After a regulatory-induced hiatus, KiwiSaver providers should start a new round of product innovation in 2016, according to the latest Morningstar report on the sector.
The Morningstar KiwiSaver December 2015 quarterly survey, authored by analyst Elliot Smith, says with managers focused on compliance with the Financial Markets Conduct Act (FMC), new products were thin on the ground last year.
“There were no new KiwiSaver funds added to the database during the quarter,” the report says. “… For the most part, providers are through the worst of this [regulatory upgrade] and we expect new KiwiSaver offerings to be brought to the market in 2016.
BNZ KiwiSaver would be first-up this year with a new product due to hit the Morningstar database shortly.
“BNZ has recently launched the First Home Buyer Fund, which has a strong capital preservation focus and invests predominantly in cash and bonds,” Morningstar says.
According to the report, all KiwiSaver funds in the Morningstar database earned positive returns over the 2015 calendar year despite increased market volatility.
“Growth assets continued to be in favour as the aggressive category posted the strongest average return, rising 11.40%, while the conservative category returned 6.07%,” the survey says.
Over the December quarter returns ranged from 0.69 per cent for conservative funds to 4.4 per cent in the aggressive space, Morningstar says, but with “wide dispersion” of performance in each category.
“For instance, funds with greater exposure to NZ stocks benefitted the most, whereas, funds with investment in the UK or emerging markets lagged,” the report says. “The strengthening dollar also played a part – funds with their international exposure fully hedged would have benefitted the most.”
BNZ KiwiSaver, which outsources investment management to Russell Investments, earned kudos during the quarter, Morningstar says, with its funds near the top in almost all categories.
“This scheme primarily benefitted from its hedged international equities exposure, which took advantage of the strengthening NZ dollar,” the survey says. “Its Australasian equities exposure, which is managed by Harbour Asset Management, also had a strong quarter as many of Harbour’s favoured stocks performed well.”
The report also name-checks the Milford and Generate schemes as top-performers in the balanced and moderate sectors respectively.
“Generate’s returns primarily benefited from overweight exposure to the domestic healthcare sector, while Milford’s returns were propelled by prudent stock picking on both sides of the Tasman,” the report says.
The survey documents an increasing concentration in the KiwiSaver market with the top six providers now owning 86.3 per cent of assets compared to 78.9 per cent in 2012.
ANZ continued to build its lead over the year, growing from 25.2 per cent to 25.8 per cent of total KiwiSaver market funds under management. However, with the exception of Westpac, which maintained its fourth place and market share at 12 per cent, the remaining top five schemes – ASB, AMP and Fisher Funds – all lost ground over 2015.