Research Team, 2 October 2017

Ten years on from its launch, KiwiSaver is a huge success. Over 2.6 million New Zealanders have $40 billion tucked away in their KiwiSaver accounts. If you are part of KiwiSaver then congratulations, but it is simply not enough as you need to ensure you have selected the right fund within KiwiSaver.

The right fund means a fund which has the right mix between income and growth assets. Income assets are lower risk assets like cash and fixed interest which generally have lower rates of returns, while growth assets have a higher risk and include investments in things like shares and property assets.

An asset mix can make a big difference to returns over the long-term. We have modelled an investment of $10,000 over 40 years in a Conservative fund, made up of 75% income assets and 25% growth assets, and compared it against the same investment in a Balanced Growth fund, which has a higher allocation to growth assets 75% and less to income assets 25%.

The average expected returns of a Balanced Growth fund is 1.2% a year higher than a Conservative fund. This difference doesn’t look to be too large, however, the power of compounding means the Balanced Growth fund ends up being worth 50% more than the Conservative fund after 40 years. See the chart below.


Using the data in the Financial Market Authority’s 2016 KiwiSaver Annual Report we estimate 83% of KiwiSaver members are under 55 years of age. This means that most KiwiSaver members will be invested for at least 10 years and many more will be invested for 20 years or more.

These long-term savers have time to sit through the inevitable market fluctuations that happen from time to time. If they are contributing, then they can afford to take a more growth orientated approach. In practice, this means contributing to a fund that has a higher exposure to ‘growth’ assets.

On this basis, when you look at KiwiSaver as a whole, you would expect to see a focus on growth assets, perhaps more along the lines of the Balanced Growth fund asset allocation, with 75% of total assets allocated to shares and property. According to the latest Morningstar KiwiSaver

investment survey, only 48% of KiwiSaver funds are invested in growth assets, with 52% in income assets. There seems to be a mis-match between the age profile of KiwiSaver members and what they are investing in.


This is a general perspective and it won’t be right for everybody. What mix of assets is best for a particular KiwiSaver member depends on their particular situation – their risk tolerance, the term of their investment and their investment objectives.

As KiwiSaver balances grow we believe we will see more KiwiSaver members take a more active interest in their KiwiSaver fund, including ensuring they have the right mix of assets, and perhaps also having a say on what they own; flexibility might just become KiwiSaver’s big talking point for 2018.

Example Craigs KiwiSaver Portfolio – $102,000

Nick* – 38 years old.

Below is an example of how Nick has shaped his Craigs KiwiSaver Investment Portfolio. The QuayStreet Growth Fund at $75,000, is the cornerstone of his investment portfolio providing diversification across different markets and industries, and types of investments (eg shares, bonds, funds, cash).

He has then added a selection of stocks across New Zealand, Australia and globally, including an exchange traded fund (ETF) from the United States to complement this with the remaining $27,000.  He will continue to build on those investments until he has $120,000 in his KiwiSaver, and then will select some additional securities (shares, bonds or funds) to add to his portfolio.