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KiwiSaver Performance - Morningstar Survey to 31/03/2013

Since the launch of KiwiSaver in 2007, we have monitored the returns of each of the main KiwiSaver providers Balanced Funds every quarter.

The Morningstar Survey covers all of the main providers with the exception of the Gareth Morgan KiwiSaver scheme (as he refused to participate in the comparison survey).

Moneyworks NZ Ltd's comments from the survey for the quarter ending 31/03/2013.

Fees and Returns - an inverse relationship?

There does not seem to be the anticipated relationship between the Total Expense Ratio and returns.  Based on the rhetoric from some journalists, all that you should be looking at is the level of fees charged by the fund manager.  You should then choose the lowest fees, and this will lead to you getting the highest returns.

Well, KiwiSaver has been going for over 5 years now and this does not seem to be working.  As an example, here are four providers, with their fees, fund size and returns for the last 1, 3 and 5 years according to the Morningstar research.  As you can see, this has been sorted by the highest Total Expense Ratio of this sample to the lowest.

Therefore, based on the commentaries, you would expect to see the 1 year, 3 year and 5 year returns increase as you go down the table.  Interestingly, this appears to be the opposite.  The ANZ and OnePath SIL KiwiSaver schemes continue to consistently outperform the lower fee ASB, Westpac and Tower funds over all time horizons.

Interesting food for thought - it appears that there is more to choosing a suitable fund manager than just heading for the lowest fees and being able to see your balance on your bank account statement...

Balanced PIE KiwiSaver

Total Expense Ratio (%)

Member Fee $pa

12 month return to 31/03/2013

36 month return (per annum) to 31/03/2013

60 month return (pa)to 31/03/2013

Fund Size  ($million)

ANZ KiwiSaver Balanced Fund

1.15

24.00

13.6

8.5

6.5

186.3

OnePath SIL KiwiSaver Balanced Fund

1.11

24.00

13.7

8.6

6.6

205.3

Tower KiwiPlan Balanced 

1.09

33.00

12.1

6.7

5.2

281.8

AMP KiwiSaver Balanced Fund

0.96

36.00

11.2

6.9

4.8

218.8

Westpac KiwiSaver Balanced Fund

0.91

31.08

12.0

7.6

5.9

414.8

ASB Scheme KS Balanced Fund

0.65

30.00

11.1

6.5

3.0

279.2

ASB FirstChoice KS Tracker Balanced Fund

0.56

36.00

11.2

6.9

4.9

 

22.9

The Morningstar Survey is available free to download to the public here.

Relevant comments from Morningstar in their survey:

The first quarter of 2013 was a period of significant change for a number of KiwiSaver providers. AMP Wealth (formerly AXA), National Bank, and ASB’s FirstChoice KiwiSaver have all closed to new investors. All the above scheme’s will continue to be runin the same fashion they have previously for existing investors, although each Provider has stated these schemes will be either merged into a comparable option, or is under a strategic review.
Further to this, BNZ announced its much anticipated arrival into the KiwiSaver space with the launch of its new scheme. BNZ    previously sold AXA’s KiwiSaver offering, but has now introduced its own scheme to the market, (with an interesting new advertising jingle that is hard to shake). We expect to add BNZ’sKiwiSaver Scheme to our database it in the coming months.
There was also the much publicised acquisition of TOWER Investments by Fisher Funds, finalised just after the quarter-end.

Morningstar - Some Pointers for those Impacted by KiwiSaver Provider Changes

A sizeable number of KiwiSaver investors will have received letters from their provider aroundthe future of the scheme they have allocated too. As already stated, during the first quarter of 2013 there was a significant amount of change which will impact many KiwiSaver investors. In some cases, the changes are literally a name change.
For example, National Bank KiwiSaver investors will continue to have their savings managed in the same identical fashion as previously by the OnePath investment team. This team is responsible for all investment decisions of the ANZ National Bank, and SIL KiwiSaver options which are managed in an identical fashion, and have been since inception in 2007.
Investors in the former AXA KiwiSaver scheme (rebadged AMP Wealth following the sale of AXA to AMP) will find they have the same underlying investment team making their asset allocation decisions, given the AXA investment team were brought over aspart of the transaction. There are some differences between the asset allocations in the AMP and AXA KiwiSaver schemes, but the investment philosophy and team are consistent.
ASB’s FirstChoice KiwiSaver option is a different proposition. ASB is well known for its low cost passive KiwiSaver Scheme, while the firms lesser known FirstChoice Scheme has used an active approach. It has also provided access to Generation, a global leader in sustainable investment management, via the  FC KiwiSaver Scheme's Global Sustainability Fund. All the
FirstChoice options are currently under review.
Likewise, TOWER and Fisher Funds have quite differentiated KiwiSaver offerings, so the merged entity will take some time to come together. Fisher Funds Managing Director Carmel Fisher has stated that it will be more of the same for TOWER and Fisher clients in the short-term. You can expect to see some changes from the combined offering over time, but as it stands today, both schemes will be managed under their existing asset allocation framework. However the investment management of both schemes is under the guidance of Fisher’s investment team.
Investors don’t necessarily have to wait to hear for any decisions, though, and can take these changes as a good excuse to closely scrutinise your KiwiSaver provider and decide if they continue to be the right option for you. The KiwiSaver universe continues to include a diverse range of options. Don’t just look at past returns to make an assessment. As we have stated before, also take into account other factors, such as the level of disclosure, customer service, and of course fees. Your risk profile decision, which is the choice between the conservative to growth options is a critical decision. Now is a good time to also seek advice to make sure you are in the most appropriate risk profile. Importantly, you don’t need to rush any decision, as
already stated your money will continue to be managed in the same manner for some months to come.

If you have any thoughts or opinions that you would like to share, visit us at our Twitter, Facebook or Linked In pages, and comment.



 

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