Late model KiwiSaver schemes surged ahead in 2017 with all three of the relatively recent releases climbing the Morningstar funds under management (FUM) rankings in 2017.
The Morningstar December 2017 quarter KiwiSaver report released last week shows BNZ, Generate, and Simplicity as the only schemes to rise up the FUM tables during the calendar year.
BNZ and Generate – both 2013 vintage vehicles – clambered up a spot each to 11th and 8th respectively while 2016 start-up Simplicity leapt from 15th to 13th by FUM size over the 12-month period.
Performance-wise the three schemes reported a diverse range of annual results across the various Morningstar risk-weighted product categories (which fall into five basic risk pools ranging from conservative to aggressive).
For example, Generate topped the aggressive fund table with a 23.9 per cent annual after-fees return compared to Simplicity’s 16.4 per cent (eighth out of the nine products in the category) and the Morningstar index of 17.8 per cent. Generate favours active international equities managers while Simplicity invests through an underlying Vanguard passive global shares fund.
At the other end of the risk spectrum, the BNZ conservative fund returned 7.3 per cent for the 12 months to December 31 putting it fourth out of the 20 products in the Morningstar category. The Simplicity KiwiSaver conservative product ranked middling in the group (11th) returning 6.4 per cent after fees against the benchmark 6.7 per cent.
Despite their impressive growth records BNZ, Generate and Simplicity remain marginal players for now with total respective FUM of about $1.5 billion, $656 million, and $260 million (translating to market share of 3.4 per cent, 1.4 per cent, and 0.6 per cent, respectively).
Tellingly, the market share of the larger mainly bank-owned KiwiSaver schemes remained static over 2017 while smaller providers Aon, Booster, the SBS-owned FANZ, and NZ Funds all dropped down a place in the Morningstar FUM rankings.
The Morningstar report includes 16 of the 25 KiwiSaver providers but more than 90 per cent of total FUM.
Chris Douglas, Morningstar Asia-Pacific director manager research ratings, said the market remained reasonably competitive despite consolidation in recent years.
Douglas said an influx of new smaller schemes, for example, was unlikely to lead to fee reductions across the board.
“Some of the smaller players have the largest fees,” he said.
However, Douglas said the current dollar-based administration fees – typically set at about $30 per year – should be abolished.
“Dollar-based admin fees are essentially a tax on the poor,” he said, with lower-balance members disproportionately hit by the fixed annual impost.
In the 12 months to March 31 2017 KiwiSaver providers levied a total $82.4 million in administration fees at an average $30.28 per member, according to Financial Markets Authority data, compared to $77.8 million (or $29.84 per member) the previous year.