Morningstar: Don't expect another 2019

Investors are still being rewarded for taking risk – but there may not be another year like 2019 for some time, Morningstar’s director of manager research for Asia-Pacific Tim Murphy says.

Wednesday, February 12th 2020, 10:57PM

The research house has put out its latest KiwiSaver survey, which showed some of the top performers in the three months were AMP’s KiwiSaver Default fund, up 0.7%; Generate’s Conservative fund, up 2.1%; AMP ASB Balanced, up 2.9%; Generate KiwiSaver Growth, up 5.2%; and Generate Focused Growth, up 6.6%.

Murphy said it had been a good quarter for the markets, with the NZX50 up 5.2% and 30.4% for the year. Australian shares were up 23.4% over the 12 months.

He said that default funds were the worst-performing group in the survey, which highlighted the need for people to make an active fund choice.

Over 10 years, default funds returned an average 5.7% a year, conservative 6.1%, moderate 6.5%, balanced 8.1% and growth 9.8%. For the year, average annual returns ranged from 23.3% in aggressive funds to 8.5% for conservative.

“I think it certainly highlights again a reminder for KiwiSaver members who have not taken the chance to actively choose that the default options are not necessarily the best place for long-term savings. We’re seeing that now, a far lower return over the long term.”

He said there was a spread of performance, with managers who had more money in equities generally doing better. Those who were more exposed to the US and tech sector globally were doing well, and local technology, utility and infrastructure stocks had also given fund managers a boost.

Over the 10-year period AMP lagged group averages across all types of funds. Murphy said over time the differences between funds tended to become smaller.

But he said investors should not get used to double-digit returns on an ongoing basis and should not expect 2020 to be as strong as 2019.

“I’m confident 2019 will go down as one of the strongest years return wise for the investment market.”

Tags: KiwiSaver Morningstar