KiwiSaver

More conservative KiwiSaver schemes are starting to get their chance to shine.

After a number of years where growth and aggressive schemes were the outperformers, a period of sharemarket volatility has seen the balance tip back in favour of those invested in less risky assets.

Morningstar has released its survey for the quarter ended March 31.

It found funds with a tilt towards defensive assets outperformed growth funds in the quarter. Average returns were positive across the board, ranging from 0.79% for the aggressive category through to 2.65% for the moderate category.

“Despite a volatile first quarter in global markets, most KiwiSaver funds delivered positive performance, with more conservatively-oriented options in particular doing well,” Morningstar Australasia director of manager research Tim Murphy said. “Strong returns from bond markets, coupled with the local sharemarket’s resilience, meant that most KiwiSaver investors’ retirement savings continued to grow.”

Fixed interest returns were strong across the board, as global bond yields generally fell over the quarter, while another unexpected cut to the OCR in March was a further positive for local bond performance.

In equities, New Zealand was one of the strongest performing markets in the world in the March quarter, benefitting funds with greater exposure to domestic stocks. Australian equities weren’t as strong, despite the rebound in commodity prices, while most international equity exposures delivered negative returns for the quarter.

Aon Russell KiwiSaver Scheme was again a standout performer in most of its categories. Aon’s outperformance is due primarily to its low exposure to growth assets.

Kiwi Wealth KiwiSaver had a tough quarter, with all its multi-sector funds sitting at the bottom of their respective peer groups. Kiwi Wealth has no exposure to Australian or New Zealand shares.

Over a longer term, Aon KiwiSaver Russell and ANZ KiwiSaver were at or near the top of most categories and were the most consistent performers across the board. Mercer KiwiSaver continues to be a top performer within the conservative category, while Milford KiwiSaver comfortably tops the balanced category over the long term, despite a weaker quarter.

Three-quarters of all KiwiSaver members have no idea how much money they will have in their accounts when they reach retirement, a new survey shows.

The survey of 781 members, commissioned by Kiwi Wealth, shows 77% of people do not know what their account will be worth when they hit 65.

But more than half estimate they will need between $400 and $600 a week to live on, after tax.

Another 27% did not know what type of fund their KiwiSaver account was in and 31% had never reviewed it. Women were more likely to have not made any changes.

Almost 40% of those aged under 25 did not know who their provider was.

More than 60% expected to get NZ Super when they retired.

Joe Bishop, Kiwi Wealth head of retail wealth and marketing, said there was a large gap between people’s retirement income expectations and the amount they needed to save to achieve it.

“For an initiative designed to encourage retirement savings, it’s alarming that 77% of KiwiSaver members don’t know how much will be in their account when they retire.

“It’s likely that many are seriously overestimating how much it will be, and seriously underestimating how much they’ll need to have the retirement lifestyle they hope for,” he said.

“Half of the KiwiSaver members surveyed thought they would need $400-$600 a week to get by when they reach retirement age. Massey University research shows that even for a ‘no frills’ retirement, someone living in a metropolitan centre will need $490 a week.

“Current New Zealand Superannuation for a single person is around $370 a week, so there is a shortfall that needs to be bridged by KiwiSaver.”

He said the survey showed many members were not taking enough action on their KiwiSaver accounts and could be missing out on money in retirement.

“The prevailing sentiment appears to be that many people approach their KiwiSaver accounts like bank accounts when they should be thinking about them as investments. Many of these accounts are lying ignored in default funds which may not be performing as well as other funds more aligned to the customers’ risk profile and investment timeframe.

“Too many KiwiSaver members are short-changing themselves.  They need to be more involved with their investment and make informed decisions,” Bishop said.

“The onus, too, must be on KiwiSaver providers to engage more with their customers and help them make good decisions for their investments.  That’s the best way for KiwiSaver members to increase their wealth.”

Pie Funds is shelving plans to launch a KiwiSaver scheme, for now.

It had been reported that the fund manager was working on a KiwiSaver scheme to launch this year.

The Australasian small-cap specialist manager had said it wanted to get enough funds under management before launching the product.

But head of client services Sam de Court said that had now been put on the back-burner.

“We haven’t decided not to do it but we’ll put off planning until 2017. We’re quite busy growing the business at the moment.”

He said Pie Funds had decided to focus on its other areas of growth. “KiwiSaver would be a huge undertaking and we don’t need that distraction.”

Pie has grown its funds under management from $200 million in 2015 to $350 million today.

Last year, Pie launched a new fund, Growth 2, which focused on small and medium-sized Australasian companies that offer value and growth.

It had been reported that fund was something that a Pie Funds KiwiSaver scheme could invest into.

But de Court said it made sense to focus on that fund and other areas of growth in the business for the time being.

Pie Funds’ best performing fund in 2015 was its Emerging Fund, which returned 41.7% over the calendar year for the $56.3 million invested.

That was followed by its Growth Fund, which returned 24.7%  but is up 337.5% since inception.

Newcomer Growth 2 is up 9.7% since its inception and down 1.6% month on month. It returned 14.1% through 2015 and has $40.5 million invested.

Ethical investing is a growing trend and one KiwiSaver Scheme believes its Responsible Investment Association Australasia (RIAA) certified socially responsible investment (SRI) funds will drive business.

Grosvenor’s two SRI KiwiSaver funds became the first to gain certification under the RIAA’s recently revamped certification standards last week.

SRI funds, which don’t invest in companies that trade in such things as alcohol, tobacco, gambling and fossil fuels, have been around for a while.

However, as the global drive towards more ethical practices is growing, so too is the desire among some investors for such practices and funds.

Grosvenor chief executive David Beattie said they have had a very positive response to their SRI funds and he would expect that to increase with the RIAA certification.

“A particular subset of investors is dedicated in wanting to follow their ethical beliefs through into their investment practices.

“We think this certification will encourage such investors.”

Investor interest in SRIs has grown significantly since fossil fuel companies have been filtered out, he said.

After applying fossil fuel filters to their funds, 30 companies were dropped off the Grosvenor SRI funds register.

“There has been a good response to that. Such SRI strategies are only getting more popular and more attractive to investors.”

Beattie added that, on a broader scale, many investors are still getting their head around ethical investing.

“But both our analysis and RIAA analysis show it a growing trend globally.

“So we are optimistic that growing numbers of New Zealand investors are going to be attracted to SRI funds.”

Grosvenor is the only KiwiSaver provider with SRI funds certified by the RIAA. It already has three RIAA certified “Investment Series” SRI funds.

The RIAA, which is an Australasian body, is building its RIAA certified product list into a fund-finding web tool that is scheduled for launch in mid-2016.