Good year for KiwiSaver growth funds

Buoyant stock markets helped KiwiSaver growth funds achieve another solid year in 2013, according to new figures by research house Morningstar.

Thursday, January 30th 2014, 6:00AM

by Niko Kloeten

But despite the continued strong performance of growth funds, the bulk of KiwiSaver money remains in more conservative options.

Aggressive funds were the top performers in the year ended December 31 with a total return of 15.9%, followed by growth funds which achieved a return of 14.6%.

Balanced funds were next, with returns of 11.3%, well ahead of moderate funds (7.3%) and conservative funds (including default funds), which returned 5.8%.

Default funds, which have $5 billion of investor money tied up in them, returned 5.5% for the year.

While the short-term results are encouraging for growth investors, the figures show they are also better off than more conservative KiwiSaver investors over the longer term as well.

Growth funds have returned 9.1% per year over the past three years, ahead of balanced funds (8.0%) moderate (6.8%) and conservative (5.9%).

Over the past five years growth funds have average 10% per year, bettered only by aggressive funds (10.8%) and ahead of balanced (8.7%), moderate (7.5%) and conservative (6.3%).

The Mercer Conservative fund was the top default fund in 2013, returning 7.4%, almost 70% better than the worst-performing default fund, the Tower Cash Enhanced fund, which achieved 4.4%.

Morningstar’s figures show KiwiSaver continues to grow at a rapid pace, increasing in total funds under management by almost $4 billion (29%) during the year to reach $17.6 billion at year’s end.

However, more than a third of that money ($6 billion) is in conservative funds, dwarfing the amount in growth and balanced funds ($3.3 billion each), moderate funds ($2.6 billion) and aggressive funds ($1.1 billion).

The KiwiSaver market is still being dominated by a handful of large providers, with more than a quarter of total funds managed by one company (ANZ).

ASB, the next biggest provider with $3.6 billion under management, has the largest product with more than $1.8 billion invested in its ASB Scheme Conservative (a default fund).

The other providers with more than $1 billion under management are AMP ($2.8 billion), Westpac ($2.3 billion) and Fisher Funds, which has swelled to $1.96 billion after acquiring default provider Tower Investments.

Mercer, the sixth-biggest provider, is likely to cross the $1 billion mark this year after reaching $974 million at year’s end.

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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