KiwiSaver risk indicators

Abstract

In a recent proposal, the New Zealand Financial Markets Authority promotes the synthetic risk and reward indicator used in the European Union as a way to standardise the risk classification of KiwiSaver funds. Our study shows that KiwiSaver providers generally correctly indicate the risk category of their funds, but there are some important exceptions. We also show that historical fund volatility is the best predictor of future volatility, and propose an easy-to-understand risk indicator that outperforms the SRRI.