Covid and KiwiSaver returns

Mar 2, 2021 | KiwiSaver

Recently I received a survey of KiwiSaver Returns, which basically ranks performance on a group of major providers, and measures their performance across 1 year, 3 year and 5 year periods.

So with Covid 19, the risks when we started that journey in early to mid 2020 were quite high for major losses in the sharemarkets for that year. Investors in Growth categories, which have more sharemarket exposure are more at risk of losses in the short term compared to more conservative investments.

Approx 6 months after the sharemarkets recovered somewhat.

Your KiwiSaver provider has their own view on how to deal with turbulent investment markets. Their goal is always about investing your funds prudently to the best of their ability for the long term and each KiwiSaver provider have different ideas about how to go about it, naturally. They didn’t know whether the sharemarket would keep falling or not or how long the pandemic would last for. Mention of a vaccine in the media was scarce at that time. As such, some fund managers decided to pull money away from sharemarkets in favour of conservative investments like cash or fixed interest. Cash and fixed interest have a much lower risk of sustaining a short term loss compared to sharemarkets. Meaning that they avoided the falls, but also did not participate in the recovery, as they thought that was the best thing to do for their investors.

Others may have also purchased some derivatives such as Futures and Options, which come at a cost, but can make more money in the future when they are executed. Some fund managers still thought risks were around, some fund managers started creeping back into Shares. All of this will impact on your 1 year returns for 2020.

Long story short, those fund managers who thought that staying in low risk assets longer would see lower 1 year returns, compared to other fund managers who decided to take a more aggressive stance with the risks that were around last year, and invest more into the sharemarket earlier.

The main thing I want to get across in this message is to trust your fund manager to do the right thing by you over the longer term and not make decisions based on short term performance patterns.

Just because it appears your usual fund manager had a bad year compared to others when looking only at comparing 1 year returns, try not to be too hasty in changing providers immediately. They may have some “cards up their sleeves” which they can use over the next year or two, to achieve a great result for long term growth investors. With Covid 19 hitting us last year, they all put into place their own plans to protect and maximise opportunities on your behalf for your long-term benefit.

(This is intended to be general advice not personalised advice, a copy of Disclosure Statement available – Craig Coupland CFP)

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