Return dispersion among KiwiSaver funds has increased in line with risk exposure over the last 10 years, the latest Melville Jessup Weaver (MJW) investment survey found.
According to the MJW December 2020 quarter survey, investment returns for conservative-to-moderate funds remained “tightly clustered” for the 10-year period with a much wider performance spread for those further up the risk spectrum.
“The range of returns for Balanced Funds is around 4% while for Growth Funds it is over 5%,” the MJW report says. “Thus, choice of provider is perhaps relatively more important for the more aggressive funds and relatively less important for the more conservative funds.”
Milford emerged as a stand-out on both relative risk-return and nominal performance measures for both its balanced and growth options over the 10-year period to the end of 2020.
However, over the one-, three- and five-year periods, the Fisher KiwiSaver growth fund atops the MJW survey with SuperLife winning the December quarter in the same category.
“By contrast, AMP’s fund returns have been relatively low,” the MJW report says. AMP is in the throes of converting its KiwiSaver scheme into a mainly passive investment option after appointing BlackRock as underlying manager last year.
The MJW analysis also found that while there is a clear divide between risk-weighted KiwiSaver portfolios “there is a relatively large overlap between the Growth and Balanced Funds”.
All KiwiSaver funds remain in positive territory across every period covered in the MJW study, with the median manager booking impressive returns in December quarter ranging from 2.1 per cent for conservative to 7.8 per cent in the growth category.
The last quarter of 2020 was kind, too, in most asset classes where the median manager outperformed in 11 of the 14 sectors tracked in the MJW survey. Average managers only underperformed their respective benchmarks in the global asset classes of growth and emerging market equities and listed property.
The report, authored by MJW principal Ben Trollip, says during the final three months of last year share market returns “rivalled the stellar June 2020 quarter”.
Global equities returned 12.4 per cent (albeit only 4.6 per cent on an unhedged basis for NZ investors) over the period. Australian shares (unhedged) were also up 12.4 per cent during the quarter, just ahead of the 11.5 per cent recorded by the S&P/NZX 50.
However, for the 12-month period, NZ equities remained the best-performing asset class in the MJW survey, returning 14.6 per cent. Despite the strong annual performance, the NZX result in 2020 was only its 11th best of the last two decades in a period bookended by 2019 (up over 30 per cent) and 2008 (down by more than 30 per cent – the only negative year in the series).
The MJW study also picked up a slight whiff of style-rotation as the median global equities value manager returned 9.4 per cent in the December quarter, almost double the 4.8 per cent of the growth counterpart.
For the three-month period, the “MSCI World Index was up over 12% and, interestingly, the value component of the MSCI index outpaced the growth component somewhat over the quarter”.
“Prominent, high-growth stocks have dominated over 2020 and some might see this latest development as an indicator of a reversal of fortunes to come,” the MJW report says. “Nevertheless, the road to recovery for value stocks is long: the 2020 local currency return for the MSCI Value Index was -3.3% compared to a staggering 31.1% for the equivalent growth index.”