KiwiSaver started at zero in 2008 - 7 years later it's hit NZ$30 billion. With net inflows of almost $1.4 billion in the quarter to 30 Sept, the total under management continues to hit new highs (source: PlanForLife). It's great for NZ to have a large and growing retirement savings pool, but what other issues should we consider?
1 - are the large providers finding it difficult to invest ever increasing amounts in NZ's relatively small and less liquid local listed market? The NZ market is less than 0.1% of global equity markets - expect more and more KiwiSaver $$$ to be invested in offshore equities.
2 - will providers widen their focus and include less "conventional" asset classes with good long run returns? The inclusion of private equity would be a great start. (Answer - they should but are unlikely to, it's seen as too hard and Milford is the only provider to have taken this step).
3 - will KiwiSaver investors continue to have such a strong conservative bias? One of the biggest challenges for providers is convincing investors in conservative funds with a long time horizon to retirement that they should take on more risk (i.e. move to balanced or aggressive funds). A cynic would say this switch means higher fees for providers (which is true) but more importantly the switch should also mean much a higher balance for these investors on retirement (which is the whole point of KiwiSaver....). May be as average balances grow more will make this switch.
Of the top 4 providers AMP is struggling to grow while ANZ, ASB and Westpac march onwards and upwards....