KiwiSaver members urged to ponder asset allocation

The New Zealand Institute of Economic Research (NZIER) has warned that KiwiSaver members in conservative funds are in for poor returns, in its first New Zealand Investment Quarterly.

Conservative funds, including the nine KiwiSaver default funds, mostly invest in sovereign (government) bonds and cash while allocating only a small proportion to shares.

They are expected to return only 4.6% per year to 2022, compared to the expected average 90-day bank bill rate of 4.2%.

“NZIER believes sovereign bonds will perform poorly in the medium term, which would drag down the returns from conservative funds,” said NZIER principal economist Aaron Drew.