KiwiSaver

A number of active KiwiSaver providers have failed to fire in the past year, while passive management has come to the fore.

Managers have been navigating a volatile environment, with many tech stocks soaring in price and becoming increasingly dominant on indices.

0Some active managers have reduced their exposure to some parts of the market they view as riskier, which has so far led to softer returns.
After a long period of outperformance, for example, Milford has slipped down the KiwiSaver growth rankings in the past year. It retuned 11.12 percent in a year.  Amova’s Global Shares fund has returned 1.2 percent.

In comparison, Kernel Wealth’s Global 100 is up 36.8 percent over a year, and 26.55 percent NZD hedged. ASB’s growth fund is up 16.32 percent over a year. Simplicity’s growth fund returned 17.56 percent.

Gertjan Verdickt, a senior finance lecturer at the University of Auckland, said part of the reason was the market structure.

“When index returns are concentrated in a handful of mega-caps, the cap-weighted benchmarks are hard to beat.

“Active managers are structurally underweight the largest names: diversification rules, mandate limits, and simple reluctance to hold a 7 percent single-stock position. If those names drive most of the index return, being underweight them is a large negative contribution regardless of how good the stock-picking is elsewhere. High correlation across stocks also compresses the dispersion managers need to add value.”

He said it was less likely that current market conditions were to blame.

“Higher volatility does widen tracking error and make skill harder to detect statistically, but it doesn't mechanically reduce average excess return; it just widens the distribution around zero”

He pointed to SPIVA data that showed under-performance by active managers over 10 and 15-year windows across most categories and most markets,  including periods with wide dispersion and no concentration problem.

“Fees are the persistent drag: arithmetic, not conditions. ‘Conditions are unusual’ is what you'd expect managers to say in any period where they've lagged; the test is whether the same managers outperformed in the periods when conditions supposedly favoured them.”

Kernel founder Dean Anderson said active managers liked to say index funds would win when markets were calm but active would earn its keep in tough times.

“We've had a few of those moments over the last five years. Right now though, a few things are lining up that should, in theory, create more opportunity for active managers: concentration in the big index names has been high and those names have pulled back recently in performance, we've got renewed conflict in the Middle East driving inflation and volatility, and we've got dispersion.”

He said wide dispersion just meant bigger rewards for getting the active calls right.

“Several commentators have flagged 2026 as a stock picker's market on exactly this basis, with dispersion running well above historical averages and correlations between stocks falling to some of their lowest levels in years.

“But here's the catch. Wide dispersion cuts both ways. Get it wrong and you can get it really wrong.. 74 percent of actively managed global equity funds in New Zealand underperformed the S&P World Index in 2025, and over 10 and 15 year periods, all funds underperformed. That matters a lot, because global equities are a big chunk of a typical growth or high growth KiwiSaver fund.”

Sharesies KiwiSaver offering was marginally cash-flow-positive in the year ended March but its general manager says the focus is still on growth and enhancing its products.

Sharesies Matt Macpherson its KiwiSaver is about chasing scale, not profitability. Pic Supplied

Matt Macpherson says members of the KiwiSaver fund reach about 26,000 at March 31 and has since grown to just over 35,000.

Part of that growth has been fuelled by Sharesies’ offering KiwiSaver accounts for children – “That’s really resonated well,” Macpherson says.

But that’s only part of the growth story – of the 8,300 new members attracted to the scheme between April and June 30, about 2,900 were children.

Sharesies Investment Management reported a $270,000 net loss for the year ended March, down from the previous year’s $1.09 million net loss.

Cash flow was positive to the tune of $55,000 compared with the $1.14 million cash outflow the previous year.

Managed funds referral revenue – the scheme provides a platform from which members can chose external managers – jumped 77% to $3.75 million while share trading transaction fees jumped more than five fold to $895,000 from $176,000 the previous year.

Revenue over all climbed to $6.73 million from $2.38 million the previous year while operating expenses grew at a somewhat slower pace from $3.49 million in the 2025 year to just over $7 million in the year ended March..

“We’re continuing to invest in product, marketing and distribution. We’re not really chasing profitability, we’re chasing scale,” Macpherson says.

He notes that some of the funds Sharesies KiwiSaver members can access come with extremely low fees – the US 500 fund launched a couple of years ago charges fees of just nine basis points while the world share fund, which includes about 8,000 companies in 40 countries but which has a 60% weighting towards the US, charges fees of 12bp.

