Aon KiwiSaver Scheme Review
Updated 26 January 2021
Summary of Aon KiwiSaver
- Funds: Aon offers KiwiSaver members the choice of fourteen funds, with around $550 million under management. The funds range from low-risk cash and fixed-interest options, to funds focused on growth. Investors instead select funds managed by third-party specialists, like Milford Asset Management, Nikko Asset Management, ANZ and Russell Investments.
- 100% Active Management: All of the funds are actively managed by a fund manager. The costs associated with an active fund means that fund fees will be higher, relative to index-tracking schemes like Simplicity. However, investors in growth-orientated funds arguably get the best value for money, with their investments managed by industry leaders.
- Performance: Our KiwiSaver Three-Year Returns Calculator and Comparison shows the latest three-year returns in dollar terms, so you can see which funds over-performed and under-performed compared to above average across all KiwiSaver funds (listed as Balanced, Moderate or Growth). This tool is updated monthly, so you can see the latest results.
- Fees: There are two fees - an annual account fee of $49.80 for being an Aon KiwiSaver member. It's worth pointing out that Aon charges the highest membership fee out of all other KiwiSaver providers. The second fee is an annual fund charge, which is for administration and management and ranges from 0.89% p.a. to 1.51% p.a. of the value of your investment. As is standard in KiwiSaver schemes, different funds have different fees, with growth-focused funds tending the charge the most.
- No Performance Fees: There are no direct performance fees charged by Aon, but the underlying managers may charge a performance fee directly from their fund.
- Ownership: Aon KiwiSaver is owned and operated by Aon Saver Limited, ultimately owned by Aon NZ Group. Each Aon KiwiSaver fund (i.e. ANZ, Nikko AM, Milford and Russell Investments) is managed by its respective limited liability company.
Read this First: Fees, Performance and Understanding What's Best For Your Situation
Our Review
In this guide, we outline what the Aon KiwiSaver scheme is, what funds it offers to KiwiSaver members, and how they're different to other funds, as well as looking at alternatives and the level of fees involved.
Please note: MoneyHub is not a Financial Adviser, and this guide has been published to explain the investment fundamentals and outline the pros and cons of Aon as a KiwiSaver investment option.
This Guide covers:
- A lot of media attention focuses on KiwiSaver fees, but this is only one thing to consider when picking the most suitable provider and fund for your retirement needs.
- We believe that being comfortable with what you're investing in is the most important aspect of saving for your retirement, not the fee you'll pay.
- While we don't focus on the latest returns, we encourage readers to make their own comparisons using our KiwiSaver fund comparison tool.
- Ultimately, deciding upon whether Aon is right for you will most likely come down to your interpretation of the past fund performance, the investment strategy and the fees.
Our Review
In this guide, we outline what the Aon KiwiSaver scheme is, what funds it offers to KiwiSaver members, and how they're different to other funds, as well as looking at alternatives and the level of fees involved.
Please note: MoneyHub is not a Financial Adviser, and this guide has been published to explain the investment fundamentals and outline the pros and cons of Aon as a KiwiSaver investment option.
This Guide covers:
The Specs of the Aon KiwiSaver Funds - fees, risks and explaining where your money is invested
- The scheme is managed by Aon Saver Limited, a subsidiary of Aon Holdings New Zealand. Aon Saver is responsible
for the investment of the scheme’s assets. - Quarterly fund performance reports are available on the Aon website.
- Each of the 14 funds has a unique risk factor (1 = lowest, 7 = highest), which is driven by its distinct investment profile.
- Fees, returns, risks and the suggested investment timeframe differ between funds, as we outline below.
- The funds are categorised by the investment management company. In this review, we have focused on the Russell Investment funds, which are exclusive to Aon. The other funds offered, managed by ANZ, Nikko AM and Milford, can be invested in directly via their own schemes, where fees are lower. We outlined this in a fees comparison table below.
- The fund offered by the Aon KiwiSaver scheme are as followed:
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Russell Investment Group Limited
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ANZ New Zealand Investments Limited
Nikko Asset Management New Zealand Limited
Milford Funds Limited
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Who is Russell Investment Ltd?
