Our comprehensive review of Conservative KiwiSaver fund performance to June 30, 2017, identifying who has the best long-term returns

By David Chaston

If you are in a Conservative KiwiSaver fund, you have clearly made a choice to prioritise low risk, even lower than for the Default funds. (We reviewed the Default fund performances here.)

Low risk as a priority can be important if you cannot tolerate your fund balance decreasing due to financial market volatility.

Often that is important if you are contemplating needing the value for retirement living expenses soon. Or you have a view that the future may not be positive.

But, at this end of the risk spectrum, you need to be sure that keeping your retirement savings in these types of vehicles is better than in a bank term deposit (or a guaranteed Kiwi Bond deposit). Here are how these Conservative KiwiSaver funds have performed since inception, and over the last three years:

You have to conclude that most of these are not very good if you use the "bank term deposit" benchmark. Those returned an average of 3.3% gross, or after-tax 2.7%.

And the main reason is that fees are paid on any managed fund, whereas they are not charged for a straight bank deposit. Paying someone to 'manage' a cash fund that returns anything less than that is hard to fathom - and that applies to all but about half a dozen of the funds listed above.

Further, you might also want to know where these fund managers have invested your KiwiSaver monies. These details are set out in each of our fund pages, and here is a summary:

That list shows why you need to do some homework on them. Just relying on their 'name' or their risk class may not reveal where the manager has the fund allocated. There is a surprisingly wide variety.

I accept that the 10 year track record of any fund is not a certain basis for forecasting what it will be in the future. But a track record is not something that should be ignored either.

Now, compare that with the Default funds.

Only you can decide your tolerance for risk. Nothing in life is truly risk-free, so understanding it better can help you target where you have your KiwiSaver invested. And a qualified professional adviser can help with that too.

If you are invested in the top Conservative fund, you would be $1,377 worse off than being invested in the top Default fund. Comparing the average of the top five in each, you would be $1,744 worse off over the whole period.

Capital Guaranteed Funds

In addition to the mainstream Conservative KiwiSaver funds, Westpac has five capital 'guaranteed' funds that were previously offered in this category. The funds are no longer open to new investments but we have continued to gather and report on their performance so you can compare these to the funds above.

Westpac has five plans and they all start at different times:

Some changes and updates

We have reviewed and updated some of the processes in our regular savings analysis of all KiwiSaver funds on www.interest.co.nz and as a result the numbers may differ from previous releases. The key changes are a downward revision to the monthly contributions a person on an average income and 28 years old in 2008 would have made, and an enhancement to the way in which tax liability for the funds was calculated. These changes affect all funds analysed equally, so there is no material change to the relative positioning.

For explanations about how we calculate our 'regular savings returns' and how we classify funds, see here and here.

There are wide variances in returns since April 2008, and even in the past three years, and these should cause investors to review their KiwiSaver accounts especially if their funds are in the bottom third of the table.

The right fund type for you will depend on your tolerance for risk and importantly on you life stage.

You should move only with appropriate advice and for a substantial reason.