KiwiSaver risk reward just 2.1%

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KiwiSaver members in conservative funds have received returns just 2.1% per year less than those who took on extra risk in a growth fund over the past eight years.

Thursday, October 20th 2016, 5:59AM 2 Comments

by Susan Edmunds

That is the finding of Melville Jessup Weaver’s (MJW) latest investment survey, which showed the median annualised return from growth funds was 8.2%, compared to 6.1% for conservative ones.

“[This is] perhaps less than one might have expected at the outset,” it said.

MJW actuary Ben Trollip said over the past five years there had been more difference – growth funds had returned more than 12% per year compared to 6.8% for conservative.  Returns from growth assets over that period have been particularly strong.

Trollip said he would expect 2% difference to be “about right” in future years. But that should not deter people with a longer investing timeline from taking more risk, he said. “Even a difference of 2% per year is going to add up. If you have a longer time horizon and can weather some volatility a more aggressive strategy makes sense.”

He said it was also important to consider the difference between funds within each category.

The best performing fund over the most recent quarter and year was Milford Active Growth, returning 5.9% and 15.2% net of fees respectively. BNZ has had good results with its growth fund third this quarter while its balanced and moderate funds each came first in their respective categories.

“There’s a wide dispersion of returns within each category, it shows it's important not only which strategy you choose but which provider you go with.”

Tags: MJW

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