Building on the work we launched last November, we have analysed the Default and Conservative funds using our new methodology and found there to be some reasonable variances in the returns received across the various Schemes.
This report updates our analysis to June 2014.
You would not normally expect a Default Scheme to show wide variances in returns as the asset allocation is reasonably standardised and within tight bands, so we suspect the quality of the research and security or fund manager selection processes are playing a larger part in the total return picture.
For the first time we are including analysis on the Kiwi Wealth Scheme and our initial analysis suggests they stack up favourably against other Schemes available in the Conservative KiwiSaver space.
One thing that has not changed is a select number of providers remain firmly entrenched at the top of the leader pack and there continues to be a healthy premium achieved over the Cash funds which will give those investors in these funds some food for thought.
Here is the update to June of the five default funds using the new methodology and perspective on KiwiSaver returns:
Default Funds | Cumulative $ | + Cum net gains | Effective* | = Ending value |
since April 2008 | contributions | after all tax, fees | cum return | in your account |
to June 2014 | (EE, ER, Govt) | $ | % p.a. | $ |
AMP** | 18,745 | 3,607 | 4.8% | 22,351 |
ANZ Investments | 18,745 | 4,349 | 5.8% | 23,094 |
ASB | 18,745 | 3,946 | 5.3% | 22,690 |
Mercer | 18,745 | 4,819 | 6.3% | 23,564 |
Fisher Funds TWO | 18,745 | 4,025 | 5.4% | 22,770 |
(* This is the equivalent cumulative annual average return to achieve the after-tax and after-fees gain between the total contributions to the account and the current value of the fund for our benchmark KiwiSaver.)
(** Note for the members of the old AXA default fund. Your account has now been transferred into AMP, but the numbers above don't actually apply to you; they are just for the original AMP default fund members.)
The next reporting cycle will see four more Schemes added to the Default Provider list namely BNZ, Grosvenor, Kiwi Wealth (the combined GMI/Kiwibank offering) & Westpac. As some of the new default providers have had to create new funds which meet the Default provider requirements it may take some time for the comparisons across the entire spectrum to become useful as a comparative tool.
Obviously, we do not know your personal income and earnings, so the results above aren't your's.
We have modeled a benchmark KiwiSaver individual like this:
- a full-time worker,
- on a median income,
- who was about the 500,000th signup to KiwiSaver (that is, at the end of March 2008),
- who was aged 28 on March 31, 2008,
- who has contributed 2%/2% until March 2012, and then 3%/3% (less ESCT) since,
Full details of our method is here.
(Please note that our new analysis can only be done for funds that supply unit prices or returns based on a similar basis to unit prices which we can use instead for our analysis. A small handful however won't supply them.)
Back to our Default funds. We now have over six years of regular saving and investment returns under review.
We believe long term performance is a key way to assess how a fund performs. But there is always a concern that a fund may be resting of earlier laurels, and long term results don't show recent under-performance.
To keep an eye on that aspect, we are adding an additional metric - the return over the last three years. Any shorter can encourage you to consider switching in a way that is neither healthy for your returns, nor recognising of long-term gains. Don't use your KiwiSaver account as a sharetrader would. It is a long-term commitment. (If you are keen to chase high returns, choose an aggressive fund and leave the research and trading to their experts.)
Adding the extra perspective gives this revised table:
Default Funds | Cumulative $ | + Cum net gains | Effective* | = Ending value | Effective |
since April 2008 | contributions | after all tax, fees | cum return | in your account | last 3 yr |
to June 2014 | (EE, ER, Govt) | $ | % p.a. | $ | return % pa |
AMP** | 18,745 | 3,607 | 4.8% | 22,351 | 5.0% |
ANZ Investments | 18,745 | 4,349 | 5.8% | 23,094 | 5.9% |
ASB | 18,745 | 3,946 | 5.3% | 22,690 | 5.3% |
Mercer | 18,745 | 4,819 | 6.3% | 23,564 | 6.4% |
Fisher Funds TWO | 18,745 | 4,025 | 5.4% | 22,770 | 5.6% |
For most default funds, the last three year's return are on a par with the lifetime returns. We believe this is reflective of the improving global economy and sharemarkets where above average long-run returns in equities have helped.
KiwiSaver default funds are only part a broader range of Conservative funds available, some of which have better returns. Here is the full list:
Conservative Funds |
Cumulative $
|
+ Cum net gains
|
Effective*
|
= Ending value
|
Effective
|
since April 2008 |
contributions
|
after all tax, fees
|
cum return
|
in your account
|
last 3 yr
|
to June 2014 |
(EE, ER, Govt)
|
$
|
% p.a.
|
$
|
return % p.a.
