Milford KiwiSaver Plan Review

​Updated 20 January 2020

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A Summary of the Milford KiwiSaver Plan

• Milford offers three KiwiSaver funds, presenting investors with a spectrum of risk, from cash-investing funds to aggressive growth options.
• In the five-year period to June 30 2018, the Balanced Fund, Conservative Fund and Active Growth fund have all been rated the best performers in their category by Morningstar.
• Management fees are higher than some other, more traditional, KiwiSaver options because Milford has to pay the costs involved with actively managing a fund. These include brokerage when trading shares, the fees of any underlying external fund managers, and the costs of the analysts and fund managers (i.e. overhead) that work for Milford.
• The plan publishes fantastically clear fund updates every three months (such as this example of the Active Growth fund in June 2018), all of which show exactly where each fund invests at a granular level (a specific share, external fund managers or cash investment), building confidence with investors. Every Milford KiwiSaver investor also receives a monthly review of commentary and performance data for all three funds (a recent example for the period ending 31 August 2018 can be found here).
• There are three types of fees; $3.00 per month is charged for being a member of the Milford KiwiSaver Plan, and once you start contributing to your fund, fees are on the higher-end (0.96% to 1.09%, depending on the fund). There is also a management fee for the Balance fund and Active Growth fund if performance targets are met.
• Switching between any Milford KiwiSaver fund is free. There are no joining fees or exit fees if you take your money to another fund.

Pros & Cons
PROS

• Three clearly-defined funds that offer a sliding scale of risk and return
• A trusted KiwiSaver provider which has won multiple awards within the industry
• All funds were ranked #1 for performance in their category in the five-year period to June 30 2018 by Morningstar
• Investors get an actively managed fund, aimed at beating market returns year after year

​CONS

• Higher-than-standard management fees - this is due to the costs associated with running actively managed funds, specifically the overhead of employing a New Zealand-based fund management team. 
• There is no age-based investment option, meaning there is only a choice of three funds and no option to gradually move money into more conservative investments as members get older. 
• Underlying Managers Performance Fees - the Balanced Fund and Active Growth Fund imposes a performance fee, which is explained in detail in the fund's outline below. 

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Read this First: Fees, Performance and Understanding What's Best For Your Situation
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. Milford would likely argue fees should be far less of a consideration and instead point to the past returns (although this is no indication of future performance) and the value for money the fees offer given the services of leading international investment managers.

​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. For example, if you are not willing to risk your money in the sharemarket, it wouldn't be in your interests to invest in a growth fund.
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Our Review 
In this guide, we outline what the Milford KiwiSaver Plan is, what funds they offer 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 Milford as a KiwiSaver investment option.
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This Guide covers:

• The Specs of MIlford KiwiSaver, Fees and Where Your Money Is Invested
• ​Milford KiwiSaver in the Media - What You Need To Know
• Who is Milford KiwiSaver Suited to?
• 8 Things To Know About Milford KiwiSaver
• Conclusion​

The Specs of Milford KiwiSaver Plan - fees, returns and where your money is invested

• Milford Funds Limited, a fund manager, is the manager of the three Milford KiwiSaver funds.
• Up-to-date fund performance data is available every three months for each fund on the Milford website.
• Milford operates three KiwiSaver funds and invests KiwiSaver money in two asset classes:

1. Income assets — refers to lower risk investments such as cash and fixed interest securities 
2. Growth assets — refers to higher risk investments such as Australasian and International equities (shares) and property.

• Each of the three funds has a unique risk factor (1 = lowest, 7 = highest) and an annual management fee, as well as distinct investment profiles.

Milford KiwiSaver Plan

Conservative Fund, Balanced Fund and Active Growth Fund

1: Conservative Fund
This fund invests 83% of its money into income assets (term deposits and fixed interest), and 17% in growth assets (equities and listed property).

• 5-year average annual return (after fees, pre-tax) to 30 June 2018: ~9.00%
• Annual management fee: 0.96%
• Risk factor: 2
• Suggested minimum investment period: 3 years 

Investment Composition targets
Income Assets

• Cash and Cash Equivalents: 6%
• NZ Fixed Interest: 36%
• International Fixed Interest: 41%

​Growth Assets

• Australasian Equities: 6%
• International Equities: 7%
• Listed Property: 4%
• Unlisted Property: 0%
• Commodities 0%
• Other 0%

We say: Milford's conservative fund sees active investment managers chasing the highest interest rates offered by banks and company bonds while ensuring what they invest in has suitable credit ratings. The conservative fund invests primarily in New Zealand assets - the top 3 recent holdings included a NZ dollar cash deposit with Australia's NAB Bank (6%),  a term deposit with Westpac (2%) and a bond with Investore Property (2%). 

