A weak performing local sharemarket has put a dampener on growth in KiwiSaver returns in the first three months of the year.
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A quarterly survey by investment research company Morningstar shows the value of KiwiSaver funds grew by about $2.5 billion to just under $78.8b.
"KiwiSaver funds generally reflected the underlying market conditions experienced over the March quarter as funds with larger exposures to defensive and domestic growth assets generally struggled over the three-month period," director of manager research Tim Murphy said.
He said the New Zealand sharemarket, which fell 4 percent over the quarter, had been a clear underperformer compared to other markets such as the US, which gained 6.2 percent, and Australia which was up 4.2 percent.
"However, the solid market returns disguised divergent performance at the sector level. Investors have rotated out of 2020's winning growth stocks and into undervalued stocks."
The average return for the quarter for conservative funds fell 0.6 percent, moderate funds averaged a 0.1 percent fall, but balanced and growth funds grew 1.4 and 2.4 percent respectively.
However, Murphy echoed the recent warnings of the Financial Markets Authority that investors should not look at one quarter's returns or even over the past year, given the volatility caused by the pandemic.
"It is most appropriate to evaluate performance of a KiwiSaver scheme by studying its long-term returns. Over 10 years, annual returns had averaged between 5.8 percent for conservative funds through to 9.9 percent for the growth category."
ANZ remained the dominant KiwiSaver provider with $17.9b in funds under management, about 23 percent of the market, with ASB second at $13.6b.