Aon - Industry KiwiSaver Survey Summary Report

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1 Aon - Industry KiwiSaver Survey Summary Report May 2016 Aon Hewitt s latest comprehensive survey of KiwiSaver funds and KiwiSaver managers as at 31 March 2016 is now available. Our analysis includes all multi-sector funds from KiwiSaver providers with more than $100m under management. Overall, the funds in our survey manage assets of $31.6bn which is more than 95% of the total KiwiSaver universe. A total of 90 funds are included across 5 categories Cash, Conservative, Moderate, Balanced and Growth. Using data back to 2008, we show the recent and long term performance of each fund after fees and after tax (at 28%) numbers which are of most relevance to the majority of KiwiSaver members. We also show the benchmark asset allocation for each fund and we compare this with the reported actual asset allocation in order to determine sector overweights and underweights for the KiwiSaver universe as a whole. Some highlights from our survey Total funds under management have increased by 4.4% over the quarter to $31.6bn. Generate saw the largest percentage gain in funds (25.9%), whilst BNZ increased funds under management by 8.4%. Banks continue to dominate the KiwiSaver landscape. ANZ, ASB, Westpac, KiwiBank and BNZ manage more than 60% of the assets in our survey. The 5 banks have seen funds under management increase by $940m over the last quarter. The fund managers continue to favour cash this sector has the largest overweight across all funds with 20.2% allocated versus a benchmark allocation of 17.9%. The largest underweights are to Australasian Shares (12.6% allocated versus a benchmark allocation of 13.9%) and Overseas Shares (25.4% allocation versus a benchmark allocation of 26.6%). We now have 8 full years of data. Over this period, Aon has the best performing fund in 5 of the 6 categories. In the Growth category the best performing fund is the Fisher Funds Growth fund which has provided returns, after tax and fees, of 8.2% p.a. Over 8 years, AMP has the worst performing fund in 5 of the 6 categories. Over the last 12 months the stand out performer is the Generate Conservative Fund. This is the best performing fund across all categories in our survey its 7.7% return is 3.4% ahead of the next best Conservative product. The fund appears to have benefitted from a high exposure to domestic bonds and domestic shares and no exposure to overseas shares. Only 6 funds out of the 90 in our survey failed to deliver positive returns after tax and fees over the last 12 months. These were mostly Growth funds with a large allocation to Overseas Shares. The NZ Funds Growth Fund was the worst overall performer, returning -10.9%. Full details are reported in the survey results which can be accessed from our website or by ing us at nz.info@aonhewitt.com. Aon Industry KiwiSaver Survey Summary Report 1

2 The KiwiSaver Universe KiwiSaver Provider FUM ($m) % of total Cumulative % of total ANZ $8, % 26.1% ASB $5, % 45.1% AMP $4, % 57.8% Westpac $3, % 69.8% Fisher $2, % 79.0% Kiwi Wealth $2, % 86.7% Mercer $1, % 91.1% BNZ $ % 93.7% Grosvenor $ % 96.1% Milford $ % 97.9% Aon $ % 99.0% Generate $ % 99.6% NZ Funds $ % 100.0% Total $31, % KiwiSaver Provider FUM ($m) 30 Mar 2016 FUM ($m) 31 Dec 2015 Increase in FUM ($m) Increase in FUM (%) ANZ $8,251 $7,858 $ % ASB $5,978 $5,696 $ % AMP $4,006 $3,879 $ % Westpac $3,793 $3,610 $ % Fisher $2,906 $2,799 $ % Kiwi Wealth $2,434 $2,415 $ % Mercer $1,390 $1,341 $ % BNZ $793 $731 $ % Grosvenor $768 $740 $ % Milford $556 $530 $ % Aon $371 $360 $ % Generate $176 $139 $ % NZ Funds $130 $127 $ % Total $31,552 $30,225 $1, % We have split the universe into 6 categories of funds. The Conservative option remains the most popular. Total FUM ($m) % of total Number of funds Allocation to Growth Assets Cash $1, % 11 0% Conservative $11, % 21 <35% Moderate $2, % 10 <50% Balanced $8, % 24 <70% Growth $7, % 24 >70% Total $31, % 90 Aon Industry KiwiSaver Survey Summary Report 2

