In the default funds, there has been 2.6 billion New Zealand dollars invested by Kiwi’s. The six new default KiwiSaver funds which started in December last year replacing the 9 previous funds have had a poor overall performance with the average returns being - 5.5% in the three months from December 1st to March 31st.
A similar occurrence happened in 2007 when KiwiSaver was first launched. The reason these new funds are making losses is that the new default funds are mandated by the government to have a greater proportion of growth assets than the previous default funds because they have changed from matching conservative funds to matching balanced funds in growth assets. Growth assets are more volatile because they include shares than income assets and because there is a greater allocation towards growth assets the default funds are riskier than they previously were.
The funds are very similar, having growth assets that range from 50 to 60 percent. The most aggressive of the default funds belong to Kiwi Wealth and BNZ, while the more conservative option is Westpac’s default fund which has only 50% of growth assets.
The quarter also produced a poor result for most diversified funds. The median Balanced Fund returned -5.5% for the quarter, while the median Growth Fund returned -5.9%. In addition, the median conservative fund had a loss of 4.0% for the quarter. This means that there is a -1.5% larger loss on the new default funds than there would have been with the previous funds. However, this means that there could also be a larger return on the new default funds in the future than the previous funds.
These past performances do not represent the future performance of the default funds or any of the other KiwiSaver Funds. Although there have been losses in the short term, these are intended to be long-term investments, therefore you can expect these losses to be mitigated and for New Zealanders to receive a positive return from their KiwiSaver investments.
To find out more about the KiwiSaver Funds in April you can watch the below video:
KiwiSaver Market Update April 2022
Although default funds have now become a better option to some with the balanced fund as a default, it is encouraged that people check their KiwiSaver provider and check their funds to make sure they're on track. If you're not happy, you can move and find a fund that makes you comfortable with help from the KiwiSaver Healthcheck.