Because Russell Investments ('Russell') manages a number of Aon's KiwiSaver scheme funds, it's vital to understand who they are and what they do. At its core:
Key facts about Russell include:
Because Russell Investments ('Russell') manages a number of Aon's KiwiSaver scheme funds, it's vital to understand who they are and what they do. At its core:
- The Aon Russell funds invest in five different Russell funds (Global Fixed Interest, NZ Fixed Interest, Global Shares, Hedged Global Shares and NZ Shares). A KiwiSaver fund investing in other funds is standard practice in many KiwiSaver schemes.
- Aon itself doesn't make any active investment decisions - Russell and its investment managers are directly responsible for the performance of each Aon fund given the Russell funds drive Aon's results. We explain what investments the funds make below.
Key facts about Russell include:
- As at July 2019, Russell managed over $400 billion of assets in 30+ countries around the world. The Aon KiwiSaver money is part of this amount.
- Russell has been managing money for 80+ years, and is internationally regarded as one of the world's most experienced fund managers.
- Per its marketing materials, Russell employs researchers "strategically placed around the world, searching for future outperformers". It also states that their investment process has been refined over almost five decades, and is rigorous, ongoing, and ultimately effective.
- Russell believes in a "multi-asset approach, combining asset allocation, manager selection and dynamic portfolio management". This means that it invests in a wide range of assets, and is actively seeking out new opportunities.
- In New Zealand, Russell offers five funds and publishes quarterly fund updates which state what assets have been invested in and what the returns are.
1: Russell LifePoints® Conservative Fund
This fund invests 80% of its money into income assets of a short term nature such as bank deposits and floating-rate notes, and some shares. Five Russell Investments funds drive the Conservative Fund's performance - Global Fixed Interest, NZ Fixed Interest, Global Shares, Hedged Global Shares, and NZ Shares.
We say:
This fund invests 80% of its money into income assets of a short term nature such as bank deposits and floating-rate notes, and some shares. Five Russell Investments funds drive the Conservative Fund's performance - Global Fixed Interest, NZ Fixed Interest, Global Shares, Hedged Global Shares, and NZ Shares.
- Average annual net return since fund launch (2007): ~7%
- Annual fee: 1.12%
- Risk factor: 3
- Fund objective: "To produce returns over time in excess of inflation with a low to medium level of risk by investing mostly in income assets with only a modest allocation to growth assets".
- Suggested minimum investment timeframe: 3 years
- Investment Composition: New Zealand fixed interest (16%), international fixed interest (64%), Australasian equities (6%) and international equities (14%).
We say:
- The Russell LifePoints® Conservative Fund is the most conservative Aon Russell fund, with the aim of providing stable returns over the short term with some capital growth.
- Despite its hefty 1.12% fee, it has repeatedly been one of the top 3 performing out of 20+ conservative KiwiSaver funds since launching in 2007.
2: Russell LifePoints® Moderate Fund
This fund invests 60% of its money into income assets of a short term nature such as bank deposits and floating-rate notes, and some shares. Five Russell Investments funds drive the Conservative Fund targets - Global Fixed Interest, NZ Fixed Interest, Global Shares, Hedged Global Shares, and NZ Shares. Recent international and Australasian equities held included A2 Milk, Spark, Contact Energy, Johnson & Johnson, Roche and Microsoft, among others.
We say:
This fund invests 60% of its money into income assets of a short term nature such as bank deposits and floating-rate notes, and some shares. Five Russell Investments funds drive the Conservative Fund targets - Global Fixed Interest, NZ Fixed Interest, Global Shares, Hedged Global Shares, and NZ Shares. Recent international and Australasian equities held included A2 Milk, Spark, Contact Energy, Johnson & Johnson, Roche and Microsoft, among others.
- Average annual net return since fund launch (2007): ~9%
- Annual fee: 1.21%
- Risk factor: 3
- Fund objective: "To produce returns over time in excess of inflation with a low to medium level of risk by investing with a higher allocation to income assets than growth assets".
- Suggested minimum investment timeframe: 5 years
- Investment Composition: New Zealand fixed interest (12%), international fixed interest (48%), Australasian equities (14%) and international equities (26%).
We say:
- The Russell LifePoints® Moderate Fund continues to be a strong performer, having been placed #1 by fund performance and ratings company Morningstar among all moderate funds in 2018.
