Milford Asset Management and the Aon Russell Lifepoints have been two of the best KiwiSaver performers over the past decade, Morningstar research shows. AMP is one of the worst.
The research house measures long-term returns for fund performance, and finds Milford’s active growth fund the best across all categories over a 10-year horizon, with annual returns after fees of 13.8 percent. Of the fund’s $1.1 billion of assets, some 42.1 percent are held in New Zealand-domiciled assets and 70.5 percent are in growth assets. Fees of 1.6 percent are higher than the 1.27 percent average.
At the other end of the scale, AMP has been one of the worst performing providers. Over a 10-year horizon it generated the lowest annual returns among conservative, moderate, balanced, growth, and aggressive classes. In all but the conservative option, its fees were above average.
AMP’s assets under management still grew to $5.43 billion as at September 30, from $5.08 billion at the start of the year. However its market share shrank to 10.5 percent from 12.1 percent.
Tim Murphy, Morningstar’s Asia Pacific director of manager research, said Milford’s fund initially focused on Australasian equities but has diversified over the past decade as it’s grown.
“Performance has stacked up favourably against peers, the strong return has come from a bias to growth assets and exposure to Australasian credit,” he said.
The other provider singled out for long-term good performance was Aon Russell Lifepoints, which Murphy called one of the most consistent performers across all categories. Aon Russell schemes were the best in the conservative, moderate, and balanced classes, with after-fees returns of 7.5 percent, 8.2 percent, and 8.9 percent respectively.
Milford is the 10th biggest provider with $1.4 billion under management; Aon is 12th, with $537.8 million.
ANZ Bank New Zealand is the largest provider with $12.92 billion under management, or 24.9 percent. Its after-fees returns beat the average in most classes, although the conservative scheme charged a higher average fee.
ASB Bank is the second biggest provider with $9.41 billion under management, or 18.2 percent of the market. Its 10-year performances are largely middle-of-the-pack, although it offers the lowest fees among default providers, and among moderate and growth schemes. In balanced and conservative schemes, its fees are second lowest, higher only than industry disrupter Simplicity.
Simplicity was founded by former Tower Investments head Sam Stubs and is run as a not-for-profit. It pitches itself as a cheaper alternative, relying on passive investing to bring fees down. Passive investors basically follow major indexes, so don’t need people drawing potentially expensive salaries and making active investment decisions.
Since its launch in 2016, Simplicity has built $453.5 million of assets under management, or 0.9 percent of the market, ranking 13th in size out of 16 providers.
Meanwhile, in a separate report, fund manager AMP Capital noted the resilience of local equities due to the traditional dividend focus of NZX investors, which has helped attract yield-hungry, exchange-traded funds.
Head of investment Greg Fleming said steady inflows from KiwiSaver funds promoted bargain-hunting and also supported the local market. Rising interest rates may have a disproportionate impact on NZX-listed stocks, by undermining the attraction of those dividend yields, he said.
“The domestic market is expensive on traditional measures and has been seen as a suitable destination for global yield-seeking investors,” he said. “Cuts to the dividends paid by major New Zealand corporations would only risk reinforcing the signal that critical fundamentals are changing.”
New Zealand’s benchmark S&P/NZX 50 index hit a record in the September quarter. The new quarter has seen heightened volatility across international financial markets as investors question the pace of global growth and as the world’s major central banks start raising interest rates.
The NZX 50 is the best performing major index across Asia Pacific in the year-to-date, up 2.6 percent, although Fleming doesn’t expect New Zealand equities to keep outperforming their international peers over the next three years.