3 Fund Performance Conservative funds fared best over the first quarter of 2016, with the median fund in this category returning 1.7%. Poor returns from Global Shares meant that growth funds struggled over the quarter. The median growth manager returned just 0.8%, and a number of funds in this category posted negative returns. Over the long run investors have received some reward for taking additional risk. The median fund in both the Balanced and Growth categories returned 5.6% p.a. over the last 8 years compared with 4.6% for the median Conservative fund and 2.5% for the median Cash fund. Median Fund Performance (p.a.) to 31 March 2016 Category 3 months 12 months 8 years Cash 0.5% 2.2% 2.5% Conservative 1.7% 3.4% 4.6% Moderate 1.5% 3.6% 5.4% Balanced 1.2% 3.8% 5.6% Growth 0.8% 3.9% 5.6% Performance by fund type for Q Category Top Performer Return Bottom Performer Return Cash Aon Nikko Cash 0.6% AMP Cash 0.4% Conservative Generate Conservative 2.4% Kiwi Wealth Conservative 0.7% Moderate ASB Moderate 1.8% BNZ Moderate 1.1% Balanced Mercer Balanced 1.8% Kiwi Wealth Balanced -1.5% Growth Mercer Growth 1.6% NZ Funds Growth -8.1% Performance by fund type for 1 Year Category Top Performer Return Bottom Performer Return Cash Kiwi Wealth Cash 2.4% AMP Cash 2.0% Conservative Generate Conservative 7.7% AMP Conservative 1.5% Moderate Aon Russell Moderate 4.3% AMP Moderate 0.9% Balanced AMP Nikko Balanced 7.3% Kiwi Wealth Balanced -0.6% Growth Aon Milford Active Growth 7.6% NZ Funds Growth -10.9% Performance (p.a.) by fund type for 8 Years Category Top Performer Return Bottom Performer Return Cash Aon Nikko Cash 2.9% Westpac Cash 2.4% Conservative Aon Russell Conservative 6.5% AMP Default (Conservative) 3.6% Moderate Aon Russell Moderate 6.5% AMP Moderate 3.9% Balanced Aon ANZ Balanced 7.5% AMP Moderate Balanced 3.7% Growth Fisher Funds Growth 8.2% AMP Aggressive 3.2% All returns are after fees and after Aon Industry KiwiSaver Survey Summary Report 3

4 Asset Allocation Across the KiwiSaver universe the largest overweight is to cash. The overall allocation to this sector is 20.2% versus a combined benchmark allocation of 17.9%. This 2.3% overweight compares with a 1.5% overweight to cash across the same funds last quarter. KiwiSaver managers are underweight in both domestic and international shares compared with their benchmarks. KiwiSaver funds continue to have only a very small allocation to alternative assets. The actual allocation is 1.6% versus a benchmark position of 1.3%. Total FUM ($m) % of Total FUM Sector Benchmark Actual Difference Benchmark Actual Difference Cash $5,657 $6,360 $ % 20.2% 2.3% NZ Fixed Interest $4,755 $4,758 $4 15.1% 15.1% 0.0% Intl Fixed Interest $6,418 $6,371 -$ % 20.2% -0.1% Total Income $16,829 $17,490 $ % 55.4% 2.2% Australasian Shares $4,371 $3,986 -$ % 12.6% -1.3% International Shares $8,401 $8,023 -$ % 25.4% -1.2% Property $1,531 $1,537 $5 4.9% 4.9% 0.0% Other $419 $516 $97 1.3% 1.6% 0.3% Total Growth $14,722 $14,062 -$ % 44.6% -2.2% Total funds in our KiwiSaver universe have increased by $1.3bn since 31 December Defensive sectors have gained the most, with allocations to bonds increasing by $680m and allocations to cash increasing by nearly $480m. As at 31 Mar 2016 As at 31 Dec 2015 Change over quarter Sector FUM ($m) % of FUM FUM ($m) % of FUM FUM ($m) % of FUM Cash $6, % $5, % $ % NZ Fixed Interest $4, % $4, % $ % Intl Fixed Interest $6, % $5, % $ % Total Income $17, % $16, % $1, % Australasian Shares $3, % $3, % $ % International Shares $8, % $8, % -$ % Property $1, % $1, % $ % Other $ % $ % -$ % Total Growth $14, % $13, % $ % Total $31, % $30, % $1, % Aon Industry KiwiSaver Survey Summary Report 4

5 Contact Information Guy Fisher Consultant guy.fisher1@aonhewitt.com Tamsyn Claase Analyst tamsyn.claase@aonhewitt.com Aon Industry KiwiSaver Survey Summary Report 5

6 About Aon Hewitt Part of Aon plc, Aon Hewitt is the global leader in human resource consulting and outsourcing solutions. Our services focus on helping organisations mitigate risk in their workforce and realise the untapped potential of their employees. We also help individuals maximise their wealth to enable people to live the life they want. In New Zealand, our team of experts partner with your organisation to develop and deliver people strategies that achieve positive business outcomes in the areas of: actuarial and investment consulting; talent, leadership and employee engagement; remuneration and incentives; total rewards; health and benefits; global benefits; Aon KiwiSaver Scheme; and Aon Master Trust. With more than 30,000 professionals in 90 countries, Aon Hewitt makes the world a better place to work for clients and their employees. Aon Hewitt is the global talent, retirement and health solutions business of Aon plc. For more information on Aon Hewitt, please visit aonhewitt.co.nz Aon New Zealand Aon Industry KiwiSaver Survey Summary Report 6