How to compare KiwiSaver funds effectively
Comparing KiwiSaver funds requires looking beyond simple performance rankings. The best fund for you depends on your individual circumstances, risk tolerance, time horizon, and investment goals. What makes a fund "best" for one person may be completely unsuitable for another.
When evaluating funds, consider multiple factors: historical performance over 5-10 year periods (not just 1 year), annual fees and total costs, asset allocation and diversification, fund manager expertise and track record, and alignment with your personal investment values.
It's also crucial to compare funds within the same category. A growth fund shouldn't be compared directly to a defensive fund—they serve different purposes. Instead, compare growth funds to other growth funds, and defensive funds to other defensive funds.
Key metrics for fund comparison
Historical performance
Look at performance over multiple timeframes: 5-year, 10-year, and since inception if available. Longer timeframes matter most because they smooth out short-term market volatility and show whether the fund manager can deliver consistent results across different economic cycles.
Be cautious of recent 1-year performance rankings. A fund might have an exceptional single year but underperform over 5-10 years. Similarly, a fund that underperformed last year might be excellent long-term. Focus on sustained multi-year performance.
Volatility and downside protection
Beyond average returns, examine how much a fund fluctuates. A fund returning 8% on average but with wild swings might feel riskier than a fund returning 7% more consistently.
Look at performance during market downturns. Did the fund decline less than peers during the 2020 or 2022 market corrections? Funds with better downside protection help you avoid panic selling during market stress.
Annual fees and total cost
Always compare total annual costs, including management fees, administration fees, and any other charges. A fund returning 7% with 1.5% fees is equivalent to 5.5% net return, while a fund returning 6.5% with 0.5% fees delivers 6% net return.
For this reason, lower fees often result in higher net returns even when gross (before-fee) returns are similar.
Asset allocation
Check what the fund actually holds: percentages of New Zealand shares, international shares, bonds, property, and cash. A balanced fund from one provider might hold 45% shares and 55% bonds, while another balanced fund holds 55% shares and 45% bonds.
Ensure the fund's asset allocation matches its category label and your expectations for the fund type.
Fund size and liquidity
Larger funds typically have advantages: better economies of scale leading to lower costs, greater diversification, and deeper analyst resources. Very small funds may struggle to maintain competitive returns.
Liquidity matters for switching. Most KiwiSaver funds can be switched quickly, but ensure your provider can process your switch within a reasonable timeframe.
Conservative funds compared
Conservative funds typically allocate 20-30% to growth assets and 70-80% to bonds and cash. These funds suit members in their 50s or those approaching retirement.
Key characteristics
Conservative funds prioritise capital stability over growth. You won't see dramatic returns, but you also won't experience the volatility of growth funds. Annual returns typically range from 2-4% in normal economic environments.
Conservative funds are appropriate for members within 5-10 years of retirement who cannot afford significant losses. If your retirement date is approaching, the stability conservative funds offer is often more important than higher potential growth.
Performance comparison
Over 10-year periods, conservative funds typically deliver 3-4% annual returns after fees, compared to inflation around 2-3%. This means conservative funds provide modest real return growth, roughly maintaining and slightly growing your purchasing power.
Conservative funds from different providers show relatively similar performance because they hold similar asset types (government bonds, investment-grade corporate bonds, cash). Differences are usually small and driven primarily by fees rather than asset selection.
Balanced funds compared
Balanced funds target 50/50 or 60/40 allocations between growth and defensive assets. These are the default KiwiSaver funds for most members and suit workers aged 30-50 with a reasonable time horizon.
Key characteristics
Balanced funds offer moderate growth potential with moderate volatility. Historical returns average 5-6% annually over 10-year periods. They experience volatility (typically 10-15% maximum annual declines in difficult years) but recover reasonably quickly.
Balanced funds provide reasonable diversification across multiple asset classes, reducing concentration risk. They suit members seeking steady growth without extreme volatility.
Performance comparison
Balanced fund performance varies more than conservative funds. Some managers take a more active approach to asset allocation, adjusting between shares and bonds based on market conditions. Others use passive index-tracking approaches.
Over 10-year periods, balanced funds typically deliver 5-6% annual returns. Performance differences often come from:
- International share exposure (some hold 20% international, others 40%+)
- Active versus passive management approach
- Property and alternative asset allocation
- Fee differences
When comparing balanced funds, ensure you understand the fund manager's investment approach and whether it aligns with your preferences.
Growth funds compared
Growth funds typically hold 70-80% in growth assets (shares and property) and 20-30% in defensive assets. These funds suit younger members (age 35-50) with 15+ years until retirement.
Key characteristics
Growth funds target long-term capital appreciation. They experience significant volatility, with annual fluctuations of 15-25% not uncommon. In growth years (technology booms, economic expansions), returns can exceed 15%. In down years (recessions, market corrections), losses can reach 20-30%.
Historical 10-year returns for growth funds average 7-8% annually, significantly outpacing inflation. Over 20+ year periods, this compounds to substantial wealth creation, justifying the volatility for younger members.
Performance comparison
Growth fund performance varies significantly based on share market exposure, active management approaches, and allocation to international shares versus NZ/Australian shares.
Key differences include:
- Share market weighting (some 75%, others 85%+ equity)
- International diversification (emerging markets, developed markets percentages)
- Active stock-picking versus index tracking
- NZ/Australian home bias (some funds overweight local companies)
Comparing growth funds requires examining not just performance but the specific bets the fund manager is taking. A fund outperforming temporarily might be due to successful stock-picking or simply overweighting market sectors that are currently popular.
