Banks secure hold on KiwiSaver

The power of KiwiSaver as a driver of fund managers’ fortunes, and the dominance of big banks within it, is made clear in the latest Morningstar market share report.

Friday, August 12th 2016, 6:00AM

by Susan Edmunds

The report, for the June quarter of this year, shows the scale and flow of the New Zealand managed funds market.

AMP leads the pack with 28.3% of the overall retail market, but that has dropped from 38.7% in June 2013, as its big bank competitors increased their hold on the KiwiSaver landscape. It lost $549.7 million in the June quarter alone.

It also dropped its KiwiSaver market share from 15.8% to 12.3% over the three years.

AMP has been working on methods to retain customers in the face of increasing competition from banks, including linking insurance offers to the retirement savings vehicle.

But the banks' dominance is only growing, the report shows.

ANZ, the biggest KiwiSaver provider with 26% of the KiwiSaver market, has had the biggest increase in share over the same period, from 13.1% in 2013 to 17% this year. It picked up $3.6 billion in the most recent quarter.

An ANZ spokeswoman said the bank had strong and steady growth in portfolio investments from Private Bank customers and had good growth in its wholesale investment business, with new mandates and higher sums invested. “Our market share position in KiwiSaver has held reasonably steady over the last few years, growing just slightly ahead of the market.”

Commentator Claire Matthews, of Massey University, said KiwiSaver was now the dominant force in New Zealand funds management, having ticked over the 50% of total FUM benchmark.

The Morningstar report shows that KiwiSaver funds now make up 51.4% of all funds invested, up from 40.7% three years ago. Although both KiwiSaver and non-KiwiSaver funds are growing in size, funds are flowing more swiftly into KiwiSaver options. Non-PIE funds have been losing FUM.

Even people who had both KiwiSaver and non-KiwiSaver funds wanted to maximize their KiwiSaver returns, she said. “For some people that’s where the bulk of their retirement savings is going. It’s a big part of the funds management market and it’s only going to grow.”

She said non-KiwiSaver funds should also grow, but more slowly.

Across the market, most money is in multi-sector balanced funds - 18%.

The percentage invested in conservative funds has remained relatively constant over the past three years, even as share markets delivered standout returns. The percentage invested in Australasian equities has actually dropped since 2016, from 8.2% in 2013 to 7% now.

Matthews said it was possible there could be more consolidation in the funds management market, particularly if new arrivals such as Simplicity put pressure on providers’ fees.

The report details a top 10 providers, and “the rest”. Matthews said it was significant that the combined size of “the rest” was only a third of AMP’s size.

“Four fund managers are individually bigger than the rest of the group combined. There’s the potential for consolidation there but you wouldn’t want to see too much, it’s good to have competition. It’s a matter of getting the right number where it’s still competitive but not so many that it’s unmanageable.”

AMP was approached for comment.

Tags: AMP ANZ KiwiSaver