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KiwiSaver returns plateau after four quarters of gains

Monday 10th May 2010

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KiwiSaver funds provided positive returns for the fourth straight quarter, though the growth is running out of steam and ongoing fears of a debt crisis in the euro zone may be partly to blame, according to Mercer (NZ) Limited.

The median return for the most conservative Default Funds was 2% in the three months ended March 31, according to Mercer’s KiwiSaver survey.

The median for conservative funds was 2.1%, balanced funds chalked up 2.9% and growth funds managed 3.3%. 

“While KiwiSaver funds have posted positive returns over the last four quarters, performance has reached a plateau and we’re not seeing the same level of growth achieved over the last six months,” said Mark Lewington, head of Mercer New Zealand. 

While growth in global markets and better-than-expected corporate earnings have underpinned returns, “growing concerns over possible sovereign debt defaults in the euro zone could threaten the run of positive returns,” he said.

“The volatility is far from over.”

Some US$3.7 trillion was wiped off the value of global equity markets last week, according to Bloomberg, on fears Greece’s debt crisis would spread. Equity markets rallied again in Asia today after governments in the euro zone agreed to lend as much as 750 billion euros to member states drowning under their debt burdens. 

Fidelity Life’s Aggressive fund turned in the best result, with a 6.3% return in the first quarter, while Fisher Funds Growth Fund recorded the fattest return for the 12 months through March, at 50.8%.  

Growth in funds under management for the top seven default funds grew by almost $1 billion between June 2009 and March 31, bringing the total held between them to $2.2 billion.

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