Fees still too high: Morningstar

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KiwiSaver funds’ fees stand in the way of them being given a gold rating in Morningstar’s research, its Australasia co-head of fund research says.

Friday, March 21st 2014, 11:57AM 1 Comment

by Susan Edmunds

Morningstar has just finished its latest round of research, covering nine KiwiSaver providers managing the bulk of the country’s KiwiSaver funds.

Chris Douglas said overall,  New Zealanders should be optimistic about KiwiSaver’s ability to help them save for their retirements.

Morningstar’s research assigns funds with ratings of gold, silver, bronze, neutral or negative. The funds are ranked on their people, process, parent, price and performance.

Douglas said it had never handed out a gold rating to a KiwiSaver fund in the three or four years it had been researching them.
He said part of that was due to the large amounts of movement among the decision-makers in each scheme.

Another issue was fees. “They’re still a bit too high in some cases, especially for a conservative fund. In many cases, you’re paying more than 1% for a conservatively managed KiwiSaver product looking to get mid to high single digit returns. That’s a decent chunk out of someone’s savings.”

Five schemes were awarded silver or bronze awards.

Douglas said that was an increase from the last review and an indication of Morningstar’s increased conviction in them.“We believe there are very good reasons for New Zealanders to be optimistic about KiwiSaver's ability to help them save effectively for their retirement income."

AMP KiwiSaver and ANZ KiwiSaver (including OnePath and OneAnswer) were given Morningstar Analyst Ratings of silver, the highest ratings of the strategies covered.

Douglas said Morningstar analysts were impressed by AMP KiwiSaver's strong investment team, close relationship with the firm's Australian investment team, and widely-diversified portfolios of assets.

“We believe these characteristics should provide the foundation for strong future performance. The AMP KiwiSaver assets are managed by the former AXA KiwiSaver team, which had an Analyst Rating of bronze before it was closed following its acquisition by AMP.”

Mercer KiwiSaver, Milford KiwiSaver (Conservative and Balanced), and Westpac KiwiSaver received Analyst Ratings of bronze.

Milford Active Growth KiwiSaver was given a rating of silver.

Douglas said none was given a negative rating. He said there were likely some KiwiSaver schemes in the market that deserved one, but not those in Morningstar’s database.

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