Global financial volatility will have affected KiwiSaver returns, but there also is an opportunity for new KiwiSaver investors to enter at relatively lower prices, Forsyth Barr saving specialist Damian Foster says.
"The impact on each individual will depend on which fund they have selected." Investors in the "aggressive" or "growth" funds were naturally more affected, but could take comfort from the fact their funds had generally been better performers over the past one to two years.
With automatic enrolment being signalled by the Government, it was likely that about one million workers would be automatically enrolled in conservative default funds, meaning a reduced impact from the recently volatile global markets, Mr Foster said.
"The concern for those automatically enrolled then becomes more long term and whether the conservative option is their best strategy for a long-term investment such as KiwiSaver."
Mercer New Zealand head Martin Lewington said, although KiwiSaver funds started the year with positive returns, the recent volatility had tempered growth.
The market jitters continued on the back of a string of weak economic reports and ongoing concerns over global growth prospects and the impact sovereign debt problems would have on the euro.
Global growth momentum had slowed, resulting in a period of market volatility. Adding to the uncertainty was the United States debt issue. The market was watching closely to see how the problem was dealt with in the coming months, he said.
Despite those factors, Mercer remained "cautiously optimistic" on the economy and believed the recovery would continue.
It was important for investors to maintain a long-term outlook. While growth funds were the hardest hit in the June quarter, those funds had topped the performance tables in two of the past three years, Mr Lewington said.
"Over the longer term, default funds which have the highest allocation to bonds and cash remain the best performers since KiwiSaver's inception in 2007."
That was largely because of their superior performance in 2008, at the height of the global financial crisis, he said.
Over a 30-year investment horizon, or longer, the picture could be different, emphasising the importance of selecting investment options which were appropriate to the investor's life stage, Mr Lewington said.
