KiwiSaver returns were hampered in the first quarter by a poor NZX.

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A depressed local sharemarket has stifled growth in KiwiSaver returns in the first three months of the year.

According to a quarterly report conducted by market consulting firm Morningstar, the valuation of KiwiSaver funds increased by around $2.5 billion to just under $78.8 billion.

“KiwiSaver funds generally reflected the underlying market conditions experienced over the March quarter as funds with larger exposures to defensive and domestic growth assets generally struggled over the three-month period,” director of manager research Tim Murphy said.

He said the New Zealand sharemarket, which fell 4 percent over the quarter, had been a clear underperformer compared to other markets such as the US, which gained 6.2 percent, and Australia which was up 4.2 percent.

“However, the solid market returns disguised divergent performance at the sector level. Investors have rotated out of 2020’s winning growth stocks and into undervalued stocks.”

The average return for the quarter for conservative funds fell 0.6 percent, moderate funds averaged a 0.1 percent fall, but balanced and growth funds grew 1.4 and 2.4 percent respectively.

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However, Murphy echoed the Financial Markets Authority’s latest warnings that investors should not look at one quarter’s returns, even even over the past year, considering the uncertainty triggered by the pandemic.

“It is best to assess the success of a KiwiSaver scheme by looking at the long-term returns. For a ten-year period, annual returns ranged from 5.8 percent for conservative funds to 9.9 percent for growth funds.”

With $17.9 billion in funds under administration, or about 23% of the market, ANZ remained the leading KiwiSaver provider, with ASB coming in second at $13.6 billion.


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