Defensive investor strategy succeeds

Defensive investment strategies had proved the best performers in a period of financial turmoil, according to a FundSource KiwiSaver survey.

"Now that KiwiSaver is established, we can start to see the effect of performance over a longer time frame," FundSource investment analyst T. J. Singh said yesterday.

The survey identified diversity in performance between the balanced, conservative and growth sectors.

The statistics demonstrated the difference in performance of KiwiSaver providers over the two-year period to October 2009, with diversity observed in all three sectors - conservative, balanced and growth.

Over the two-year period, on average, conservative funds had performed better than balanced and growth funds, Mr Singh said.

On a year-to-date basis, growth funds had performed better than balanced funds which had performed better than conservative funds.

There had been much volatility in markets over the two years.

It was expected there would be variations in returns across fund managers that adopted different investment strategies.

"Also, you would generally expect growth funds to outperform the conservative funds over a longer time period. However, the past two years have meant that funds with a higher weighting to defensive assets, such as cash and fixed interest, have outperformed the others."

In the conservative sector, all fund managers experienced positive returns over the two-year and one-year period to October.

Huljich was the top performer, with an average annual return of 10.57% over the two-year period.

AMP, Craigs Investment Partners, ASB and ING conservative funds had also performed well and produced a return of greater than 3.5% over the same period.

In the balanced sector, all funds had experienced positive returns over the one-year period but only 10 funds had experienced a positive return over the two-year period.

Huljich and Brook were top performers, with average annual returns of 7.2% and 4.49% respectively.

In the growth sector, all fund managers had experienced positive returns over the one-year period but only three funds had a positive return for the two-year.

Again, Huljich and Brook were the top performers, with average annual returns of 6.42% and 4.22% respectively.

Mr Singh said boutique fund managers like Brook and Fisher funds, that took an active approach to portfolio management, appeared to have performed well compared with their competitors.

"If we are to draw some conclusions for the statistics, it would be that KiwiSaver members should ensure they are in an investment vehicle that is aligned with their own risk appetite and investment objective."

Many KiwiSaver members would have been automatically enrolled in a defensive or conservative fund, Mr Singh said.

While that had been a good strategy for the past two years, it might be appropriate for some investors, with greater ability to take risk and greater risk appetite, to look at growth oriented funds, he said.

Top performers
Conservative funds
Huljich - two-returns, 10.57%
AMP - two-year returns, 4.27%
Craigs - two-year returns, 3.84%
ASB - two-year returns, 3.8%
ING - two-year returns, 3.78%