Pro tip: Look beyond 1-year returns
A fund ranking #1 in 1-year performance might be #20 in 5-year performance. Market trends shift, and what's popular in one year often underperforms in the next. Always examine 5-year and 10-year performance to identify genuinely good funds versus lucky short-term performers.
Aggressive funds compared
Aggressive funds allocate 80-100% to growth assets with minimal or no defensive holdings. These funds are for very young members (under 40) with exceptional risk tolerance and 25+ year investment horizons.
Key characteristics
Aggressive funds aim for maximum long-term growth. They experience extreme volatility, with potential annual fluctuations of 20-40% or more. Market crashes can cause 40-50% temporary declines.
These funds are only suitable for members who can maintain conviction during severe market downturns without panic-selling. If market volatility causes you significant stress, aggressive funds are inappropriate regardless of your time horizon.
Performance comparison
Aggressive funds show the greatest performance variation across providers. Some focus heavily on developed market shares, others emphasise emerging markets or frontier markets. Some add alternatives like hedge funds or commodities.
Over 20+ year periods, aggressive funds typically deliver 8-10% annual returns, significantly exceeding conservative and balanced funds. However, this requires staying invested through multiple market crashes without emotional decision-making.
ESG and ethical fund options
An increasing number of KiwiSaver providers offer environmental, social, and governance (ESG) funds that exclude companies with poor ethical records.
What ESG funds exclude
ESG funds typically exclude companies involved in:
- Fossil fuel extraction and coal production
- Weapons and military manufacturing
- Poor labour practices and human rights violations
- Significant environmental destruction
- Other criteria depending on the fund's specific mandate
ESG fund performance
Historically, ESG funds have performed competitively with mainstream funds. Excluding poorly-run companies with ethical issues often means excluding poor-quality businesses anyway. Over 10-year periods, many ESG funds have matched or exceeded the performance of similar mainstream funds.
ESG investing has moved from a fringe concept to mainstream, with major global asset managers now offering competitive ESG options. If ethical alignment matters to you, ESG funds allow you to invest according to your values without sacrificing expected returns.
Fund comparison table
| Fund type | Typical growth allocation | Typical 10-year return | Maximum typical annual volatility | Suitable time horizon | Best for |
|---|---|---|---|---|---|
| Defensive | 0-10% | 2-3% | 5-10% | 0-5 years | Members in first 5 years of retirement |
| Conservative | 20-30% | 3-4% | 10-15% | 5-15 years | Members 50+ approaching retirement |
| Balanced | 50-60% | 5-6% | 15-20% | 15-30 years | Mid-career workers 30-50 |
| Growth | 75-85% | 7-8% | 20-30% | 20+ years | Younger members 35-50 |
| Aggressive | 90-100% | 8-10% | 30-40% | 25+ years | Young members under 40, high risk tolerance |
Using online comparison tools
Modern KiwiSaver comparison tools make selecting and comparing funds straightforward. RatePal's KiwiSaver fund finder allows you to:
- Filter funds by type (defensive, conservative, balanced, growth, aggressive)
- Compare fees across all major providers
- View historical performance data over 1-year, 5-year, and 10-year periods
- See asset allocation breakdowns
- Identify ESG and ethical fund options
Using comparison tools, you can quickly identify funds matching your criteria and compare them side-by-side without manually visiting each provider's website.
Making your final decision
After comparing funds across multiple criteria, you should be able to identify 2-3 funds that best suit your situation. At this point, make a decision and implement it.
Remember that perfect cannot be the enemy of good. If you find a fund that matches your risk profile, has reasonable fees, and acceptable performance, it's time to switch or contribute to it rather than endlessly researching.
You can always review your fund choice annually or when your circumstances change. Making a good decision now is better than delaying investment while seeking the perfect fund.
Find the best KiwiSaver fund for your situation
Compare KiwiSaver funds across all major providers using comprehensive performance data, fee comparisons, and fund characteristics. Our comparison tool helps you identify the best options within each fund type to match your age, risk tolerance, and investment timeline.
Frequently asked questions
What's the best KiwiSaver fund overall?
There's no single best KiwiSaver fund for everyone. The best fund depends on your age, risk tolerance, time horizon, and investment values. A growth fund might be ideal for a 30-year-old but completely inappropriate for a 62-year-old. Use comparison tools to identify the best fund within the category that suits your situation.
Should I choose an actively managed fund or index fund?
Historically, most actively managed KiwiSaver funds underperform index funds over 5-10 year periods after fees. Index funds track a market benchmark with minimal active decisions, keeping fees low. Unless you have strong conviction about a specific fund manager's skill, lower-cost index or balanced funds often deliver better results.
How often should I review my KiwiSaver fund?
Review your fund annually and whenever major life events occur (job change, inheritance, relationship changes). However, don't overreact to short-term performance. Changing funds frequently based on 1-year rankings usually hurts rather than helps long-term returns.
Can I hold multiple KiwiSaver funds with the same provider?
Yes, some providers allow splitting your balance across multiple funds. This might be useful for a transitional strategy (e.g., 70% growth fund, 30% balanced fund) if no single fund perfectly matches your needs. However, most members are better off choosing one appropriate fund rather than splitting holdings.
What about international KiwiSaver funds?
Most balanced and growth funds already include significant international share exposure (typically 30-50% of growth assets). Separate international-only funds exist but are riskier due to currency exposure and lack of domestic diversification. Most members benefit from the international diversification already included in mainstream balanced and growth funds.