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Kernel’s Global 100 fund, which owns 100 blue-chip companies across the major share markets, was the best performing KiwiSaver fund in the June quarter, returning 8.9 per cent.
Morningstar has released its latest KiwiSaver survey results, which show KiwiSaver assets increased by $3.5 billion during the quarter, with average fund returns ranging between 0.3% and 0.8%.
Kernel founder Dean Anderson said the results reflected the strong performance of international stock markets relative to New Zealand markets over the past few years.
“It also illustrates that many actively managed funds are struggling to beat global index funds. Fee differences are a big barrier, and managers who fail to own some of the largest technology companies are not able to reap the full returns.”
The survey showed that stock market performance was mixed in the second quarter.
The unhedged MSCI World ex-Australia index rose 8% in New Zealand dollar terms, helped by a strong performance in US technology stocks and positive earnings reports from several major global companies.
Morningstar noted that New Zealand’s NZX50 index underperformed, rising only slightly by 2.5%, as domestic companies faced pressure from rising costs and a cautious consumer environment.
The data predates the volatility of recent days, but Morningstar data director Greg Bunkall said the market rebound on Tuesday was quite strong and most KiwiSaver members had limited exposure to Japan and Taiwan, the two countries worst affected.
“Some of the US tech-heavy KiwiSaver funds were somewhat impacted, but generally speaking most large diversified funds were not significantly impacted during this period. Given the time horizon of KiwiSaver investors it was largely non-eventful.”
Morningstar said the second quarter was a cautious period for New Zealand investors.
“While global economic growth momentum sent some positive signals, domestic challenges remain. Equity markets rose modestly, mainly thanks to international investments, while fixed income provided some stability amid yield volatility.
“The weakening New Zealand dollar highlights the importance of currency diversification in portfolios. Looking ahead, investors will need to remain vigilant in balancing global market opportunities with the evolving economic situation at home.”
Milford Asset Management has been the best performer in the conservative, balanced and growth fund categories over the past 10 years. Generate’s growth-focused fund has been a standout among aggressive funds over that time.
Murray Harris, head of KiwiSaver at Milford, agreed that much of the recent divergence in performance was driven by different funds’ investments in US tech and artificial intelligence – but he said that for many fund managers it was a conscious decision weighing up the risks against the potential opportunities.
“All these big tech stocks have done very well. Those (passive) managers have by default a greater exposure to these companies. For our part, we are not chasing this story because the valuations of some of these companies are so high, therefore it is not an attractive investment.
“Companies like Nvidia are much riskier now than they were 12 months or two years ago. As an active manager, you evaluate that and see if the potential future upside is worth the additional risk, and for us, we say no.”
Koura’s Carbon Neutral Crypto Fund, which has performed strongly in recent months thanks to the growth of cryptocurrencies, fell 15.3% in the most recent quarter.
ANZ is the country’s largest KiwiSaver manager but had relatively poor returns over the past year, ranking 23rd out of 25 growth funds and 32nd out of 33 balanced funds.
Over the past year, Fisher Funds had the best performing conservative fund, Westpac had the best performing mid-cap fund, Pie Funds had the best performing balanced and growth funds, and Generate came out on top among aggressive funds.
Over the past 12 months, default funds have returned an average of 10%, growth funds have returned an average of 11.1% and aggressive funds have returned an average of 13.8%.
Harris said there might still be volatility in the short term, but KiwiSaver members should try to ignore it.
“We saw people moving from growth and aggressive funds into cash funds (when the market fell this week)… It’s still human nature to panic, and they shouldn’t.
“Investors who bought yesterday might be thinking about returning today, but the market has changed overnight, so they are willing to pay a higher price to get back into their original fund.”
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