KiwiSaver Fund Performance and Asset Allocation Policy

This study examines the performance and asset allocation policy of 70 KiwiSaver funds labelled as Growth, Balanced or Conservative over the period October 2007- June 2016. On average, funds underperform their respective benchmarks, with the mean quarterly excess return (after management fees) of -0.15% (Growth), -0.63% (Balanced) and -0.83% (Conservative). Benchmark returns variability, on average, explains 43%-78% of fund's across-time returns variability, and this is primarily driven by fund's exposures to global capital markets. Differences in benchmark policies, on average, account for 18.8%-39.3% of among-fund returns variation while differences in fees and security selection may explain the rest. About 61% of Balanced and 47% of Growth funds' managers make selection bets against their benchmarks. There is no consistent evidence that more actively managed funds deliver higher after-fee risk-adjusted performance. Superior performance is often due to randomness and does not attract additional managed funds, except for the top quintile of Growth funds