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Review of the KiwiSaver Fund Manager Market Dynamics and Allocation of Assets

3 KiwiSaver in Context of the New Zealand Economy

KiwiSaver has grown much faster than Government officials' forecasts from when the scheme was designed in 2005.[12] Those original forecasts - which acknowledged the difficulty in forecasting a then untested scheme - anticipated 25% of 18-65 year olds numbering 680,000 joining the scheme by 2013/14. In fact, KiwiSaver assets under management total $22.8 billion as of June 2014 with membership in the same period reaching 2.3 million members.[13] In the context of the New Zealand economy, KiwiSaver represents a significant change in the channelling of savings to financial assets. This can be seen in the below figure 1 which illustrates the growth in KiwiSaver among managed fund assets. Recent analysis by the Treasury[14] has highlighted the growing significance of KiwiSaver funds for the supply of capital in the economy, representing a significant change in the channelling of saving. This analysis - as figure 2 - shows an expected growth in funds under management to $70 billion or 23% of GDP by 2020 and growth in the share of offshore assets in members’ portfolios. In the following, we illustrate the significance of KiwiSaver in the economy and in financial markets, based on Treasury analysis of various data sources.[15]

Figure 1: Managed Funds in New Zealand as % of GDP
Figure 1: Managed Funds in New Zealand as a % of GDP.
Source: Reserve Bank of New Zealand
Figure 2: Actual and Forecast Growth in KiwiSaver Assets Under Management
Figure 2: Actual and Forecast Growth in KiwiSaver Assets Under Management.
Source: Reserve Bank of New Zealand, Treasury analysis Based on Treasury forecasts (Half-Year Economic and Fiscal Update 2014) and the Treasury Fiscal Strategy Model

Notes

  • [12]New Zealand Treasury (2005).
  • [13]As of June 2015, AUM totalled $29.7 billion (RBNZ) and membership was 2.53 million members.
  • [14]New Zealand Treasury (2014).
  • [15]Morningstar's quarterly reports contained the most granular and detailed historical data which were collated into a singular dataset enabling time-series analysis. Difficulties experienced included the changing in reporting of fees in 2012 and the development of reporting over the years. Our analysis is available on request. Limited data from FMA (for four quarters) has also been incorporated. Additionally, data was assembled from Statistics NZ and the Reserve Bank of New Zealand in order to complete the report and fill any gaps not covered in the Morningstar data.
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