Most KiwiSaver members are in actively managed funds — where portfolio managers make decisions about which shares to buy and sell. A growing minority are in passive index funds — which simply track a market index, charge far lower fees, and have historically outperformed most active managers after fees in NZ.
Understanding the passive vs active distinction is one of the most valuable things a KiwiSaver member can learn.
What Is a Passive Index Fund?
A passive index fund tracks a specific market index — for example:
- The NZX 50 (New Zealand’s top 50 listed companies)
- The S&P 500 (US’s 500 largest companies)
- The MSCI World Index (thousands of global companies)
Instead of a portfolio manager deciding which stocks to buy, the fund simply holds all (or a representative sample of) the companies in the index, in proportion to their size.
The key advantage: No expensive research team, no active trading costs, no manager judgement risk. This translates to dramatically lower fees.
Passive vs Active: The Fee Difference
| Provider | Approach | Growth fund fee (approx.) |
|---|---|---|
| Fisher Funds | Active | ~1.35% |
| ANZ | Active | ~1.06% |
| Milford | Active | ~0.85%–1.05% |
| Booster | Active/blended | ~0.67%–0.87% |
| ASB | Active/blended | ~0.50%–0.60% |
| BNZ | Passive/blended | ~0.40%–0.55% |
| Simplicity | Passive (index) | 0.31% |
| Kernel | Passive (index) | ~0.25%–0.39% + $60/yr |
On a $100,000 balance, the difference between 1.35% (Fisher Funds) and 0.31% (Simplicity) is $1,040/year — every year, compounding against you.
Does Passive Outperform Active in NZ?
The global evidence is clear: over long timeframes, most active fund managers underperform their benchmark index after fees. The data in NZ mirrors the global picture:
- Over 5-year periods, the majority of NZ active KiwiSaver managers have underperformed a comparable passive index after fees
- The exceptions are a small number of managers (primarily Milford and Generate) who have delivered consistent after-fee outperformance — but this is not guaranteed to continue
- The mathematical headwind for active managers is the fee drag — to beat an index after fees, an active manager must outperform the index before fees by at least their fee amount, every year
The implication: Unless you’re specifically selecting a proven active manager (Milford, Generate), a passive index fund is likely the better default choice — particularly for cost-conscious members.
Which KiwiSaver Providers Offer Passive Index Funds?
Simplicity
New Zealand’s leading passive KiwiSaver provider. Simplicity tracks global and NZ indices, charges 0.31% with no admin fee, and operates as a not-for-profit. This is the most commonly recommended low-cost option in NZ.
Funds: Conservative, Balanced, Growth (all index-tracking)
See the Simplicity KiwiSaver review.
Kernel
Kernel offers a range of index funds with some of the lowest fee rates in NZ:
- Individual index funds: NZ 20, Global 100, S&P 500, Global Green Property, NZ Cash Plus
- High Growth multi-index option
- Fee: ~0.25%–0.39% + flat $60/year admin fee
- Cheapest above ~$85,000–$100,000 balance (where flat fee becomes less significant)
See the Kernel KiwiSaver review.
BNZ KiwiSaver
BNZ uses a passive/index-blended approach for its funds, with fees of ~0.40%–0.55% — significantly cheaper than other bank providers. It’s the best-value option among the major banks.
See the BNZ KiwiSaver review.
SuperLife
SuperLife (owned by Smartshares/NZX) offers a range of index ETF-based KiwiSaver funds with low fees. Highly customisable — members can mix and match exposure to NZ, Australian, and global indices.
Smartshares
Smartshares also operates index-based funds with competitive fees, primarily through the NZX ETF structure.
Passive vs Active: When Does Active Win?
The honest case for active management:
- Milford and Generate have delivered consistent after-fee outperformance over 5+ years in NZ — they are genuine exceptions to the “passive wins” rule, at least so far
- Active managers can react to market dislocations (e.g. March 2020) in ways index funds cannot
- In less efficient markets (small-cap NZ companies, emerging markets), skilled active managers may have a larger edge
The counterargument:
- Past performance does not guarantee future results — even Milford and Generate may revert to the mean over time
- Most active managers who outperform in one period underperform in the next
- The fee headwind is permanent; outperformance is probabilistic
For members who don’t want to track performance closely and just want a reliable, low-cost approach, passive index funds remain the most robust default choice.
Index Funds and Diversification
A well-constructed passive index fund is inherently diversified:
- Simplicity’s growth fund holds exposure to thousands of global companies via index tracking
- Kernel’s Global 100 holds the world’s 100 largest companies
- BNZ’s index blend spans NZ, Australian, and global markets
This broad diversification is one of the underrated advantages of index funds — you’re not reliant on a manager’s judgement about which 30 stocks to hold.
Frequently Asked Questions
Are passive index funds safer than active funds? Not inherently — a passive growth fund will still lose 25–35% in a severe market downturn, the same as an active growth fund. “Passive” refers to the investment method, not the risk level. Fund type (conservative, balanced, growth) determines your risk exposure.
Can I combine passive and active KiwiSaver? No — you can only be in one KiwiSaver scheme at a time. However, you can choose a provider whose funds blend passive and active (e.g. BNZ, ASB, Booster) as a middle ground.
Is Simplicity’s index fund really as good as more expensive active funds? For most members, yes — after fees, Simplicity’s growth fund has matched or outperformed the majority of NZ active KiwiSaver managers over 5-year periods. See the cheapest vs best performing KiwiSaver comparison.
What index does Simplicity track? Simplicity’s growth fund invests in global and NZ share indices (primarily MSCI World ex-Australia + NZ equities) and fixed income indices. It does not track a single index — it’s a multi-index blend appropriate for a diversified growth allocation.
Does Kernel’s flat $60/year fee make it expensive for small balances? Yes. At $10,000, the $60 fee is 0.60% — more expensive than Simplicity. Kernel becomes cheaper than Simplicity above approximately $85,000–$100,000, where the flat fee is a smaller percentage of the balance. See cheapest KiwiSaver fund NZ.
What to Read Next
- KiwiSaver Fund Types Explained — conservative, balanced, growth in detail
- Conservative vs Balanced vs Growth by Age — which fund at each life stage
- Cheapest KiwiSaver Fund NZ — lowest-fee options ranked
- Cheapest vs Best Performing KiwiSaver — the fee vs return debate
- Simplicity KiwiSaver Review — leading passive provider
- Kernel KiwiSaver Review — index specialist