KIWI SAVER UPDATE

We continue to be a supporter of the KiwiSaver scheme as another option for retirement planning. There has been much discussion in the media lately about the performance of the KiwiSaver options offered by Huljich Wealth Management.

The additional payments made by Peter Huljich make it difficult to make peer-relative assessments of the performance of the Huljich funds. But it is clear that without these payments, performance would have been considerably worse on an absolute basis, and much more in line with peers.

This is yet another reminder of why investors need to approach all past returns with caution. Whenever you see a star performer, there are a number of questions to ask. What contributed to those returns, and are those factors likely to be repeated? Are the people and processes that generated the returns still in place?

Another key factor to access is the level of assets being invested over the period of the returns. Where these assets have grown substantially, investors should be cautious from two perspectives. Firstly, fund managers may not be able to manage the money in the same way as the asset grow (this applies primarily to share funds). Secondly, one-off stock picks can have a disproportionate impact on returns when assets are low.

MARKET OVERVIEW
Performance-chasers would have had an average result in 2009, as many of the worst performing fund managers in 2008 were top of the table for 2009. 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. All the major asset classes generated positive returns over the last 12 months, growth-oriented funds, overweight equities and listed property delivering superior returns over more conservative counterparts. The majority of Kiwisaver options in the Multi-Sector Growth and Aggressive categories delivered double-digit returns over the past year.

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. Our advisors 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.