Macpherson says the single biggest factor that most attracts people to the Sharesies KiwiSaver product is the increased degree of control it provides members compared to other schemes.

The Sharesies group didn’t kick in any more equity into the investment management company in the latest year, having previously provided $3 million, but does provide it with an intercompany funding facility of $3 million, increased from $1 million the previous year.

The funding facility, which is non-interest bearing and repayable on demand, was $1.65 million at balance date. Macpherson says this was the amount owed to the group at balance date for services it provides.

KiwiSaver advisers who are reviewing their clients’ investments on an annual basis probably aren’t serving them as well as they could, the founder of an AI business says.

Clive Fernandes is director of Sevaka, which provides AI support for financial advisers. He also established advice firm National Capital.

He said annual reviews had never been best for clients. “The proof of that is the fact that clients haven’t been responding to the call from advisers to get financial advice.

“There has to be another reason other than clients don’t care about their own financial lives. I believe the reason is that we just don’t have the system set up correctly to give clients what they actually need. Right now advice is given on the adviser’s timeline rather than the client’s timeline. Just because a client happened to speak to me for the first time on December 24th, doesn’t mean every year the client’s available on December 24th.”

He said a better option was to try to speak to clients at the points they needed advice.

“The problem with that of course is how do we know when the client needs to speak to us? I Don’t think that’s a problem I’d have had an answer to if we were having this phone call a few years back but now we do,” he said. “Now we have an answer and the answer is to look at the data.”

He said a KiwiSaver adviser should be able to see the KiwiSaver transactions their clients were making, and then use AI to highlight anything that could mean a life change.

“A simple example is KiwiSaver contribution – if the amount has changed I could deduce from that whether it reflects a change in the client’s income. They could still be on 3 percent but now 3 percent of a higher income is a higher amount. Based on that if I was going to reach out to he client not with like ‘book an appointment with an adviser’ but with ‘we’ve noticed this… what are you doing with that extra income?’”

He said it was the approach he suggested to advisers.

“We’re running a technology company that could enable all of this. Rather than them send their client data to us, the system is set up within the confines of the FAP itself. As per the policies and agreements that our advisers have with their clients, they process the client’s data to give them the kind of advice I think clients have always  needed.

"I think they’re going to want even more and more going into the future just because the technology and the capability now exists.”

Fernandes said he expected consolidation in the industry which would allow adviser businesses to invest more in technology. “Most advisers are like ‘I’d love to do it. I have no idea how and I’m currently working 40 hours in my business so I just don’t have the time to look into that. That is a struggle that I guess small business owners have had for a long time.”

KiwiSaver providers want more clarity on how total remuneration packages will be treated with any move towards compulsion.

National said on Sunday that, if re-elected, it would make KiwiSaver contributions compulsory from 2028, and move to a 12% contribution by 2032.

Koura founder Rupert Carlyon said that would be a significant increased burden on people with total remuneration packages, who are currently funding contributions of 7%.

“Personally I think total rem has got to go.”

Pie Funds chief executive Ana-Marie Lockyer had a similar concern.

“As KiwiSaver moves toward a compulsory model understanding how employer contributions will be treated within remuneration packages will be important for both employers and employees.  In addition, the principle of helping more people save is sound, but the implementation details around hardship exemptions, contribution suspensions and support for lower-income households will be important to get right.”

Booster cheif executive Diana Papadopoulos says "proposed higher contributions from both employees and employers would make an even bigger difference to grow the future wealth of New Zealanders, but the issue of total remuneration arrangements needs to be addressed."

"If they’re not used appropriately it can have a really negative impact on people who will miss out on the contributions they deserve."

The Retirement Commission estimates 45% of employers use a total rem arrangement for at least some of its employees.

Kernel founder Dean Anderson agreed the government needed to look at total remuneration agreements. He said it would not be practical for people to lose up to 12 percent of their salary in contributions.

Matt Mackpherson, Sharesies general manager of funds, said it was not clear whether National’s plans included an end to total rem. “These packages go against the spirit of KiwiSaver and employees who receive these packages are not protected by law when minimum contribution levels increase.”

Polling for Simplicity had shown support for compulsion, but economist Shamubeel Eaqub said that was on the basis that it was the employer contributions that were made compulsory.

“My preference would be to make the employer contribution compulsory, keep the employee contribution voluntary and unlink the two.”