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KiwiSaver Fees and Returns - an inverse relationship?

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 refuses to participate in the comparison survey).

We have developed an in-house 'quick reference' sheet to monitor the funds that we recommend and the funds that our clients hold.

One of the interesting things that we have been noting is the continued dominance of consistent investment return from the Balanced Funds in the OnePath stable of KiwiSaver Funds.

In addition, we have noticed that there doesn't seem to be the predicted relationship between fees and investment 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 a selection of Balanced Fund 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, the returns appear to do the opposite.  As the fees decrease, so do the investment returns.

The ANZ and OnePath SIL KiwiSaver schemes continue to consistently outperform the lower fee ASB, Westpac and Tower funds over all time horizons.

There does not seem to be the anticipated relationship between the Total Expense Ratio and returns.

There is clearly more to selecting your fund manager than heading for the lowest fees available and the fact that you can view your balances on your bank statements.  A good professional consistent fund manager for your KiwiSaver should be your aim.  Check out the articles below on other factors to consider when you are selecting or reviewing your KiwiSaver fund manager.

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.

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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