Portrait of a TOWER KiwiSaver Scheme Investment Fund 

The TOWER KiwiSaver Scheme Balanced Fund – what is it?

There are six TOWER KiwiSaver Scheme investment funds. 

One of them, called the TOWER KiwiSaver Scheme Cash Enhanced Fund (which is our default fund), is only available to members who have been automatically assigned to it by the IRD.  (For further information on the TOWER KiwiSaver Scheme Cash Enhanced Fund, please read the previous fund portrait article).

The other five investment fund choices are called “active funds” because TOWER KiwiSaver Scheme members can actively choose which one to invest in according to personal preferences, needs, goals and objectives. 

The TOWER KiwiSaver Scheme Balanced Fund has proven to be the most popular choice within the range of active funds.

A balancing act

The TOWER KiwiSaver Scheme Balanced Fund (‘Fund’) is a “mid-point” fund within the TOWER KiwiSaver Scheme’s active range and seeks to strike a balance between risk and return.

The Fund is “balanced” because it contains about equal amounts of low risk income assets which aim to preserve the value of the investment and higher risk growth assets which have the potential to increase returns.

Jargon! – When we refer to ‘assets’ in an investment fund, this simply refers to the types of investments it has invested into. Income assets for example, include cash and bonds, while growth assets include property and shares.

Table 1: Income and growth assets in the TOWER KiwiSaver Scheme Balanced Fund

More detail on the TOWER KiwiSaver Scheme Balanced Fund’s portfolio can be found in its online monthly fund fact sheet.

Why go half’n’half?

Having around half the TOWER KiwiSaver Scheme Balanced Fund’s assets in cash and bonds and the other half in property and shares means that investors can  have a “bob each way”, regardless of whether markets go up or down.

A balanced investment portfolio helps investors to spread their assets to cover a range of investment market conditions.

Jargon! – When referring to an investment fund a ‘portfolio’ is a way of describing the group of investments that the fund has made. Imagine a file that you might keep all your statements in at home – a portfolio is the same kind of thing.

Case 1: A bull market

A bull market occurs when prices for growth assets, especially shares, keep rising overall.  The image of a charging bull is used to symbolise the rampant optimism in this sort of market. 

When there is a bull market under way, the growth half of the balanced portfolio will generally rise with the market, improving total returns.

Of course, as only half of the Fund is invested into growth assets the income assets will effectively tone down the total increase in possible returns during this kind of market.

Case 2: A bear market

A bear market takes place when prices for growth assets, but particularly shares, keep falling overall.  In this case, the symbol of a bad tempered bear is used to symbolise the “retreat to the cave” mood of pessimism dominating the market. 

When there is a bear market under way, the growth half of the balanced portfolio will fall with the market, reducing overall returns.

However, at a time like this the income half of the portfolio - cash and bonds – generally helps provide a partial buffer to the downturn and works to preserve the value of the Fund.

Who is the TOWER KiwiSaver Scheme Balanced Fund (‘Fund’) suitable for?

The Fund is most suited to an investor of middle risk profile, meaning someone who wants to achieve a reasonable amount of growth when markets are performing well, but not be too much exposed to losses when markets are not.

The objective of the Fund as at the date of this article is to achieve a return which exceeds the Consumer Price Index (CPI) by 6% per annum before tax and fees on a rolling five-year basis.

This all sounds very technical, but is aimed at giving investors an idea of what the Fund aims to achieve on average each year.

To help figure out whether or not the TOWER KiwiSaver Scheme Balanced Fund is right for you, TOWER provides a useful online tool to assess your personal risk profile. You can access this tool by clicking on risk profiling self-assessment

If you wish, you can switch out of your current TOWER KiwiSaver Scheme investment fund and into another TOWER KiwiSaver Scheme investment fund.

Simply log in or register for online access to your member account by clicking on the Check My Balance link in the upper right hand corner of the TOWER KiwiSaver Scheme Quarterly newsletter. If you have not  registered yet, simply click on the ‘Reset Your PIN’ button in the Sign in box on the home page and follow the simple steps from there.

Remember you’ll need your TOWER KiwiSaver Scheme Member number and Plan number shown at the top of the email we have sent you to register.

Best of all - it costs you nothing to switch between TOWER KiwiSaver Scheme investment funds.

It’s just another advantage of being with TOWER.

For further information on switching, please read the article Are you in the right TOWER KiwiSaver Scheme investment fund?, or call 0800 379 372.

For a copy of the TOWER KiwiSaver Scheme investment statement, click here.