Divergent asset allocations have come to the fore again in the KiwiSaver market with Milford Asset Management producing stand-out results – at both ends of the scale, the latest Melville Jessup Weaver (MJW) quarterly investment survey shows.
According to the MJW report, the Milford KiwiSaver growth option finished bottom of class for the March quarter (and second-last over the annual period) while its recently-launched conservative fund simultaneously topped its category.
The Milford KiwiSaver growth fund returned 2.7 per cent for the March quarter and 9.3 per cent over the year compared to 5.3 per cent and 13.2 per cent, respectively for the top-ranking product in the sector, the AMP Aggressive option.
While the short-term Milford growth result is leavened by stellar long-term results – where it is number one performer over the five- and nine-year periods – the MJW study says the fund has a unique asset allocation compared to rival products in the risk profile.
“Even though its benchmark is 80% in growth assets, Milford is quite conservatively invested and is currently sitting below 70% growth assets. Its 26% weighting in cash is a significant outlier for the peer group,” the MJW report says. “This conservative stance will have weighed on Milford’s recent returns but, despite this, it is still top performing growth fund for the longer-term periods.”
At just 68.7 per cent in growth assets, the Milford fund has the most defensive stance in the sector, followed closely by the Fisher Two KiwiSaver scheme (69.4 per cent) – albeit the latter has 8.2 per cent in cash compared the former’s 26.1 per cent.
The MJW survey also shows wide divergence in KiwiSaver manager allocations between growth sub-asset classes, ranging from almost zero Australasian shares (Kiwi Wealth) and over 55 per cent (Milford). Conversely, Milford has the lowest global equities component (13.7 per cent) and Kiwi Wealth the highest (84.5 per cent).
Meanwhile, Milford’s top-performing conservative KiwiSaver fund – currently with just a one-year track record in the MJW survey – returned 2.6 per cent and 7.4 per cent over the quarter and 12-month period, respectively. In the conservative category, Milford reported the highest weighting to income assets (86.2 per cent) but with one of the lowest cash allocations (10.2 per cent).
“… within the Conservative funds, the two funds with relatively low cash exposure – Milford and AON (Russell) – have produced the best results,” the MJW survey says. “AON (Russell) has, however, had significantly higher volatility than its peers (the Milford fund does not yet have a five-year track record, so we do not show its risk figures).”
The MJW survey shows most funds and sectors came through the March quarter in good health, buoyed by apparently calm markets despite rising global political angst.
“Overall then, the March financial year ended up with reasonably good results – double-digit returns from (most) equity markets and small positives from bonds (more so where there was credit involved),” the report, authored by MJW principal, Ben Trollip, says.
“While we see challenges to such strong returns being maintained in the near term (given the valuation levels in most markets), we continue to advocate for a long-term view and maintaining an appropriately diversified portfolio.”