Grosvenor head of marketing and business services Andrew Lendnal has questioned the methodology of Canstar, a research firm that rates a number of other financial products including home loans, KiwiSaver schemes, term deposits and credit cards.

Canstar bases 70% of its KiwiSaver ratings on fees, with the remaining 30% on features such as investment options, account access and communication.

ASB and Superlife both received five-star ratings in all three categories (conservative, balanced and growth), while the award-winning Milford Asset Management scored only three stars.  Grosvenor’s funds were awarded two stars.

Lendnal said the value of the survey was minimal because of its heavy focus on the fee aspect, with factors such as fund performance ignored.

“The analysis they do is based on fee structures… if you are ASB yes you will have cheap fees and you’ll be right at the top.”

Canstar New Zealand general manager Derek Bonnar said:  “While performance is not guaranteed, fees are known and do have an impact on the final retirement benefit of KiwiSavers.  A small difference in fees can have a substantial difference on the final retirement savings of the individual investor.”

Canstar’s doesn’t measure fund outperformance, although it looks out for persistent underperformance as this can be an “indicator of broader management or systemic issues which may be impacting the investment performance,” Bonnar said.

“We have taken the decision not to make a judgement on the sustainability of investment returns,” he said.

“While we recognise that some fund managers have outperformed the market, there is a wide range of research which indicates that the majority of fund managers cannot persistently outperform a benchmark over the long term i.e. 10-plus years.

“Given that KiwiSaver is not only a long-term investment but a lifetime investment, consumers cannot reasonably rely upon current top performers sustaining that position.” 

Diversified director Norman Stacey, who manages the Law Retirement KiwiSaver Scheme which received a one-star rating, said he wasn’t familiar with Canstar and wasn’t aware of his scheme’s low rating.

But he said the proliferation of different ratings systems with different methodologies could cause confusion for investors.
“It must be hugely confusing; everyone claims to be fund manager of the year.”