KiwiSaver

March 2 will see either Fisher funds, OnePath or Milford Asset Management emerge triumphant from the Morningstar Fund Manager of the Year Awards having been crowned KiwiSaver Manager of the Year for 2010.

Good Returns spokes to all three providers to try and find out what makes them amongst the best three KiwiSaver managers in the country last year.

For Fisher Funds managing director Carmel Fisher, being nominated in the KiwiSaver category is especially pleasing.

“Their finalists for KiwiSaver are slightly different in that they focus a little bit on client service, communications, all round offering really,” she said.

Fisher believes the company’s approach to communicating with their clients is one of their key pluses.

“We’ve always believed that if you communicate well with investors about how you’re investing their money and why, then they become better investors over time because they understand the process and engage with it, and we’ve certainly done that with KiwiSaver. For a number of KiwiSaver members, their KiwiSaver accounts represent the first time they’ve ever invested, so there is an education process to be done and we take that seriously.”

She also said that fact that KiwiSaver is a long-term investment means the investor will go through numerous market cycles, adding to the importance of effective communication.

“For a lot of people their KiwiSaver account is locked up for a long period of time, so the more they can be educated and communicated with on the way through, even though they can’t access their money, at least they understand what its doing and why its behaving the way it does.”

“Then I think they will be more engaged with it and take more interest in it, which they should as its their retirement savings,” she said.

For Milford Asset Management managing director Anthony Quirk, communication is also an essential part of the company’s approach to KiwiSaver management.

“We’ve made a big commitment to have very good communication to our investors on our website and communicating with them directly so we’ve made quite a deliberate effort in that area,” he said.

“This means we’re very transparent in terms of what we report to clients on the performance, what’s done well, what hasn’t done well, we’re very open with them in lots of different areas which I think is appreciated, which I think Morningstar has recognised as well.”

He said they had received positive feedback from their KiwiSaver customers both in terms of their performance – which Quirk acknowledged as the “bottom line” – and on how they report.

“We do get people transferring from other providers who make good contrast with the information they get with us to what they received previously, so it’s something we’ve been very conscious is an important thing to do.”

“Investors not only want to know that their funds are managed well, they want to understand how they’re managed.”

For OnePath general manager, funds management, David Boyle, their nomination is a reflection of the company’s track record of investing in different market cycles over 25 years and the experience that comes from managing the country’s oldest and largest superannuation schemes.

“These are some of the reasons for our default KiwiSaver provider status where the strength and stability of the manager was paramount for meeting rigorous criteria, along with a demonstrated ability to process and administer the scheme at the highest standard.”

Boyle said over the last three-and-a-half years the company has focused on meeting the needs of more than one-in-five New Zealanders with a KiwiSaver scheme.

“We offer the widest range of investment choices including five multi-sector funds and the lifetimes option, delivering the best quality and services to our members,” he said.

“In general we have delivered above market performance in the numerous investment sectors we work in.”

Fidelity Life’s Options Kiwi Fund was named as the best performing KiwiSaver fund out of 120 surveyed by FundSource for the three years to December 31, 2010.

With an annual average return of 11.59% over three years the Fidelity Life Kiwi Options was placed well ahead of the next placed fund in the survey, the Milford KiwiSaver Aggressive Fund.

In the year to January 31 it returned 9.21%.

The fund is one of the more unique KiwiSaver funds and is modeled on Fidelity’s Options Portfolio, managed by Tyndall Investment Management, which is a cash fund that issues options on US 10-year and other government bonds.

Fidelity Life CEO Milton Jennings said the alternative, fixed-interest strategy of the Options Kiwi Fund had produced consistently high returns for its KiwiSaver investors and attracted a growing number of New Zealanders.

The overall fund is now worth $36.7 million, up 64% on the year-earlier period.

“We have to produce consistent, and consistently high, returns for our customers to be successful,” Jennings said.

