A KiwiSaver growth fund invests mainly in shares and property: assets with larger short-term ups and downs and higher long-run return potential than bonds and cash. Here’s what a growth fund holds, how it behaves, and how growth funds differ from one another.
What Is a Growth Fund?
A growth fund holds the majority of its assets in growth assets — predominantly shares listed on NZ and international stock exchanges, as well as listed property and infrastructure. Income assets (bonds, cash) make up a smaller portion.
Typical growth fund asset allocation:
| Asset class | Approximate allocation |
|---|---|
| International shares | 40–60% |
| NZ shares | 10–20% |
| Listed property/infrastructure | 5–10% |
| NZ and international bonds | 15–25% |
| Cash | 2–5% |
The exact allocation varies by provider. Some providers offer both a “growth” and an “aggressive” or “high growth” fund; growth typically means 70–85% in growth assets, while aggressive is 85–100%.
Returns and Volatility
A growth fund’s return comes mostly from share prices and dividends, so it moves with share markets:
- In a strong year for shares, a growth fund can return well into double figures.
- In a fall (the 2008 global financial crisis, March 2020, 2022), growth funds have fallen further than balanced and conservative funds, and have later recovered; how long that took varied from months to several years.
- Over long periods, growth funds have historically returned approximately 7–9% a year before fees and tax, more than balanced and conservative funds. Past returns do not guarantee future performance.
Compared with an aggressive fund, a growth fund keeps more in bonds and cash, so a share market fall has a little more cushion and the long-run return potential is slightly lower.
Switching to a lower-risk fund after a fall sells growth assets at the lower price and misses any recovery; KiwiSaver during a recession covers what happens to a balance in a downturn. How these swings matter at different stages, including in your 50s, is covered in risk by time horizon.
Growth Fund Fees
Growth fund fees vary widely: low-cost index funds charge a fraction of what some actively managed funds charge. On a $100,000 balance, a 0.23% fee is $230 a year and a 0.98% fee is $980 a year. The KiwiSaver fee comparison by fund type lists providers’ current growth fund fees.
Active vs Passive Growth Funds
Growth funds come in both styles: actively managed ones, where managers pick shares and bonds aiming to outperform, typically at a higher fee, and passive (index) ones that follow market indices more cheaply. For fees, after-fee results and which schemes have index options, see passive vs active KiwiSaver funds.
Switching to a Growth Fund
A move into a growth fund is made with the provider you’re already with, often through its app or website, and isn’t a taxable event. Leaving for another provider is a different process (switching KiwiSaver provider), and the old provider may charge a transfer fee. Full guide: how a fund switch works.
Summary
| Feature | Growth fund |
|---|---|
| Risk level | Medium-high |
| Typical return (long-run, before fees and tax) | 7–9% p.a. |
| Asset mix | 70–85% growth assets |
| Main risk | Share market falls, especially close to a withdrawal |