New Zealand’s falling dollar made the biggest difference to KiwiSaver members’ account balances over the most recent quarter, research firm Morningstar says.
It has released its latest KiwiSaver survey, to June 30. Over that period, the New Zealand dollar fell in value by just over 8% against the US, 12% against the Euro, 9% against the Australian, and 13% against the British pound.
KiwiSaver funds with more exposure to growth assets performed more strongly than conservative funds again in the quarter.
Morningstar said that did not necessarily mean the growth assets themselves performed better but that currency exposures within conservative funds are usually fully hedged so were not affected by the falling New Zealand dollar. The median aggressive fund returned 2.85% for the quarter, while the median conservative fund returned 0.38%.
Forsyth Barr and Generate were the top performing aggressive and growth funds. Generate was also top of the moderate category and Kiwi Wealth topped the conservative category.
Tim Murphy, director of manager research, said the drop in the dollar had come as a bit of a surprise, given how strong the dollar has been lately. “The benefits of that have been seen in funds that have unhedged foreign exposure.”
But he said that did not mean KiwiSaver members should rush to change to funds that were exposed to the falling currency. “You shouldn’t make a decision on your KiwiSaver investment on the basis of one particular factor. You’ve got to ascertain what’s the appropriate risk profile, then compare the different options and providers. There is no one magic solution.”
In the past, Morningstar has been critical of the fees charged by conservative funds and Murphy said they had not changed.
He said KiwiSaver members could see a drop in funds as assets under management grew and managers had more scale to work with. He said how much the managers would try to hang on to increasing margin and how much they might pass to members would remain to be seen.
Meanwhile, Morningstar analysts say pockets of value are returning to the New Zealand sharemarket.
Asia-Pacific consumer sector head Daniel Mueller said stocks were trading in line with fair value estimates after a market pull back in the most recent quarter.
He said Contact and Genesis Energy were both trading below fair value. Ryman Healthcare and Fisher and Paykel Healthcare were two high-quality stocks with strong growth prospects trading close to fair value. Mueller said low-risk New Zealand property stocks were a reasonable place for investors to be.
“I wouldn’t say there is lots of value but it looks now that they are fairly valued.”
The search for yield has pushed up some defensive stocks to levels that some analysts have described as overpriced but Mueller said they had started to come off a bit. “Over the last quarter they have pulled back a bit and there is a little bit of value.”
Spark had come off the boil after a number of non-core asset divestments and a subdued reaction to the half-year result.