KiwiSaver Growth funds walk tall in March quarter

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KiwiSaver funds enjoyed a strong start to 2011, despite adverse global events, posting positive returns for the second consecutive quarter, according to the latest Mercer KiwiSaver survey.

Tuesday, May 17th 2011, 7:03AM 1 Comment

by Benn Bathgate

KiwiSaver funds posted positive returns across the board for the March quarter, with those with a higher weighting towards shares and property performing best thanks to positive share market returns.

The median KiwiSaver Growth Fund returned 3.8%, higher than the more conservative Default Fund return of 1.6%.

The best performing fund for the quarter was the Fidelity Aggressive Growth Fund, with a 5.6% return over the quarter.

The head of Mercer New Zealand, Martin Lewington, said global share markets had performed well despite increased volatility with turmoil in the Middle East and the Japanese tsunami.

However, he believes further volatility may have an adverse impact on returns in the upcoming quarter, especially around Europe's sovereign debt issues and the challenge of investing in inflationary times.

Over the March quarter Growth Funds provided the best median returns followed by Balanced (2.5%), Conservative (1.8%) and Default (1.6%).

The year to date figures also reveal the same pecking order, with Growth Funds offering the best return at 7.7%, followed by Balanced (7%), Conservative (5.8%) and Default (5.3%).

On the issue of Budget changes to KiwiSaver, Lewington said that while changes to Member Tax Credits had been flagged in advance, other compensatory measures may be announced.

"If you take a step back KiwiSaver is absolutely pivotal towards New Zealand having a sustainable pension system and we need to make it attractive so there's a bit of carrot and stick required, we've had some pretty good carrots there, I don't think should be taken away."

From the fund managers perspective, he said any possible changes would be more keenly felt by the smaller, boutique managers, as the larger managers "have got scale and momentum, a tail wind."

He said that whatever changes are revealed with the Budget on May 19, it was essential the scheme retained public confidence.

"We have only got a bit of clarity around one side of the equation but to me there is a confidence issue, there is a trust issue. We know the financial services sector has got a long road on rebuilding trust with its customers and we know politicians don't feature highly in any polls on trust. It's unfortunate the two are combined on KiwiSaver," he said.

"It would be unfortunate if there was any collateral damage there that members did feel a loss of confidence. Lets wait and see what's announced on Thursday and hopefully any pain investors feel with the removal of the Tax Credit is offset by something else."

Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz

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