All but two KiwiSaver funds produced positive returns in the December 2023 quarter – research firm Morningstar said. 

Morningstar said the average multisector category returns for the December quarter ranged from 4.9 per cent for the conservative category to 7 per cent for the aggressive category. 

Default options averaged 6.3 per cent. 

KiwiSaver assets covered in the Morningstar database increased during the December quarter to $104 billion. 

ANZ again led the market share with more than $20.3b in KiwiSaver funds under management. 

Fisher was second with a market share of 15.4 per cent. 

BT dropped down to the fourth spot ahead of Milford, which debuted in the top five. 

The five largest KiwiSaver providers accounted for about 68 per cent of assets in the database and generated around 69 per cent of the fees. 

All KiwiSaver funds, with the exception of two, produced positive returns over the December quarter, with most north of 5 per cent. 

As for default funds, Simplicity celebrated its small fee cut coming in 2024, with the best return of the quarter. 

“Quay Street continued to perform well across many time periods in the conservative and balanced categories,” Morningstar said. 

“Milford has consistently high performance within the moderate, balanced, and growth categories over the long term, though it struggled in 2023,” it said. 

Generate is putting up strong numbers across many periods, it added 

Morningstar’s study of the long-term returns showed that over 10 years, the aggressive category average has given investors an annualised return of 8.3 per cent, followed by growth (7.9 per cent), balanced (6.4 per cent), moderate (4.6 per cent), and conservative (4.3 per cent) 

The firm said markets continue to embrace moderating inflation trends, allowing scope for central banks to lower interest rates modestly while delivering a soft landing for the global economy. 

“That sentiment is vulnerable to challenge,” Morningstar said. 

“The onus will be on inflation outcomes to validate market expectations, with core inflation measures globally still elevated and slow to return to target.” 

Morningstar noted that growth in New Zealand is weak, and that inflation pressures are receding, allowing scope for an eventual loosening of monetary policy. 

“Election and political risks are expected to become more relevant internationally, with half the world’s population and around 60 countries going to the polls in 2024,” it said. 

The diversion of sea traffic from the Red Sea to around the Cape of Good Hope was a reminder of geopolitical frictions, which have lifted freight rates and represent another small “supply shock” on top of what is becoming repeated supply shocks. 

The path of returning inflation to target still faces geopolitical challenges, and labour markets remain very tight, adding to inflation for services. 

“There appears a wider than normal array of views over the macroeconomic outlook in 2024, which supports diversification in portfolios, as well as increasing attention to microeconomics such as business fundamentals and valuations,” Morningstar concluded. 

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.