The annual management fee of 0.96% is higher than most conservative funds operated by other KiwiSaver option. Nevertheless, Milford's active management structure incurs higher costs which need to be passed on to investors. 

2: Balanced Fund
This fund invests 60% of its money into growth assets (equities and listed property), keeping 40% in income assets such as fixed-term deposits.

• 5-year average annual return (after fees, pre-tax) to 30 June 2018: ~11.00%
• Annual management fee: 1.14%
• Performance fee range: The Balanced Fund does not directly charge a performance fee, but it invests in underlying Milford funds that do, such as the Global, Trans-Tasman and Dynamic Funds which are not KiwiSaver funds. As a point of reference, as of 30 June 2018, the average performance fee since the Balanced Fund's launched more than ten years ago is 0.27%. Regarding an investment, the historical performance fee calculates to be $27 on a $10,000 investment and only charged when the fund has made an above-market return.
• Risk factor: 3
• Suggested minimum investment period: 5 years 

Investment Composition targets
Income Assets

• Cash and Cash Equivalents: 9%
• NZ Fixed Interest: 11%
• International Fixed Interest: 20%

​Growth Assets

• Australasian Equities: 34%
• International Equities: 24%
• Listed Property: 6%
• Unlisted Property: 0%
• Commodities 0%
• Other 0%

We say: The Balanced Fund targets growth more than fixed-income based on its target asset class (60% vs 40%). The Milford investment managers are tasked with picking shares and other funds they foresee as increasing in value. The most recent fund report included holdings in:

1. The iShares MSCI Index Fund (3% - a fund which invests in large companies in the developed world, with significant holdings including Nestle, Novartis, Roche, Shell, Toyota and BP)
2. The Vanguard International Shares Select Exclusions Index Fund (2% - a fund which also invests in large companies with top holdings including Apple, Microsoft, Alphabet, Amazon and Facebook), Contact Energy (1%), Spark (1%), a2 Milk Company (1%)
3. A number of cash investments in bank

3: Active Growth Fund
This fund invests 80% of its money into growth assets (with a focus on Australasian equities) and 20% in income assets (term deposits and fixed interest).

• 5-year average annual return (after fees, pre-tax) to 30 June 2018: ~13.00%
• Annual management fee: 1.09%
• Performance fee range: 15% of any return above 10% p.a. The historical performance fee of the Active Growth Fund is 0.54% p.a.
• Risk factor: 4
• Expected annual return: 10% over the minimum investment period
• Suggested minimum investment period: 5 years 

Investment Composition targets
Income Assets

• Cash and Cash Equivalents: 15%
• NZ Fixed Interest: 2%
• International Fixed Interest: 3%

​Growth Assets

• Australasian Equities: 68%
• International Equities: 12%
• Listed Property: 0%

Performance Fee Explanation: Please see the Balanced Fund section above.

We say: The Active Growth fund is Milford's most aggressive KiwiSaver option, with 80% of the fund targeted at growth assets, with 20% allocated to income assets. In a recent fund update, the fund had investments in:

1. The iShares MSCI Index Fund (4% - a fund which invests in large companies in the developed world, with significant holdings including Nestle, Novartis, Roche, Shell, Toyota and BP)
2. Contact Energy (2%)
3. Spark (2%)
4. a2 Milk Company (2%)
5. Delegat's wine (1%)
6. A number of cash investments in Australasian banks

​The Active Growth fund's average 5-year 13% p.a. return indicates the competency of Milford's managers in actively buying and selling investments in an effort to outperform global markets.

Milford KiwiSaver Plan - WHAT YOU NEED TO KNOW

What Others Are Saying - Milford KiwiSaver in the Media

"It is most appropriate to evaluate performance of a KiwiSaver scheme by studying its long-term returns. Milford Active Growth KiwiSaver tops the performance across all multisector categories over 10 years".
- Morningstar KiwiSaver rankings, June 2018

"The active KiwiSaver schemes like Summer, Milford, Fisher Funds, Booster and Generate charge relatively high fees, and aim to earn them by using fund manager skill to beat the market. Their fund managers research companies, and markets, and try to earn high returns by picking winners, and avoiding losers".
- Rob Stock, Stuff.co.nz, April 2018

"Milford Asset Management's growth KiwiSaver fund topped the growth category delivering $20,395 in net benefits to investors over the past five years" in a 2017 survey by SuperRatings, an Australian research firm.
- KiwiSaver's biggest money earners, Tamsyn Parker, NZ Herald, November 2017

Who is Milford KiwiSaver Plan Suited To?