- Despite its hefty 1.21% fee, which well exceeds many other moderate funds, it has repeatedly been one of the top 3 performing out of 20+ moderate KiwiSaver funds since launching in 2007.
3: Russell LifePoints® Balanced Fund
This fund invests 60% of its money into growth assets, intending to grow investor savings semi-aggressively. With over $150 million invested, it is bigger than all other Aon Russell funds put together. Like the Moderate fund, five Russell Investments funds drive the Conservative Fund targets - Global Fixed Interest, NZ Fixed Interest, Global Shares, Hedged Global Shares, and NZ Shares. Recent international and Australasian equities held included A2 Milk, Spark, Contact Energy, Johnson & Johnson, Roche and Microsoft, among others.
We say:
This fund invests 60% of its money into growth assets, intending to grow investor savings semi-aggressively. With over $150 million invested, it is bigger than all other Aon Russell funds put together. Like the Moderate fund, five Russell Investments funds drive the Conservative Fund targets - Global Fixed Interest, NZ Fixed Interest, Global Shares, Hedged Global Shares, and NZ Shares. Recent international and Australasian equities held included A2 Milk, Spark, Contact Energy, Johnson & Johnson, Roche and Microsoft, among others.
- Average annual net return since fund launch (2007): ~10%
- Annual fee: 1.28%
- Risk factor: 4
- Fund objective: "To produce rates of return over time in excess of inflation with a medium to high level of risk by investing with a higher allocation to growth assets than income assets".
- Suggested minimum investment timeframe: 7 years
- Investment Composition: New Zealand fixed interest (8%), international fixed interest (32%), Australasian equities (20%) and international equities (40%).
We say:
- The Russell LifePoints® Balanced Fund continues to be a strong performer, having been placed #1 by fund performance and ratings company Morningstar among all moderate funds in 2018.
- Again, like the Moderate Fund, it charges high fees - 1.28% is well beyond most other balanced funds, but arguably justifies the fees by repeatedly being one of the top 3 performing out of 20+ balanced KiwiSaver funds since launching in 2007.
4: Russell LifePoints® Growth Fund
This fund invests 75% of its money into growth assets, and is Aon's most aggressive Russell fund. It's not a large fund, at around $50 million, as most Aon investors prefer the Milford Growth fund. Like the balanced fund, five Russell Investments funds drive the Conservative Fund targets - Global Fixed Interest, NZ Fixed Interest, Global Shares, Hedged Global Shares, and NZ Shares. Recent international and Australasian equities held included A2 Milk, Spark, Contact Energy, Johnson & Johnson, Roche and Microsoft, among others.
We say:
This fund invests 75% of its money into growth assets, and is Aon's most aggressive Russell fund. It's not a large fund, at around $50 million, as most Aon investors prefer the Milford Growth fund. Like the balanced fund, five Russell Investments funds drive the Conservative Fund targets - Global Fixed Interest, NZ Fixed Interest, Global Shares, Hedged Global Shares, and NZ Shares. Recent international and Australasian equities held included A2 Milk, Spark, Contact Energy, Johnson & Johnson, Roche and Microsoft, among others.
- Average annual net return since fund launch (2007): ~11%
- Annual fee: 1.32%
- Risk factor: 4
- Fund objective: "To produce rates of return over the long term well in excess of inflation with a medium to high level of risk by investing mostly in growth assets with only a modest allocation to income assets".
- Suggested minimum investment timeframe: 10 years
- Investment Composition: New Zealand fixed interest (5%), international fixed interest (20%), Australasian equities (25%) and international equities (50%).
We say:
- The Russell LifePoints® Growth Fund has an impressive track record of returns, and ranks up there with the popular Milford Growth Fund.
- Like all Aon Russell funds, it charges high fees, but 1.32% is around the average for actively managed KiwiSaver growth funds, although as a point of comparison it is more than four times higher than index funds like the Simplicity Growth fund.
- With a solid performance behind it, it's likely that this fund will become more popular in 2020 and beyond.
- The annual fee charged (0.90%) is in line with actively managed funds, although still around three times higher than index funds like the Simplicity Growth fund.
