There has been 2.6 billion New Zealand dollars invested in the default KiwiSaver funds. The six new default KiwiSaver funds that replaced the 9 legacy default KiwiSaver funds in December last year had poor overall performance, average return of – 5.5% in the three months from December 1st to March 31st.
A similar occurrence happened in 2007 when KiwiSaver was first launched. The new default KiwiSaver funds are experiencing losses because they are now mandated to hold a higher proportion of growth assets. Previously aligned with conservative funds, they now follow a balanced fund approach, increasing exposure to growth assets like shares. Since growth assets are more volatile than income assets, these default funds carry more risk than they did previously
The default KiwiSaver funds are similar, with growth assets ranging from 50% to 60%. Kiwi Wealth and BNZ have the most aggressive default funds, while Westpac’s default fund is the more conservative option, holding only 50% in 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.Â
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.
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 National Capital Healthcheck.
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