Assessing KiwiSaver Fund Providers

William J. Trainor Jr., East Tennessee State University, USA

Abstract: New Zealand’s KiwiSaver retirement savings scheme has shown remarkable growth since it became available in July of 2007. It now has more than $17 billion in assets distributed across 201 funds. This study examines the ten largest fund providers that constitute more than 98% of this market. Findings are mixed in terms of performance based on the methodology applied. Standard regression analysis suggests that despite an average expense ratio of 0.96% (not including an annual service fee), average fund performance net of fees is consistent with risk-adjusted performance based on asset allocation, style, timing, and momentum. However, relative return performance compared to asset-weighted customised benchmarks for each fund suggests underperformance, especially for equity funds. The evidence of performance persistence is also mixed as both contrarian and follows the leader strategies have worked over the last six years. With the evidence from this study ranging from no outperformance to significant underperformance, providers should consider offering index type funds that minimise fees and maximise expected wealth accumulation.