|
|
|
|
|
|
|
Milford Conservative | 12,691 | 6,049 | 7.0% | 18,740 | 7.8% |
BNZ Conservative | 3,732 | 211 | 6.8% | 3,943 | n/a |
Mercer Conservative [D] | 18,745 | 4,819 | 6.3% | 23,564 | 6.4% |
ANZ Default Conservative [D] | 18,745 | 4,349 | 5.8% | 23,094 | 5.9% |
Fisher Funds TWO Cash Enhanced [D] | 18,745 | 4,025 | 5.4% | 22,770 | 5.6% |
Kiwi Wealth Conservative | 18,745 | 4,008 | 5.4% | 22,752 | 5.4% |
ASB Conservative [D] | 18,745 | 3,946 | 5.3% | 22,690 | 5.3% |
AMP Default [D] | 18,745 | 3,607 | 4.8% | 22,351 | 5.0% |
Fidelity AC Conservative | 4,105 | 176 | 4.8% | 4,280 | n/a |
ANZ OneAnswer NZ Fixed Interest | 18,745 | 3,416 | 4.6% | 22,161 | 4.6% |
Mercer SuperTrust Fixed Interest | 18,745 | 3,390 | 4.6% | 22,135 | 3.0% |
ANZ OneAnswer NZ Fixed Interest | 18,745 | 3,110 | 4.2% | 21,854 | 3.0% |
Fidelity Capital Guaranteed | 18,745 | 2,837 | 4.1% | 21,581 | 3.7% |
Lifestages Capital Stable | 18,745 | 2,783 | 3.8% | 21,527 | 4.2% |
BNZ Cash | 3,732 | 109 | 3.5% | 3,841 | n/a |
AMP Cash | 18,745 | 2,377 | 3.2% | 21,122 | 2.8% |
Grosvenor Enhanced Income | 18,745 | 2,280 | 3.1% | 21,025 | 2.6% |
Fisher Funds TWO Preservation | 18,745 | 2,194 | 3.0% | 20,939 | 2.7% |
Aon Tyndall NZ Cash | 18,745 | 2,129 | 2.9% | 20,874 | 2.6% |
ASB NZ Cash | 18,745 | 2,075 | 2.8% | 20,819 | 2.7% |
ANZ Default Cash | 18,745 | 2,018 | 2.7% | 20,763 | 2.5% |
Staples Rodway Conservative | 18,745 | 1,976 | 2.7% | 20,721 | 2.4% |
Mercer Cash | 18,745 | 1,969 | 2.6% | 20,714 | 2.2% |
Westpac Cash | 18,745 | 1,957 | 2.6% | 20,702 | 2.4% |
ANZ Cash | 18,745 | 1,942 | 2.6% | 20,686 | 2.5% |
Craigs Fixed Interest | 18,745 | 1,901 | 2.5% | 20,646 | 1.5% |
ANZ OneAnswer Cash | 18,745 | 1,862 | 2.5% | 20,606 | 2.4% |
Mercer SuperTrust Cash | 18,745 | 1,854 | 2.5% | 20,598 | 2.0% |
Aon ANZ OnePath Cash | 18,745 | 1,488 | 2.0% | 20,233 | 1.8% |
[D] = Default fund | |||||
This list includes funds which started later than March 31, 2008 which is why cumulative contributions can be less than $18,745. The list is sorted by effective cumulative return since 2008. |
In addition, savers interested in risk-protected returns should consider Westpac's capital 'guaranteed' funds.
These funds invest in equities but have a Capital Protection Plan is designed to give you the opportunity to earn the higher returns normally associated with growth assets without the risk of losing your initial contributed capital (other than through the insolvency of the Capital Protection Provider or a "tax change event"). The goal of generating higher returns is implemented by having as much of the CPP Fund as possible invested in growth assets.
However, the Manager is also required to preserve the capital value of the Fund. It does this by reducing the amount invested in growth assets if the value of the assets of the CPP Fund falls below certain predetermined levels. Instead, some (or, if there is a very dramatic fall in the value of the growth assets, all) of the assets of the CPP Fund are placed in a form of deposit with the Capital Protection Provider that is designed to recover part of the value of the assets over time but does not produce a positive investment return (these are sometimes called zero coupon bonds or deposits).
Westpac has five such plans, all starting at different times:
Capital protected | Cumulative $ | + Cum net gains | Effective* | = Ending value | Effective |
since April 2008 | contributions | after all tax, fees | cum return | in your account | last 3 yr |
to June 2014 | (EE, ER, Govt) | $ | % p.a. | $ | return % pa |
Westpac CP Plan No. 1 | 16,354 | 5,884 | 9.6% | 22,238 | 10.7% |
Westpac CP Plan No. 2 | 13,565 | 4,268 | 9.4% | 17,833 | 10.8% |
Westpac CP Plan No. 3 | 10,592 | 2,115 | 8.0% | 12,707 | 11.2% |
Westpac CP Plan No. 4 | 7,399 | 1,666 | 11.7% | 9,065 | n.a. |
Westpac CP Plan No. 5 | 4,664 | 581 | 7.4% | 5,245 | n.a. |
Don't jump into these types of funds unless you understand fully how they work in good times, and bad.
Our next review will be of 'moderate' funds, updated to June 2014.
Updated: changed reference from Kiwibank to Kiwi Wealth as a default provider from July 1, 2014.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.