What is a high growth fund?

Over the long term, high growth funds have the potential for higher returns, but you need to be willing to accept more risk.

5 minute read

High growth funds have the potential to deliver higher returns over the long term. It's important to note that with higher returns, comes more ups and downs along the way.

Due to the higher-risk nature of a high growth fund, this will not suit everybody. It will be suitable for people with a longer investment timeframe and a higher appetite for risk. This is due to the larger allocation to growth assets.

What are growth assets and income assets?

When investing in managed funds like the BNZ KiwiSaver Scheme or YouWealth, your money is generally invested in a mixture of growth assets and income assets, depending on which fund you choose.

Growth assets include shares in companies, while income assets include cash and bonds. The investment mix of growth and income assets in a fund affects its level of risk and potential returns.

What can I expect from a high growth fund?

Over the long term, high growth funds have the potential to outperform growth funds, balanced funds, and conservative funds. However, if you’re thinking about whether to accept more risk, it’s a good idea to consider how you would feel during periods of market turbulence, when there could be a drop in the value of your investment. High growth funds are likely to experience a larger drop than other funds, because of their higher exposure to growth assets. 

Our High Growth Funds invest 100% in growth assets and have a suggested minimum investment timeframe of 12 years. They are designed with diversification in mind and invest in a wide range of sectors and geographies, with investments in thousands of different companies around the world.

A tale of two savers

Let’s take a look at two hypothetical members of the BNZ KiwiSaver Scheme*.

Mārama has just turned 35 and is planning to use her KiwiSaver investment for retirement. Her investment timeframe is approximately 30 years. Mārama has seen her KiwiSaver balance go up and go down during the market impacts of Covid and while she doesn’t love it, she is ok seeing a drop in her investment balance in the short to medium term. Her focus is on growing her nest egg as much as possible so she’s taking a long-term view. Mārama has used the Sorted risk profile tool and knows she’s an aggressive investor, so a fund with more growth assets may be suitable for her needs.

Jason is in his late twenties and is saving for a first home. Along with his partner, he's planning to withdraw most of the savings in his KiwiSaver account in a few years, as part of a deposit on their first home. His investment timeframe is 3-5 years, so he needs relatively stable returns over the short to medium term. Jason uses the Sorted risk profile tool and finds he’s a conservative investor, so a fund with more income assets may be suitable for his needs. 

Is a high growth fund right for me?

There’s no ‘one size fits all’ to investing, so it’s a good idea to consider what type of investor you are, how much time you have, and your overall risk tolerance. You can try the Sorted investor profiler to see what type of fund might suit you best.

If you want lower risk and you’re happy to accept a modest long-term investment return, then you may prefer a fund that will invest more of your money in income assets. If your goal is to achieve higher investment returns over the long term, and you’re willing and able to accept a higher level of risk to achieve this, you could consider a fund that invests more of your money in growth assets.

We have a range of BNZ KiwiSaver Scheme funds and YouWealth funds, each with their own investment mix of growth and income assets. This means there’s a fund to suit pretty much everyone, and there’s no need to split your KiwiSaver or YouWealth investment across more than one fund.

Your investment balance can go up and down, and with time comes the ability to recoup any short-term setbacks.  But if you’re close to making a withdrawal for retirement or buying your first home, you’ll probably want to take less risk. 

* These are hypothetical examples and are shown for illustrative purposes only.  

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This article is solely for information purposes and is not intended to be financial advice. If you need help, please contact BNZ or your financial adviser. Neither BNZ nor any person involved in this article accepts any liability for any loss or damage whatsoever which may directly or indirectly result from any information, representation, or omission, whether negligent or otherwise, contained in this publication.

BNZ Investment Services Limited, a wholly owned subsidiary of Harbour Asset Management Limited, is the Issuer and Manager of the BNZ KiwiSaver Scheme. A copy of the Product Disclosure Statement is available at bnz.co.nz

Investments in the BNZ KiwiSaver Scheme are not bank deposits or other liabilities of Bank of New Zealand (BNZ) or any other member of the National Australia Bank Limited group. They are subject to investment risk, including possible delays in repayment. You could get back less than the total contributed. No person (including the New Zealand Government) guarantees (either fully or in part) the performance or returns of the BNZ KiwiSaver Scheme or the repayment of amounts contributed. National Australia Bank Limited, the ultimate owner of BNZ, is not a registered bank in New Zealand but a licensed bank in Australia and is not authorised to offer the products and services mentioned in this email to customers in New Zealand.