KiwiSaver default fund members suffered another down quarter in what has been a rough ride up the risk scale since entering balanced life last December.
According to the just-released Melville Jessup Weaver (MJW) September quarter investment survey, the median default fund was off -1.7 per cent for the three-month period and -14.5 per cent over the calendar year-to-date with results sprawled across a surprisingly wide range.
The NZX-owned SuperLife tops the default table for the three- and nine-month performance to the end of September, returning -1.3 per cent and -11.8 per cent, respectively.
Meanwhile, the Kiwi Wealth default fund fell -2.4 per cent over the quarter and -15.6 per cent during the calendar year-to-date to claim bottom spot.
As the MJW report shows, the six default providers have adopted diverse takes on the balanced mandate (which sets a range of 50-60 per cent in growth assets) with table head-and-foot schemes SuperLife and Kiwi Wealth particular stand-outs.
SuperLife has seen a performance boost as the only default fund to exclude global fixed income, which has fallen heavily this year in relative and absolute terms.
An underweight Australasian shares position and heavy tilt to global equities likely hit the Kiwi Wealth default strategy as the former asset class has generally outperformed this year (although, unhedged global equities had a good quarter, the MJW report shows, returning 3.1 per cent versus -5 per cent for the fully-hedged version).
The default providers also diverge in cash holdings with Booster and Westpac in defensive mode, both holding over 10.5 per cent in the asset class: Simplicity reported the lowest cash allocation of just 2.2 per cent followed by Kiwi Wealth (3.9 per cent), BNZ (6.1 per cent) and SuperLife (9.1 per cent).
Kiwi Wealth (due to complete a transition to Fisher Funds ownership before year-end) and SuperLife default products were the only ones in the group of six to veer significantly off course from their respective standard balanced funds during the quarter – reversing roles in the process. The main SuperLife balanced fund was down -2.8 per cent in the September quarter as the comparative Kiwi Wealth fell just -1.2 per cent.
Overall, though, the median default fund return of -1.7 per cent was in line with the broader MJW KiwiSaver balanced category result of -1.8 per cent.
Ben Trollip, MJW principal, says in the report that the “poor returns across most asset classes meant that growth, balanced and conservative funds saw broadly similar returns for the quarter – most were down 1% to 2%.”
“The severe drawdown in fixed interest means that, over the last twelve months, conservative funds are down in the order of 9% despite their touted defensive nature,” Trollip says. “It is cold comfort that this is some 3 percentage points better than the average growth fund.”
All assets bar cash and unhedged Australian shares were in the red for the 12 months to the end of September as other asset class results fell in a range between -19.3 per cent for global real estate and -2 per cent for unhedged international equities.
“… while we are at a particularly painful point in time, long-term investors should remain rational in their assessment of their investment strategy and focussed on their long-term mission,” Trollip says.