Foreword
Welcome to our second edition of the quarterly QROPS provider analysis. Over the last three months we have seen turbulent times in international financial markets, all time high pension transfer values for UK defined benefit schemes and a slowdown in the transfer market as work from home restrictions bit in the UK.
QROPS in New Zealand have had to navigate all these conditions, some have navigated well others not. Enjoy our analysis and if you have any questions please contact us.
Large return differences between NZ QROPS
After a year that has seen the impacts of COVID-19 on financial markets around the world the performance of some of the major QROPS providers in New Zealand has been a mixed bag to say the least.
There has also been plenty written about strategies to cope with the fallout from COVID-19 and what investment managers are going to do going forward.
The top performing scheme, Ranfurly Superannuation, has delivered, on aggregate, nearly 16% returns for its investors. The poorest performing scheme we analysed, NZ Funds, had aggregate negative returns. Everyone was investing in the same markets, so the differences must be due to their investment managers choices. While people stay that historic returns are no predictor of future returns, we’ve learned that history is a pretty good judge.
Figure 1. Investment returns and fees across NZ QROPS to 30 June 2020
Source: Charter Square analysis of Disclose filings
The curious correlation between poor returns and high fees
When looking at the three poorest performing schemes (by aggregate returns) it was interesting to note that these schemes also had the highest aggregate fees across their funds. We note that one provider even had high performance fees on their funds despite the fund having yielded negative returns over the previous 12 month period.
Figure 2. Correlation between poor performance and high fees
Source: Charter Square analysis of Disclose filings
High risk not giving high returns – better balance in balanced
A review of the fund weightings within each of the QROPS shows that the best performing scheme, Ranfurly had a heavier weighting towards balanced funds. The worst performing scheme NZ Funds had a strong weighting towards growth funds.
Figure 3. Fund weightings by New Zealand QROPS provider
Source: Charter Square analysis of Disclose filings
Our methodology
NZ superannuation schemes report on a quarterly basis their fund levels, member numbers and the funds performance. You can see this on the Disclose Register a public register run by the New Zealand Companies Office. We took each schemes fund balances for each investment option and the returns of that fund over that last year then weighted the return by the portion of the funds that the investment represents in the total scheme.
Our calculation methodology is shown in the example below.
| Amount invested | Investment weight | Annual investment returns | Weighted annual return | |
| Fund 1 | 10,000,000 | 67% | 4% | 2.7% |
| Fund 2 | 5,000,000 | 33% | 3% | 1.0% |
| Total return | 3.7% |
Disclaimer
We do not warrant the performance of the funds nor any New Zealand Superannuation Scheme. Past performance is no predictor of future performance. The information provided has been calculated using publicly available information, we do not warrant the accuracy of the underlying data. Any decisions made based on this data are the sole responsibility of the person making the decision and Charter Square Services Limited takes no responsibility for those decisions.
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