On the performance of KiwiSaver funds

Abstract

This study investigates three issues: (1) the replicability of KiwiSaver Balanced (and other intermediate) funds based on a combination of Conservative and Growth funds offered by the same provider; (2) the risk-adjusted performance of the KiwiSaver Growth funds; (3) the market timing skill of KiwiSaver fund managers. We find that for the majority of fund providers, Moderate/Balanced funds are linear combinations of the Conservative and Growth funds with some mispricing between the fees of the actual fund and the reconstructed fund. We further report substantial variation in the amount of risk-taking, and local and international stock market exposure of KiwiSaver Growth funds, making it meaningless to compare these funds simply based on their returns. Using risk-adjusted performance metrics, we observe there is no evidence of systematic outperformance of KiwiSaver Growth funds, and in several cases there is evidence of systematic underperformance. Furthermore there is no sign of market timing skill by KiwiSaver fund managers.