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The war in Ukraine has contributed to the world’s economic woes, and it is being felt in KiwiSaver’s account balances.
People with retirement savings in more than half of KiwiSaver’s most popular categories had funds generating losses of more than 10% over a year.
The Morningstar KiwiSaver report for the 12 months to the end of September shows 10% or more losses in 84 of 129 funds in the Conservative, Moderate, Balanced, Growth and Aggressive fund categories.
Morningstar spokesman Tim Murphy said the KiwiSaver fund’s returns reflected the “challenging” market conditions in the stock, bond and real estate markets around the world as the global economy faced a recession and the resulting economic disruption. of the war in Ukraine.
The one-year average loss after fund managers took their fees was 8.1% for conservative funds, 9.7% for moderate funds, 10.5% for balanced funds and 13.2% for growth funds.
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Despite the falls, KiwiSaver members living in the long-term pension savings plan have had positive returns.
The average annual return on growth funds was 8% in the 10 years to the end of September. For balanced funds this was 6.4%.
Joe Taylor, founder of the online consulting firm BetterSaver, said the majority of people realized that short-term losses don’t undermine KiwiSaver’s long-term benefits.
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“KiwiSaver is a long-term game for most,” he said.
“Short-term volatility doesn’t matter.”
People nearing retirement were hopefully in the lower-risk KiwiSaver fund, he said.
He saw little panic among KiwiSavers, with only a minority switching to lower risk funds.
Taylor said people concerned about losses should seek professional financial advice to see if they are invested in a fund that is right for them.
A small subset of funds posted losses of a fifth or more of their value.
In the balanced funds sector, only the Juno Balanced fund fell 20.1% and in the growth sector, Juno Growth fell 27.3%.
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Joe Taylor, founder of the Better KiwiSaver digital consulting firm, says most people keep their nerves down despite losing money.
The biggest drop recorded by any fund was the Nikko AM Ark fund, which fell 57.8% in value. The fund invests 100% in company stocks and focuses on global companies that use technology to disrupt markets.
Despite the losses, the total amount people have on their KiwiSaver accounts has increased over the three-month period covered by the report.
At the end of September, the funds that Morningstar tracked had $85.5 billion invested.
That was $741 million more than at the end of June.
High inflation made it challenging for households, Taylor said. If that continues, he said, some savers could choose to temporarily stop making KiwiSaver contributions or reduce their contributions.
Murphy said that as financial conditions tightened and the likelihood of a policy-induced recession increased, there was an increasingly apparent trade-off between growth and inflation around the world.
And he said: “The ongoing conflict in Ukraine has continued to disrupt international supply networks and energy resources and this, coupled with growth concerns, has eroded investor confidence worldwide.”
Local companies that many KiwiSaver funds have invested in had setbacks in the 12 months covered by the Morningstar report.
Fisher & Paykel Healthcare had a negative quarterly return – 7.41%, Mainfreight Limited achieved -2.38% and Ebos Group achieved -2.39%, he said.
However, the a2 Milk Co, Infratil and Spark helped performance, posting gains of 26.42%, 12.63% and 6.70% respectively in the September quarter.