Large return differences between NZ QROPS

After an excellent year in the equities market we have assessed the performance of major QROPS in New Zealand that are portfolio investment entities. 

Looking at the average annual returns as at 31 December 2019 we can see large differences in the returns we can see an almost 7.5% absolute return difference between the top and bottom performing schemes.

We wondered if these large differences in returns could be explained by differing risk profiles of investments within the schemes themselves.  But analysis of the risk indicators shows that most are middle of the road with 4 being medium to high risk (for more information visit https://www.fma.govt.nz/assets/Guidance/Guidance-note-on-risk-indicators-and-description-of-managed-funds.pdf)

While we appreciate that the results above represent only one year of each schemes performance, it is interesting to see what would happen to $10,000 of investment extrapolated out over five years.  This shows the heightened difference in choosing a well performing scheme.

Figure 1.  Investment value across NZ QROPS 

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 investedInvestment weightAnnual investment returnsWeighted 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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