Make sure your QROPS is not at Level 4

 

Introduction

We all know markets have been and continue to be volatile and people are worried about their investments.  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.  So while people say that historic returns are no predictor of future returns, history is a pretty good judge and plenty can be learned from it.

With that in mind we set about analysing the returns for some major New Zealand QROPS for the year up to 31 March 2020 (when the COVID-19 market ravaging was taking place).  All schemes need to report their post-tax and fees returns for each fund that they run.  We only analysed the portfolio investment entity schemes as they have fewer investment options and need to report consistently, we have not analysed platform schemes in this report.

 

Big difference in returns

What we found was a real and significant difference in returns.  In fact at its widest the difference in annual returns was 18%, with one fund achieving a 6% return and another a negative 12% return.  This difference alone would translate to an investment difference of $18,000 on a $100,000 investment.  We figure that is a pretty big difference and enough for investors to sit and take stock of their options.

So, how do you explain the difference in the returns, it must be down to investment management.  Which goes to show the choice of a well renowned investment manager with a long track record of performance is crucial when assessing your options.

Of the 31 funds that we reviewed the average performance was -3.0%.  Breaking that down only 10 had positive returns for the year, and of those only 3 had returns above 2%.  The average returns for the positive performing funds was a mere 1.7%.  On the flip side of that the average returns of the 21 negative performing funds was -5.60%.  So making sure that you have exposure to a wide variety of funds and schemes is crucial when you are looking at your investment options. 

Furthermore, when we reviewed the schemes with tied advisers (advisers that only recommend one scheme to you), their average performance was lower than the total average.  Meaning you should definitely be careful when selecting a scheme.

 

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.

 

 

get the full report

with the names and returns of different QROPS
in New Zealand over the past financial year