver |
Cash (%) |
NZ Bonds (%) |
Global Bonds (%) |
Property (%) |
Global Property (%) |
NZ & AU Shares (%) |
Global Shares (%) |
| NZ Cash | 100 | ||||||
| Conservative | 23.5 | 29.7 | 27.0 | 8.9 | 10.9 | ||
| Moderate | 13.1 | 24.7 | 22.4 | 6.1 | 15.9 | 17.8 | |
| Balanced | 7.7 | 16.8 | 16.1 | 7.1 | 19.8 | 32.5 | |
| Growth | 4.1 | 8.9 | 8.1 | 7.1 | 27.7 | 44.3 |
2 Comments
Kiwisaver is fantastic for NZ and NZers, hopefully it encourages people to learn more about the capital markets. Not many NZers understand how bonds are priced and what risk they take on in a rising interest rate environment.
By it's very nature Kiwisaver is a very long term retirement savings tool so hopefully people don't get too concerned about the odd quarter of negative performance. It isn't the first time (although its the first time for bonds for a very long time) and won't be the last.
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