Is your KiwiSaver fund actively or passively managed? And do you understand the difference between the two investment styles? Canstar looks at the difference between active and passive fund management, and how that can affect fees and returns.
What’s the difference between active investment and passive investment?
All fund mangers judge their performance against market averages, or indexes, for example the Dow Jones Industrial Average, or the NZX 50. These represent a hypothetical portfolio of investments that provide an average picture of a market's health: whether it's going up or down, even if individual shares are tracking in the opposite direction.
A passively managed fund uses computers to track an index and to buy and sell corresponding shares automatically, thus, matching the chosen index's trajectory.
An actively managed fund, on the other hand, is controlled by a fund manager, who implements an investment strategy based on expert research and analysis.
Which performs best: active investment or passive investment?
Passive investment is never going to outperform the market, as it's designed only to track the market. But as long as the market's value creeps ever upwards, everybody's happy. But if the market stagnates or drops, the value of the investments will do the same.
An active fund manager's intention is to beat the market. They buy and sell proactively and aim to make returns above indexed averages, whichever way the market is headed. But, of course, humans are fallible and nobody can foresee the future.
While active funds can outperform passive funds some years, it's harder for managed funds to maintain the same performance year-on-year.
What it means for KiwiSaver members
For KiwiSaver members, the main implications of the two different styles of investment are the fees they are charged by their fund providers. Because many of the processes involved with passive investment are automated, the funds are cheaper to administrate and, as a result, the fund providers charge lower fees.
Some passive KiwiSaver providers are very proud of this fact and heavily promote their low-fee accounts, such as Simplicity. But not all passive providers have considerably lower fees. And, just because something is cheap, it doesn’t mean that it’s better.
On the flip side, higher fees don't necessarily mean higher returns or better service.
There's a difference between cost and value. If an actively managed fund has higher fees than a passively managed fund, but delivers comparatively higher returns, then it's a good value product.
Active funds vs passive funds: the verdict
Because passive funds can only reflect the ups and downs of the market, if you want to invest in a growth fund that chases returns above the market average, you're going to have to choose an actively managed fund. But, saying that, there are exceptions to every rule, as the below table shows.
Our chart shows the top 10 KiwiSaver growth funds, sorted by past 5-year returns (highest to lowest), currently listed on Canstar’s database (correct as of 13/08/2026) for a KiwiSaver member with a balance of $50,000. And, as you can see, there are four passively managed fund in there:
KiwiSaver Fund | 5-Year Returns | Annual Fee | Managed |
|---|---|---|---|
QuayStreet Growth Fund | 9.90% | $657.54 | ACTIVE |
Milford Active Growth Fund | 7.63% | $525 | ACTIVE |
AE Investor | 7.47% | $2162.40 | ACTIVE |
Simplicity Growth Fund | 7.04% | $120 | PASSIVE |
ASB Growth Fund | 6.96% | $350 | PASSIVE |
AMP Growth Fund | 6.57% | $428.40 | ACTIVE |
BNZ Growth Fund | 6.24% | $225 | ACTIVE |
SuperLife Growth Fund | 6.19% | $335 | PASSIVE |
AMP: Global Select Growth Fund | 6.16% | $598.40 | PASSIVE |
Generate Growth Fund | 6.13% | $661 | ACTIVE |
Ultimately, choosing a KiwiSaver fund is about more than just active vs passive, and fees vs returns. There are many other considerations, too, such as your appetite for risk and a provider's levels of customer service, communication and support. That's why it's essential to thoroughly research your options and to compare providers.