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Kiwisaver Growth Funds Highest Returns For 2009, Default Options Best Over Two Years – Mercer Kiwisaver Survey

KiwiSaver funds have fared well in recent share market rallies posting positive returns for the third consecutive quarter and providing the best returns for the past year, according to Mercer’s KiwiSaver survey.

For the quarter ended December 31, 2009 KiwiSaver Growth funds, the funds which have the greatest allocation to shares were the highest performers with a median return of 3.4 per cent for the quarter ended December 31, 2009. This fell short of the 10.8 per cent median return of the previous quarter, reflecting the continuing market jitters as the full economic recovery plays out.

The best performing fund for the quarter, and for 2009 overall was Fisher Funds Growth Fund with returns of 5.5 per cent for the December quarter, and 48.4 per cent overall.

Martin Lewington, Head of Mercer in New Zealand said while KiwiSaver funds had rebounded from the lows reached during the global financial crisis, there was still volatility ahead.

“It was a case of déjà vu this quarter with funds with the highest exposure to shares and property recording the best performance for the third quarter running. In the December quarter however, funds weren’t able to sustain the level of growth achieved in the previous quarter reflecting the prevailing uncertainty surrounding the extent of the economic recovery.

“Equity markets are in for a bumpy ride with many risks still facing global economies such as high government debt and the potential to slip back a gear if stimulus spending is withdrawn too quickly, which could well impact upon the rate of growth for KiwiSaver funds.”

Quarter to December 31 2009

Fund type/Median return (%)/Top performing fund name/Top performing fund return (%)/

Default/ 1.7/ AMP Default Fund/ 1.9

Conservative/ 1.8/ AMP Moderate Fund/ 2.7

Balanced/ 2.5/ AMP Balanced Fund & AXA Balanced Fund/ 3.6

Growth/ 3.4/ Fisher Funds Growth Fund/ 5.5

12 months to December 31 2009

Median return (%)/Top performing fund name/Top performing fund return (%)

7.2/ Mercer KiwiSaver Conservative Fund/ 14.0

8.1/ Mercer Conservative Fund/ 15.0

12.1/ AXA Balanced Fund/ 19.7

16.5/ Fisher Funds Growth Fund/ 48.4

Comparing returns over a two year period

While growth funds have made the highest gains in the past year it is default funds which have recorded the strongest performance over the past two year period, recording a median return of 4.1 per cent, compared to -4.4 per cent for growth funds.

2009 Return(%)/ 2008 Return(%)/ 2 Year Return(%)

Default/ 7.2/ 0.7/ 4.1/

Conservative/ 8.1/ -1.9/ 2.6

Balanced/ 12.1/ -12.0/ -0.7

Growth/ 16.5/ -22.1/ -4.4

“The returns of the past two years demonstrate both the severity of the global financial crisis and the speed of the rebound. The conservative positioning of default funds has paid off in the last two years, but this doesn’t necessarily mean it is the best option for all investors.

“Those with a longer term horizon have the capacity to bear the heightened risk, but also reap the growth qualities of more aggressive investments over the course of their retirement savings,” said Mr Lewington.

Other findings from Mercer’s KiwiSaver Survey for the quarter ended 31, December 2009:

Growth in funds under management

Funds under management for the six default funds have grown by approximately $1 billion since the end of 2008.

ASB remains the largest default fund by some margin. However, other providers may have more than one conservative offering which could affect their totals.

Click to enlarge

Asset allocation shows preference for overseas shares

The average manager’s asset allocations had a slight bias towards growth assets relative to their benchmarks. Managers have opted for a position which is overweight shares at the expense of overseas fixed interest and cash.

The following table shows the average managers growth to income ratio versus benchmark and the average actual asset allocations of each of the four universes:

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The next table below shows how the average portfolios were positioned at the end of the quarter versus their benchmark asset allocations:

Click to enlarge

ENDS

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