Budget changes hit KiwiSaver’s appeal

Term deposits and rental property remain the investment of choice for the majority of Kiwi’s, while Budget changes have dented KiwiSaver’s popularity, according to the latest ASB Investor Confidence Survey.

kiwiSaver fell from 12% to 9% as the investment offering the best return, ranked behind term deposits, rental property and bank savings.

“The changes to KiwiSaver announced in Budget 2011 appear to have shifted investor perceptions of KiwiSaver,” said ASB head of private banking and wealth management, Jonathan Beale.

“The swing in attitude can also be seen in the 6% drop in the number of people that think KiwiSaver will encourage New Zealanders to save for their retirement, from 75% to 69%.”

However, the survey also found out of those using or intending to use KiwiSaver, a record 63% said it would be their main source of retirement provision, a percentage which has been slowly rising over the past year.

“For this reason we see the drop in KiwiSaver popularity as a downward blip in the short term.”

Beale said it remained to be seen whether this ‘blip’ developed into a longer term trend, “but our feeling is that the success of KiwiSaver will see it pick up in popularity again in future.”

The survey found an even split between investors expecting better or worse investment returns.

A total of 21% of investors felt term deposits offered the best value of all investment types, up two points from last quarter. Rental property climbed one point to 16%, followed by bank savings, steady at 12%.

Beale said the results indicated investors are incorporating their desire for security into their assessment of best returns, “and are still turning to term deposits and rental properties over other investments.”

Fidelity KiwiSaver fund hurt by market volatility

One of Fidelity Life’s KiwiSaver funds is being buffeted by the same global financial forces which forced the liquidation of the $75 million NZDX-listed Fidelity Capital Guaranteed bonds last week.

Fidelity’s options KiwiSaver fund uses the same strategy which includes writing put and call options on New Zealand, Australian and US government bonds.

Its unit price dropped to $3.8045 on August 9, the latest price available, from $4.1331 a day earlier and $4.8859 on July 29. That’s a 22.1% drop since July 29.

By contrast, over the same period, Fidelity’s aggressive KiwiSaver fund has seen its unit price fall 11.4% from $2.8057 to $2.4859 while its conservative fund has eased just $2.3% from $5.9572 to $5.8227.

The options KiwiSaver fund has been a strong performer. In the year ended July, its unit price rose 20.9% and it is 39.8% higher than at the end of July 2008.

Fidelity’s aggressive fund’s unit price rose 5.8% in the year ended July but is only 2.6% higher than in July 2008 while the conservative fund’s unit price fell 3% in the year ended July but is 8.5% higher than at the end of July 2008.

Fidelity chief executive Milton Jennings says while the KiwiSaver fund is following the same strategy as the bonds, it’s structured differently from the bonds and isn’t forced to start closing out contracts as the bonds did when they approached their floor set by a complicated formula.

That means the KiwiSaver fund can hang on in the hope of recovering when financial markets stabilise.

“When you write options and you get this extreme volatility that we’ve seen in the last couple of weeks, the premium you get escalates the income you earn from writing options – it’s probably three or four times you would have got prior to this volatility occurring,” Jennings says.

Nevertheless, “we would prefer not to have it (the volatility).”

Jennings says he expects it will take a few months for the options fund to recover. “Equity markets tend to take even longer to recover some of their losses.”

Bondholders will receive no more interest although they will get their capital back in mid-2013 because they are capital guaranteed by Westpac Bank.

Fidelity KiwiSaver fund hurt by market volatility

One of Fidelity Life’s KiwiSaver funds is being buffeted by the same global financial forces which forced the liquidation of the $75 million NZDX-listed Fidelity Capital Guaranteed bonds last week.

Fidelity’s options KiwiSaver fund uses the same strategy which includes writing put and call options on New Zealand, Australian and US government bonds.

Its unit price dropped to $3.8045 on August 9, the latest price available, from $4.1331 a day earlier and $4.8859 on July 29. That’s a 22.1% drop since July 29.

By contrast, over the same period, Fidelity’s aggressive KiwiSaver fund has seen its unit price fall 11.4% from $2.8057 to $2.4859 while its conservative fund has eased just $2.3% from $5.9572 to $5.8227.

The options KiwiSaver fund has been a strong performer. In the year ended July, its unit price rose 20.9% and it is 39.8% higher than at the end of July 2008.

Fidelity’s aggressive fund’s unit price rose 5.8% in the year ended July but is only 2.6% higher than in July 2008 while the conservative fund’s unit price fell 3% in the year ended July but is 8.5% higher than at the end of July 2008.

Fidelity chief executive Milton Jennings says while the KiwiSaver fund is following the same strategy as the bonds, it’s structured differently from the bonds and isn’t forced to start closing out contracts as the bonds did when they approached their floor set by a complicated formula.

That means the KiwiSaver fund can hang on in the hope of recovering when financial markets stabilise.

“When you write options and you get this extreme volatility that we’ve seen in the last couple of weeks, the premium you get escalates the income you earn from writing options – it’s probably three or four times you would have got prior to this volatility occurring,” Jennings says.

Nevertheless, “we would prefer not to have it (the volatility).”

Jennings says he expects it will take a few months for the options fund to recover. “Equity markets tend to take even longer to recover some of their losses.”

Bondholders will receive no more interest although they will get their capital back in mid-2013 because they are capital guaranteed by Westpac Bank.

Fidelity KiwiSaver fund hurt by market volatility

One of Fidelity Life’s KiwiSaver funds is being buffeted by the same global financial forces which forced the liquidation of the $75 million NZDX-listed Fidelity Capital Guaranteed bonds last week.

Fidelity’s options KiwiSaver fund uses the same strategy which includes writing put and call options on New Zealand, Australian and US government bonds.

Its unit price dropped to $3.8045 on August 9, the latest price available, from $4.1331 a day earlier and $4.8859 on July 29. That’s a 22.1% drop since July 29.

By contrast, over the same period, Fidelity’s aggressive KiwiSaver fund has seen its unit price fall 11.4% from $2.8057 to $2.4859 while its conservative fund has eased just $2.3% from $5.9572 to $5.8227.

The options KiwiSaver fund has been a strong performer. In the year ended July, its unit price rose 20.9% and it is 39.8% higher than at the end of July 2008.

Fidelity’s aggressive fund’s unit price rose 5.8% in the year ended July but is only 2.6% higher than in July 2008 while the conservative fund’s unit price fell 3% in the year ended July but is 8.5% higher than at the end of July 2008.

Fidelity chief executive Milton Jennings says while the KiwiSaver fund is following the same strategy as the bonds, it’s structured differently from the bonds and isn’t forced to start closing out contracts as the bonds did when they approached their floor set by a complicated formula.

That means the KiwiSaver fund can hang on in the hope of recovering when financial markets stabilise.

“When you write options and you get this extreme volatility that we’ve seen in the last couple of weeks, the premium you get escalates the income you earn from writing options – it’s probably three or four times you would have got prior to this volatility occurring,” Jennings says.

Nevertheless, “we would prefer not to have it (the volatility).”

Jennings says he expects it will take a few months for the options fund to recover. “Equity markets tend to take even longer to recover some of their losses.”

Bondholders will receive no more interest although they will get their capital back in mid-2013 because they are capital guaranteed by Westpac Bank.