Milford's funds continue to perform solidly year on year, and with a strong media and public relations presence, Milford has positioned itself as a KiwiSaver option for those looking for solid returns. Milford's managers have a track record of delivering results that have previously outperformed markets, ultimately returning significant value to investors.
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Standout Features:

1. Three core funds, each clear in their investment strategy.
2. Milford has been around well before KiwiSaver launched and has a solid reputation among historical investors, as well as KiwiSaver investors.
3. In a sample of five Growth funds (see table below) managed by Milford, Fisher Funds, Generate, ANZ and Simplicity, Milford returned the highest pre-tax growth in the year to 30 June 2018.
4. It's free to change funds; the monthly membership fee means you can move between funds as often as you like.

​Be aware:

1. The more aggressive funds and are not suitable for short-term investments. 
2. There is no age-based investment option, meaning there is only a choice of three funds and no option to gradually move money into more conservative investments as members get older. 
3. Fees are slightly higher than standard bank and index-following KiwiSaver funds - this is due to the costs associated with an actively managed fund, such as the cost of brokerage when an investment manager buys and sells investments.
4. 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. 
5. While many global sharemarkets are now at record highs, this is no guarantee of future earnings.

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The Bottom Line

• Milford is transparent in its investment strategy and has a proven record of outperforming the majority of KiwiSaver growth funds.
• Its investment approach is both responsible and environmentally-leaning, and the investment managers avoid investing in exotic asset classes; your money will not buy shares in anything that creates negative social or environmental effects, or be risky in nature. 
• The Milford fees are higher than bank-managed KiwiSaver options, and once you are in the growth-orientated funds, you're likely to be in it for the long-term.
• Depending on your KiwiSaver balance, other funds on other platforms can have cheaper management fees, but these are unlikely to be actively managed. We have presented a comparison in the table below.
• For example, the fee difference between the Simplicity Growth Fund (0.31%) and Milford Active Growth Fund (1.09%) for a $40,000 balance is $312 a year, or ~$8,000 over 25 years. In saying this, these two funds incomparable given Simplicity uses index fund investing, and Milford is actively managed. The difference in the fund value based on the contributions could be far more than $8,000 over this period. In any case, it is 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.
• As an illustrative point, we have presented the annual performance of five growth funds below, as well as a table of their annual fees.
• Milford KiwiSaver does not charge any joining fees or exit fees, and you can transfer between funds for free as many times as you want. 
• Regarding risk, each fund has a risk number (1 = lowest, 7 = highest), and in the case of Milford, the funds have been assessed between 1 to 4.

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Fund Fee Comparison: How the Milford Active Growth Fund compares alongside other
​KiwiSaver Growth Funds
(KiwiSaver balances between $5,000 and $500,000)

Balance	Milford Active ​Growth Fund (1.09%)	Simplicity  Growth Fund (0.31%)	ANZ Growth Fund (1.10%)	Fisher Funds ​Growth Fund (1.11%)	Generate ​Growth Fund ​(1.57%)
$5,000	$85	$46	$79	$92	$115
$15,000	$194	$77	$189	$203	$272
$40,000	$466	$154	$464	$480	$664
$100,000	$1,120	$340	$1,124	$1,146	$1,606
$500,000	$5,480	$1,580	$5,524	$5,586	$7,886

Milford Active Growth Annual Fee: 1.09% of total investment plus a $36 membership fee (excludes performance fees)
Fisher Funds Growth Fund Annual Fee: 1.11% of total investment plus a $36 membership fee (excludes performance fees)
Simplicity Growth Fund Annual Fee: 0.31% of total investment plus a $30 membership fee
ANZ Growth Fund Annual Fee: 1.10% of total investment plus a $24 membership fee
Generate Growth Fund Annual Fee: 1.57% of total investment plus a $36 membership fee (excludes performance fees)

Growth Funds - Annual Performance (before tax) to 30 June 2018

KiwiSaver Provider	​Annual return (after deductions for charges but before tax) to 30 June 2018
Milford	16.46% per fund update
Generate	15.21% per fund update
Fisher Funds	13.57% per fund update
​Sim​plicity	​11.63% per fund update
​ANZ	​11.52% per fund update

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8 things to know about the Milford KiwiSaver Plan

