The KiwiSaver fund that returned more than 100 percent in a year

A surge in technology stock values has helped to propel passive KiwiSaver managers and "responsibly" invested funds to strong returns this year.

Morningstar's most recent survey of KiwiSaver funds shows that most returned around 4 percent in the September quarter as most asset classes increased in value.

The best performance over the year in the quarter was Koura's cryptocurrency funds' 116 percent return.

Greg Bunkall, Morningstar data director, said the recent run-up of technology stocks, which made up a significant portion of the S&P500 had helped passive investment funds. Passive funds track a market index rather than trying to outperform.

He said funds that invested with an environmental, social and governance (ESG) lens also tended to hold more of those stocks as well as newer technology relating to renewable energy, which performed well in this environment.

Responsible investment manger Pathfinder had the best five-year returns in its growth fund, balanced funds and conservative fund.

Over ten years, Milford had the strongest performance in those categories.

Dean Anderson, founder of KiwiSaver provider Kernel, said the data showed passive funds were perfoming well. They were strong performers among balanced, high growth, cash, international shares and property funds, he said.

"The benefit of an index is it continually reflects the market, captures all these changes, and doesn't require picking them in advance.

"The spread between best and worst performing sectors is key. Under Trump, the market is trying to digest which sectors will benefit most from his prospective tariffs and trade policies. We've seen Tesla rally on the back of this, given the close relationship with Musk.

'While there is decades of data globally that shows how hard it is for active managers to outperform the market, we haven't had the range of options, or history, in New Zealand to show the local effect. The latest Morningstar results show the value of indexing for investors in KiwiSaver."

Chris Douglas, principal at My Fiduciary, said passive investment styles had done well in the last few years

"That being said, the whole active versus passive debate does get a bit tired. The most important decision is still asset allocation and the biggest driver of returns has been how much a KiwiSaver scheme has in NZ equities versus global equities. Up until 2020 the NZ market was one of the best performing equity markets and many KiwiSaver providers had a large allocation domestically. That has changed over the last three years and NZ share have significantly under-performed global equities. So, even if you are active and adding value, if you have a large bias to NZ shares, it's hasn't helped much."

Bunkall said it was not yet clear what impact the next Trump presidency would have on New Zealand funds.

"It's possible that some sectors favoured by ESG funds could miss out on the outsized returns found in industries that ESG typically avoids, such as oil and gas. As President Trump famously said, 'drill, baby, drill,' and this rhetoric could lead to oil and gas outperforming clean energy in the short to medium term. In fact, the oil and gas sector is up 5 percent since his electoral victory. Meanwhile, hedge funds have been shorting clean energy stocks recently, betting that the sector may face declines in the near future."

But Douglas said the impact on responsible investment funds might nit be as significant as some people expected.

"Congress passed the Inflation Reduction Act in 2022 under Biden which contains $500 billion in new spending and tax breaks across a number of areas, with a large focus on clean energy. Most commentators and investors believe it is unlikely Trump will repeal this as many of the beneficiaries are red states.

"We saw this in Trump's first term as President when many green initiatives continued on despite his rhetoric and there is good reason to believe that will continue today. There continues to be a huge focus globally on climate change and increasingly the public are pushing for governments and private companies to do more. There is also a good argument that it's not only good for the environment, but these decisions and the move towards a low-carbon economy is also good for business, which I tend to agree with. Just look at the impact of electric cars and lower ongoing costs."

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