Russell LifePoints® Target Date funds
Aon offers four 'Target Date funds', which are specific KiwiSaver funds designed to simplify the asset allocation process for members over time. In essence, the funds move your money away from growth investments into lower-risk fixed income (bank deposits and bonds etc) progressively as you reach retirement. The four funds each have a date, which represents the approximate retirement year. If you plan to retire in 2050, then you could pick either the 2045 or 2055 fund depending on what risk you are more comfortable with.
How does it work?
Aon offers four 'Target Date funds', which are specific KiwiSaver funds designed to simplify the asset allocation process for members over time. In essence, the funds move your money away from growth investments into lower-risk fixed income (bank deposits and bonds etc) progressively as you reach retirement. The four funds each have a date, which represents the approximate retirement year. If you plan to retire in 2050, then you could pick either the 2045 or 2055 fund depending on what risk you are more comfortable with.
How does it work?
- Each fund invests in a mix of growth and income assets with the allocation to income assets increasing progressively until it reaches 80% in the target date year.
- For example, for the Russell LifePoints® Target Date 2055 Fund, during 2019 and 2020 the fund will be progressively growth-orientated, investing most of its money in global shares. By 2055, only 20% of the investments will be growth-based.
- Aon advises that "the target mixes of the Target Date funds are reviewed annually", meaning the exact allocations can fluctuate. Aon is the Investment Manager; all the other fund managers are underlying investment managers.
- The investment objective for each fund is to "provide returns over time in excess of inflation and capital growth and income consistent with its current asset allocation".
- Each fund has its own fee, which will fall as time goes on as the allocation to income assets increases progressively. For example, the Target Date 2055 fund's current fee is around 1.51% p.a. whereas the 2025 fund's fee is around 1.18%, given the difference in investments.
Are Target Dates funds right for me?
- Everyone is different, and one investor's needs and risk profile will differ from another. If you're currently 40 and looking to retire at 65, the 2045 Fund could be a possibility.
- Our view is that we like them overall, given the 'set and forget' structure, strong performance history of Russell Investments' management, and the aggressive nature of growth assets the further your retirement is from now.
- Ultimately the Target Dates funds aim to offer an all-encompassing retirement savings solution, protecting your nest egg as you get closer to 65.
- Your age or retirement date doesn't dictate your fund either - anyone can sign up to any fund and switch any time without penalty.
Fund |
Annual Fee |
Risk |
Total income allocation |
Total growth allocation |
Russell LifePoints® Target Date 2025 Fund |
1.18% |
3 |
67% |
33% |
Russell LifePoints® Target Date 2035 Fund |
1.25% |
4 |
46% |
54% |
Russell LifePoints® Target Date 2045 Fund |
1.32% |
4 |
29% |
71% |
Russell LifePoints® Target Date 2055 Fund |
1.51% |
4 |
14% |
86% |
Beyond Russell - Aon KiwiSaver Funds with ANZ, Nikko AM and Milford
Aon offers five additional funds, managed by ANZ, Nikko Asset Management and Milford Funds. These are the ANZ Cash Fund, ANZ Balanced Fund, Nikko Cash Fund, Nikko Balanced Fund and Milford Active Growth Wholesale Fund. Because you can invest in these funds directly with their respective fund manager, we have not reviewed them here and instead suggest reading their scheme's detailed review.
Our overview view, supported by the table below, is:
Our overview view, supported by the table below, is:
- The fees charged by Aon are higher than what each scheme's own fees are, both in terms of the annual membership fee and the annual management and administration fee.
- For this reason, it's worth considering looking at signing up (or switching to) the scheme that runs any of these funds to ensure you save money.
- Minimising fees and maximising performance are two key ways to boost your KiwiSaver balance in the long run.
Fund |
Aon Annual Management Fee |
Scheme's Own Annual Management Fee |
The $ difference in fees paid on a $20,000 KiwiSaver balance invested over 10 years |
0.89% |
0.38% |
$1,020 |
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1.12% |
0.96% |
$320 |
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0.90% |
0.46% |
$880 |
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1.48% |
0.99% |
$980 |
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1.25% |
1.28%* |
$60 |
*Both Aon and Milford include Milford’s performance-based fee of 0.22%
Aon KiwiSaver in the News
Recent media reports highlight the following:
- Milford Asset Management and the Aon Russell Lifepoints aren't the cheapest or the biggest KiwiSaver providers, but they have generated the best performances over the past decade, Morningstar research shows.
