KiwiSaver may not be suitable for all employees – in particular those with high interest debt (hire purchase, credit cards, etc).
Employees will have different personal circumstances that will dictate which KiwiSaver scheme is most appropriate:
- Age
- The level of high interest debt they have
- Annual income
- Tax rate (including Working for Families)
- The amount of retirement savings they already have
- Their plans and expectations for retirement
- If they are able to take up the first home subsidy or mortgage diversion
It may not be wise for an employer to presume they are qualified to select the right scheme for every employee.
Employers need to be prepared for staff asking for advice on KiwiSaver. Employers should try and avoid providing financial advice, but assist employees to access information on KiwiSaver providers and the options available.
Keep KiwiSaver as simple as you can for your payroll and HR people - and most importantly your staff.
However we think a growth scheme is likely to be the most suitable for most employees. The graph below illustrates the difference in the retirement value of a KiwiSaver investment based on returns that are 4.5% p.a. and 6.5% p.a. respectively. Historically, the return on growth assets, such as shares, has been more than the return or more conservative investments such as bonds
Results are simulated in this chart. This analysis assumes an investor starts saving at age 23 with an annual salary of $35,000. Their salary rises steadily at 3.5% pa until at age 65 they retire. Of this salary they contribute an after-tax 4% to their KiwiSaver Scheme which is matched by their employer. Two investment return assumptions are presented. One is an assumed return of 4.5% after tax and fees each year. The other is an assumed return of an additional 2%, making a total return of 6.5% after tax and fees each year. All portfolio amounts are shown in today’s dollar terms.
By presenting portfolio amounts in today’s dollar terms, we have stripped out the impact of inflation from the results, so as to compare purchasing power at retirement with today’s prices for goods and services. Inflation is assumed to average 2%.
The assumed net returns are illustrative only and do not reflect the actual or prospective performance of the Scheme or of any investment fund. The returns to members of the Scheme are subject to investment and other risks (including loss of income and principal invested) and no amount of returns is promised or guaranteed. Returns will vary depending on the investment performance of your chosen investment fund or funds.
Reflecting the KiwiSaver legislation which applied when the chart was generated, the portfolio value results simulated in the chart assume both a 4% employer contribution which is paid entirely tax-free and the receipt of a $40 per annum fee subsidy. From 1 April 2009, in the example circumstances described above in the chart, the last 2% of the employer's 4% contribution will be subject to employer's superannuation contribution tax and the fee subsidy will no longer be payable, reducing the portfolio value accordingly. The chart will be updated when a new Investment Statement is prepared for the fisher Funds Growth KiwiSaver Scheme.
Fisher Funds has generated attractive long term returns over many years. We have done this by having a well thought out, disciplined investment approach.
The Scheme offers both a Conservative Fund and a Growth Fund, giving you flexibility as your investment needs change. You may choose either Fund or a combination of the two in any ratio you choose.
The Growth Fund seeks to grow the real value of your KiwiSaver savings by principally investing in the shares of growing New Zealand, Australian and International companies. This is the Fund that really differentiates our Scheme from other KiwiSaver providers. If you are seeking to achieve higher returns over the long term this is the core Fund to invest some or all of your KiwiSaver savings in.
The Conservative Fund has an emphasis on capital preservation, seeking secure investments to achieve returns better than bank term deposits over the long term. The Conservative Fund may invest in all or any of a range of different asset classes principally comprising cash, fixed interest, shares, infrastructure securities and property securities both in New Zealand and internationally.
Growth Fund investments
We favour small, growing companies
The Growth Fund focuses its investments in the shares of smaller, growing New Zealand, Australian and other International companies that have the potential for substantial business growth. Smaller companies tend to be overlooked and under-researched by other investors, giving us the opportunity to find some real gems. We also prefer smaller companies because they are usually easier to understand, compared with large multi-faceted corporations.
It is not our intention to buy shares in new or unproven companies, nor do we look for bargain stocks. We look for quality. Once we buy shares in a company, we generally hold them for the long term, unless the fundamental reason for buying no longer exists. After all, if you find a great business, why would you not want to hold on to that business forever?
History has shown that companies who consistently grow their profits will increase the value of their business and hence their share price over time. This is at the core of how Fisher Funds achieves attractive long term returns.
We strive to know more about our Portfolio companies than anyone else
We are close to all our Portfolio companies, visit them regularly and get to know the management teams well. We never invest in a company without first meeting the management and we pride ourselves on the relationships that we have established with the management teams of many successful businesses.
Our favourite companies will be our largest investments
We are stock pickers who invest in companies on the basis of their individual merits. The company that we like the most will have the largest position in the Fund. Our portfolios are concentrated, typically having between 10 and 20 stocks in each of New Zealand and Australia at one time and 30 to 40 internationally. We do not want too many holdings, diluting our efforts and knowledge, but we want enough to reduce the risk if something goes wrong. We believe there will always be companies that will do well, irrespective of the economy or market environment. We are constantly searching for these businesses.