Milford is NOT a default KiwiSaver provider

As per a discussion with their team, Milford has chosen not to apply to be a default KiwiSaver provider. For this reason, you will only find yourself investing with Milford if you either transferred into one of their funds or picked a Milford fund when joining KiwiSaver.
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No matter what your employer's default KiwiSaver provider or fund is, you are entitled to select any Milford KiwiSaver fund

Your employer is unlikely to offer Milford as a default KiwiSaver provider (although some do), but any KiwiSaver member has the right to pick any one of the 20+ providers and the fund they want. If you feel a Milford KiwiSaver fund is right for you, then you can either join (if you're new to KiwiSaver) or switch your existing fund to Milford. 
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There is no minimum investment, and it's easy to take contribution holidays

As a Milford KiwiSaver member, you'll pay a $3.00 monthly membership fee. This membership fee gives you the freedom to invest as you like. And if you want to contribute to your fund at a level above your fixed salary contribution, you can do this by contacting the client services team. 

Dividends your fund receives are reinvested, meaning more cash is invested on your behalf

All three Milford 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. 

Milford practices'responsible investing'

Milford has a 'responsible investing' policy is clear and fully applied to all investments. ​Its KiwiSaver funds will not directly invest in companies involved in the following activities:

• Production or sale of anti-personnel landmines that are not compliant with the Anti-Personnel Mines Prohibition Act 1998;
• Production, design, testing, assembly, or refurbishment of nuclear explosive devices
• Production or development of cluster munitions
• Processing of whale meat
• Manufacture of tobacco
• Manufacture of recreational cannabis products

In a situation where shares in nuclear weapons, tobacco and coal become popular and increase in price, Milford would not be able to invest in such assets. The purpose of such a policy is to be accountable to investors and make them comfortable with where their money ends up.

​Signing up to Milford KiwiSaver isn't Complicated, but you’ll need to decide what fund to invest in first

Signing up to the Milford KiwiSaver Plan is fast and easy, but before you go ahead, you’ll need to decide your fund first as there is no default fund. Helpfully, the names of their three funds - Conservative, Balanced and Active Growth are free of buzzwords or spin. 

Generally, if you're looking for a safe investment with the lowest risk of seeing your original investment fall, a conservative fund could be a suitable option. If you're looking for a higher return and are prepared to have your money in higher risk investments which could fall in value, a growth fund operates in this manner.

If you're not sure of what to invest in and want to have a range of options to pick from, look at Sorted's FundFinder tool which includes the Milford KiwiSaver funds.
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Milford is a widely popular KiwiSaver option, with a trusted reputation

While banks dominate 80% of the KiwiSaver market, Milford currently has over $6 billion of funds under management and is one of New Zealand's largest investment managers. Brian Gaynor, Milford's head of investments,  frequently appears in the media and writes a regular investment column for the New Zealand Herald.

Since founding the company in 2003, Milford has won multiple awards within the funds management industry, appeared in countless media publications. These include:

• KiwiSaver Manager of the Year 2016 2017 and 2018 (by NZX-owned FundSource, a research company).
• 2018 Consumer NZ People's Choice award winner as the highest rated among investors.

​Because of the large public profile Milford has created, short-term and long-term investor performance is critical to its ongoing success. ​

All of the funds (currently) invest in New Zealand shares

Every fund has a target to invest in  'Australasian equities', and recent fund updates highlight that many of the top ten assets held by the Balanced and Active Growth funds were listed New Zealand companies. Investments included Spark, Contact Energy and A2 Milk. 

Milford actively manages its investments and does not need to invest according to its targeted portfolio ratios (i.e. cash 10%, Australasian equities 45%, 45% international equities etc) if it sees specific opportunities. For example, if global sharemarkets are dropping significantly, the fund managers can sell equity investments and put the money into cash accounts with a bank,  rather than re-invest it in the sharemarket. In essence, the allocation targets are not fixed; if a fund states its Australasian equities allocation target is 40%, it can still invest anywhere from 0% to 100% - the investment manager has ultimate control. 

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Our Conclusion​

• Milford KiwiSaver offers three distinct funds that give investors exposure to a variety of underlying investments both nationally and internationally.
• Milford offers a solid performance history, with all funds were ranked #1 for performance in their category in the five-year period to June 30 2018 by Morningstar
• ​​Operating since 2007,  the average Milford KiwiSaver investor balance sat at $49,000 in 2017 (the BNZ, for comparison, was $12,000), which was the highest of any provider. It's our view that unlike other providers, Milford targets higher-earners who make regular large contributions month-on-month.

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Do you have experience with the Milford KiwiSaver Plan that you would like to share with our readers? Email our research team who would be delighted to hear from you.