- The other provider singled out for long-term performance was Aon Russell Lifepoints, which (has been) called one of the most consistent performers across all categories.
- Aon Russell schemes were the best in the conservative, moderate, and balanced classes, with after-fees returns of 7.5 per cent, 8.2 per cent, and 8.9 per cent respectively.
- Milford is the 10th biggest provider with $1.4b under management; Aon is 12th with $537.8 million.
- Aon KiwiSaver also did not have a specific exclusion policy, (therefore offered funds with) minimal or no exclusions.
- A spokeswoman for Aon said it was a global signatory to the United Nations Principles for Responsible Investment, and therefore recognised the importance of incorporating environmental, social and governance (ESG) issues into investment processes.
Who is the Aon KiwiSaver Scheme Suited To?
Our view is simple: Aon KiwiSaver offers some strong-performing funds that come with higher fees and globally-focused management expertise via its four Russell Investments funds. Unlike the other funds it offers (from ANZ, Nikko AM and Milford), the Russell funds are exclusive to Aon KiwiSaver.
With around 40,000 members and $550+ million under management, Aon KiwiSaver is a mid-size scheme which offers market-leading funds from Russell and Milford. The NZHerald summarises the scheme when it says "Aon Russell Lifepoints (isn't) the cheapest or the biggest KiwiSaver provider, but (it has generated the best performances over the past decade, alongside Milford Funds.
In our view, we believe the Russell funds compete alongside other active managers like Milford, Fisher Funds, Booster and Generate.
Standout Features:
Pros
Cons
With around 40,000 members and $550+ million under management, Aon KiwiSaver is a mid-size scheme which offers market-leading funds from Russell and Milford. The NZHerald summarises the scheme when it says "Aon Russell Lifepoints (isn't) the cheapest or the biggest KiwiSaver provider, but (it has generated the best performances over the past decade, alongside Milford Funds.
In our view, we believe the Russell funds compete alongside other active managers like Milford, Fisher Funds, Booster and Generate.
Standout Features:
- The solid performances by the Russell funds, as reported by Morningstar and the NZHerald.
- The Target Dates funds, which offer fund choice simplicity by allowing investors to select a fund closest to their estimated retirement year, and let the fund managers invest accordingly to maximise returns.
Pros
- Four Russell funds that offer a sliding scale of risk and return, clearly defined in investor statements.
- The default fund is the Russell LifePoints® Balanced Fund, a somewhat aggressive fund. This suggests Aon wants its investors to maximise their returns and not tread water in a cash-based fund like some other schemes offer.
Cons
- Fees for other Aon funds, such as ANZ, Nikko AM and Milford Funds are cheaper if you invest with the managing scheme directly.
Be aware:
- As with any investment, markets go up and down. The Dotcom bubble in the early 2000s sank global sharemarkets, as did the 2008 Global Financial Crisis. While many global sharemarkets are now at record highs, this is no guarantee of future earnings.
Aon KiwiSaver - The Bottom Line
- We see promise in the Aon KiwiSaver scheme, and the lack of public awareness and a low number of members (i.e. under 40,000) should not deter potential investors.
- The Russell Investments funds charge high fees, but their track record of returns is exceptional, suggesting the funds perform no matter the market conditions.
- It's important to keep in mind that no two funds are directly comparable, so it's essential to shop around and compare fund objectives as well as fund fees if you're serious about having the biggest KiwiSaver nest-egg possible.
7 things to know about the Aon KiwiSaver scheme
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Despite Aon being a mid-sized scheme, it's one of the best performersAon and KiwiSaver aren't promoted as much as other schemes and we believe that the Aon Russell Investment funds are something of an overlooked performer among KiwiSaver members and need more promotion.