We have the ability to invest in both listed and unlisted companies. However you can generally expect that at least 90% (by value) of the Growth Fund portfolio will be investments in listed companies. Although we like the idea of buying an unlisted company at a relatively low price, we are mindful that the listed environment gives us greater protection and ensures that we get regular information about each company.
Our investments favour smaller, growing companies. However if a company grows to become a large company, it is our intention that the Scheme will maintain its holding as long as it remains an attractive investment. If we find a company that otherwise meets all our criteria, we will not exclude it from the Portfolio based on size.
Conservative Fund investments
The Conservative Fund’s goal is to achieve returns better than bank term deposits over the long term. Its focus is on preserving your capital and protecting the purchasing power of your investments against inflation. The Conservative Fund may invest in cash, fixed interest, shares, infrastructure securities and property securities locally or internationally. The amount invested in each asset class will change when we think one asset class might be better than another. However, generally you can expect around 80% (by value) of the Conservative Fund portfolio to be invested in “income” assets such as cash and fixed interest, with around 20% invested in growth assets such as shares, infrastructure and property.
Which Fund is best for me?
Fisher Funds understands that every investor has different investment goals (and timeframes in which to achieve these) and varying appetites for risk. We have developed our Scheme to allow you to select or tailor a KiwiSaver investment strategy that meets your needs.
Before choosing your investment strategy, it is important that you think about your investment timeframe (how long you have to save until your retirement) and your investment goals (are you saving to buy your first home or growing your savings for retirement?).
We think growth assets such as shares are important, as most KiwiSaver members have a long time to save for their retirement. Historically, investing in growth assets has produced better long term returns than investing in other asset classes, minimising the impact of inflation over time on your savings.
If you are nearing retirement or saving for your first home, you may want to have a more conservative investment approach. Income assets such as cash and fixed interest typically produce more stable returns in the short term.
The timeline, in conjunction with the table above, have been designed to help you decide the best Fund/option for you.
* The above indicative sector allocations for, respectively, the Growth Fund and the Conservative Fund are based on the currently anticipated long term sector allocations for each Fund. The sector allocations may change from time to time at Fisher Funds’ discretion and there are no formal sector or asset allocation benchmarks. Additionally, the sector or asset allocations for the “Balanced” option may change from time to time at Fisher Funds’ discretion.
This section is a guide only. If you have specific retirement needs, or are unsure about which Fund or strategy to choose, please see a financial adviser.
Click here to see HOW WE COMPARE
Current Unit Price (as at 10 March 2010)
$1.0722
Fund Size (as at 28 February 2010)
Growth Fund - $122.3M
Conservative Fund - $1.5M
Fund Inception
Growth Fund - 1 October 2007
Conservative Fund - 12 June 2009
How have the funds performed as at 28 February 2010
| Fund Pre-tax Returns |
 One Month |
Three Months |
Six Months |
Twelve Months |
Two Years* |
Since Launch* |
| Growth KiwiSaver |
- 0.4% |
+ 3% |
+ 8.6% |
+ 46.5% |
+ 8.2% |
+ 1.65% |
| Conservative KiwiSaver |
+ 0.13% |
+ 0.16% |
+ 0.46% |
n/a |
n/a |
+ 0.40% |
Annualised return before tax and after fees
The above returns are based on the percentage change in the unit price of the fund for the period specified, they are not the returns individual investors will receive as this will depend on the prices at which units are purchased on the date of each individual contribution. Changes in the unit prices reflect changes in the market value of the assets of the fund. The above returns exclude government contributions and no allowance has been made for monthly administration fees. Returns displayed are after management fees but before tax.
Growth Fund Performance as at 28 February 2010
Graph illustrates cumulative increase in unit price (after fees and tax)
In short, very well.
KiwiSaver is a long term savings plan. Our investment approach is focused on generating meaningful investment returns over the long term.
When comparing returns it is important that you compare “apples with apples” i.e. schemes with similar investment strategies.
Morningstar has just released its quarterly KiwiSaver Performance Survey to 31/12/09 which can be viewed by
clicking here.
As you’ll see we rate amongst the top performing growth or aggressive schemes with the best returns for the year to 31/12/09 and the 2nd best returns over 2 years for the KiwiSaver growth and aggressive sectors.
A couple of Morningstar’s comments are worth highlighting and we have included them below:
"Last year proved to be a terrific time for growth assets, illustrating how quickly markets can turn. Investment markets were highly volatile in 2009, continuing to slide downhill in the first quarter before staging a significant recovery over the following nine months.
While many commentators are predicting a "V"-shaped recovery, the outlook for global growth is far from settled, and investors should be prepared for further volatility in returns. We continue to believe that investors with a number of decades until retirement age are best-served by the diversified KiwiSaver options with overweights to growth assets".
Source: Morningstar Performance Survey to 31/12/09 dated 23/02/2010
To keep track of performance on a more regular basis the Sunday Star Times now has a weekly KiwiSaver facts and performance update in the Business section. Information is supplied by Morningstar.