“The key benefit of our Options Kiwi Fund for investors is its focus on sound medium to long term management. This means the shorter term swings of potentially volatile financial markets are smoothed out.”

Jennings said that for Options KiwiSaver Fund customers, “the results speak for themselves.”

“An initial $1,000 invested with Fidelity Life in the fund three years ago on February 1, 2008 is now worth $1,473.97 on January 28, 2011.”

Jennings also said some 80% of Fidelity Life’s senior management have all or some of their portfolios invested in the company’s Options range of products.

He also said KiwiSaver has been a constant growth area for Fidelity Life, with a 96.6% increase in KiwiSaver funds under management, from $92.3 million on January 31, 2010 to $181.5 million on January 31, 2011.

Fidelity Life has signed up a total of 72,000 KiwiSaver members since the launch of the scheme more than three years ago.

KiwiSaver funds ended 2010 strongly with positive returns across all sectors for the December quarter – and the year – according to the latest Mercer KiwiSaver Survey.

KiwiSaver growth funds – which have the greatest exposure to shares and property – performed best with a median return of 3.7% for the quarter ended December 31. The best performing fund for the quarter was the AMP Aggressive Growth Fund, with a 6.3% return.

By comparison, the more conservative default fund, had a median return of 0.9%.

Positive returns across the board were enjoyed by all KiwiSavers over last year.

For the whole of 2010, growth funds and balanced funds performed best with median returns of 7.1%, while conservative funds had 6.1% and default funds 5.9%.

At the start of 2010, an investment of $100 in the median default fund would be nearly $106, Conservative fund $106, Balanced and Growth funds $107, excluding the impact of any employer or government contributions.

Among the top performing Growth funds the Fisher Funds Growth Fund was the best performer, up 12.1% in the 12 months to December 2010.

Over the year the best performing fund in the Default sector was the Mercer Conservative (6.2%), the best performing Conservative fund was the Aon Russell Lifepoints 2015 (10%) and the best performing Balanced fund was the Aon Russell Balanced (10.4%).

However, since the scheme’s launch in 2007 funds with the highest allocation to bonds and cash remain the best performers, reflecting volatile sharemarket performance over that period.

KiwiSaver has jumped ahead of managed funds and shares as the investment option offering the best returns, and an increasing number of people see the scheme as their primary means of retirement.

The findings have been revealed in the latest ASB Investor Confidence Survey which found KiwiSaver the third most favoured investment option behind term deposits and rental property.

“For the first time KiwiSaver jumped ahead of managed investments and shares as the investment offering the best returns,” said ASB head of private banking and wealth management Jonathan Beale.

“In addition a record 61% of respondents indicated that KiwiSaver would be their primary means of retirement, a percentage which has steadily increased in recent quarters.”

The survey revealed the  expectation that KiwiSaver would be enough to retire on was strongest among  those under 50, with 22% aged between 18-49 believing KiwiSaver would be enough for retirement, up 5% from the last quarter.

In the over 50 age group, 12% believed KiwiSaver alone would be adequate for retirement provision, also up 5%.

“It’s very encouraging to see those aged under 50 being so positive about their prospects with KiwiSaver, as this age group needs to start now to ensure they build up a sufficient nest egg for their retirement,” Beale said.

“KiwiSaver will be an important contributor to the future wealth of our country, so it is heartening to see this positive attitude.”

The survey found that overall investor confidence has begun to rise, with the three months to December 31 seeing the number of investors expecting to see their returns improve climb 4% to 19%.

Term deposits retained their top spot as most favoured investment choice, up 1% on the previous quarter to 21%.

While Beale said term deposits had returned to their highest level of popularity since the 2008 third quarter, he said the data indicated a dip in sentiment in December.

“Investors are likely to have been influenced by the December Reserve Bank announcement cautioning a slowdown on interest rates, which they again repeated in January.”

Rental property was the second most favoured investment option with 14% followed by KiwiSaver, managed funds (9%) and shares (6%).