The media repeatedly reports on the robust long-term performance of the Conservative, Moderate and Balanced funds, and while not #1, the Growth fund is a strong performer too. Yet recent fund reports showed more Aon KiwiSaver members switching out than joining, despite strong results. The core Aon KiwiSaver funds launched in 2007, and right now total around $550 million in funds under management. This represents a fraction of one percent of the total KiwiSaver investments, and is most likely due to the lack of public awareness of the scheme, minimal marketing and unknown brand. Aon is more commonly known as an insurance broker within New Zealand, and not a KiwiSaver provider. |
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No matter what your employer's default KiwiSaver provider or fund is, you are entitled to select Aon as your KiwiSaver schemeYour employer may offer another KiwiSaver provider as their preferred provider, but you are free to choose Aon KiwiSaver as your provider if you feel it's right for you. Aon is not a default KiwiSaver provider, so you only join Aon KiwiSaver voluntarily.
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Aon's Russell funds all invest in New Zealand shares (but the proportion varies)The NZ Shares is dedicated to investing in New Zealand companies, and recent holdings included heavyweights such as Meridian Energy, A2 Milk, Fisher & Paykel Healthcare, Spark, Meridian Energy and Vista Group. The more aggressive the Aon Russell fund, the greater the proportion of assets invested in the underlying Russell NZ Shares fund.
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Dividends your fund receives are reinvested, meaning more cash is invested on your behalfMany of the Aon KiwiSaver funds invest in shares, and many will pay dividends. These cash payments represent the profits from companies returning it to the shareholders, i.e. you. When a company declares a dividend, your fund will receive money, and it is re-invested into more shares, growing the value of your fund. Despite being a cash payment, and as is the case with ALL KiwiSaver funds, there is no option to take this money as cash until you turn 65.
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All of Aon's KiwiSaver funds are actively managed, either by Russell, Milford, ANZ or Nikko AMIt's important to know that Aon administers their KiwiSaver scheme, but it does not provide any investment management. All the funds offered are managed by third parties, with the bulk of the scheme under the control of Russell Investments.
Ultimately, all funds are actively managed - each fund has its own key personnel, tasked with the responsibility of portfolio management and analysis. Each fund's investment manager(s) will then select specific investments it sees as undervalued, anticipating that in time, the value of the investment will grow and ultimately make a profit for the fund. How does this work in practice?
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​Signing up to Aon isn't complicated, but you'll need to choose one fund and/or opt-in to the Target Data fundsSigning up to the Aon KiwiSaver scheme is easy, even though the number of funds to pick from may be overwhelming. If you don't select any fund, your contributions will be invested in the Russell LifePoints® Balanced Fund, which invests 60% of its assets into shares. Most KiwiSaver schemes would put you in a conservative-leaning fund, but Aon stands out and suggests to investors it wants to maximise their returns by default.
If you are in this fund and would prefer a lower risk or more aggressive fund, you have the option to switch free of charge to another Aon KiwiSaver fund, or to any other KiwiSaver fund operated by another scheme. You can also opt-out of KiwiSaver altogether if you do not wish to participate. If you're not sure of what to invest in and want to have a range of options to pick from, look at MoneyHub's KiwiSaver fund comparison tool which includes all Aon KiwiSaver funds. |
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The performance data is easy to follow, and updated regularlyFund performance details are published on the Aon website every three months. And, as a member, you can also check a fund balance 24/7 by logging in to the Aon KiwiSaver website.
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Our Conclusion​
- Aon has an enormous number of funds to pick from despite its small size and total funds under management. While Aon is more known for insurance brokerage, the Russell Investment funds repeatedly stand out as top performers over the long-term.
- Fees are high, and if you're looking for a Milford or Aon growth-orientated fund, it is better value for money to go direct to the original fund manager/scheme.
- The four Russell Investments funds give investors exposure to the New Zealand sharemarket, Australian sharemarket, local and global bonds, global sharemarket as New Zealand cash deposits.
- Active management by leaders such as Milford and Russell Investments means growth is at the forefront of the companies running the funds.
- Ethical investments are not a priority for Aon funds overall, so if sustainable investments are important to you, Aon may not meet your requirements.
- With all funds allocating money to growth assets, particular shares will be bought, at the discretion of the fund manager. This means there is a risk of negative returns if the investment doesn't perform.
- With every fund offered, the higher the weighting of growth assets vs income assets, the higher the annual management fee. This is expected to be offset by the long-term performance of the fund.
Do you have experience with Aon's KiwiSaver scheme that you would like to share with our readers? Email our research team who would be delighted to hear from you.