Unlisted Property in KiwiSaver
Diversification or Double-Up?
Unlisted Property in KiwiSaver
Diversification or Double-Up?
Recently, questions have been raised about some KiwiSaver providers growing allocations to unlisted property such as residential developments and private commercial property funds. This shift has sparked discussion about how these assets fit within diversified investment strategies, particularly as investors weigh long-term growth against liquidity and transparency.
A few factors are driving the trend. After years of low global interest rates, fund managers have looked for new ways to generate stable income and diversify away from listed markets. Property, with its tangible nature and steady rental yields, can appear to offer both. More recently, market volatility and inflation concerns have also prompted interest in “real assets” those that feel less tied to financial market swings.
However, the same features that make unlisted property appealing, its physical presence and perceived stability, can also reduce flexibility. These assets are harder to buy or sell quickly, are valued less frequently, and can concentrate exposure in one part of the market.
Property Exposure: Already Part of a Balanced Portfolio
Most diversified portfolios, including Lifetime’s already include exposure to the property sector. This typically happens through listed property companies (via shares) and bonds issued by developers, landlords, and infrastructure businesses.
These listed assets are, in effect, a reflection of the property market. Investors gain exposure to the same underlying drivers, rental income, construction demand, and property values but through instruments that are transparent, liquid, and priced daily. That means you can benefit from property-sector returns without taking on the extra concentration or liquidity risks that come with direct ownership.
Listed property also offers a broader reach. Rather than being tied to a single location or project, investors hold stakes across multiple companies and sectors, from commercial and industrial spaces to logistics and retail. This diversity helps smooth returns and keeps the portfolio aligned with overall market performance.
Understanding the Return Profile (and Why ‘Low-Beta’ Matters)
Property is generally a low-beta sector, meaning it tends to move less sharply than the broader share market. In simple terms, beta measures how sensitive an investment is to overall market movements. A lower beta can make returns feel steadier but usually means lower long-term growth potential compared to higher-beta assets like shares.
That stability can be useful within a balanced portfolio, especially for smoothing returns during volatile periods. But it doesn’t automatically improve overall outcomes. Overweighting property particularly when investors already own a home or investment property can reduce diversification rather than enhance it.
Diversification works best when the assets in a portfolio behave differently. If several parts of an investor’s wealth are influenced by the same factors, such as housing demand or interest-rate changes, risk can increase even when it looks like variety on the surface.
Our goal is to help clients balance stability and growth, ensuring portfolios include steady assets like property, while maintaining the benefits of diversification across other investment types.
Property Is Not Immune to Downturns
Property often feels like a steady, tangible investment, but history shows it can still experience significant declines.
-
During the Global Financial Crisis, property markets collapsed due to the sub-prime mortgage crisis.
-
In 2020, COVID-19 hit commercial property and retail real estate particularly hard as offices and malls sat empty.
-
In 2022, rapidly rising interest rates drove down property values as higher debt costs hurt returns.
These periods highlight an important reality: property prices are influenced by the same economic forces that affect other assets, including interest rates, and consumer confidence. While property can play a stabilising role, it has not consistently provided the downside protection investors sometimes expect.
Concentration and Diversification (Location, Type, Manager)
Unlisted property investments can sometimes be narrow in scope, focused on a single region, property type, or development style. When that happens, returns become more dependent on the performance of a small part of the market.
For example, a fund concentrated in one city’s residential housing may rise or fall with local conditions such as construction costs, rental demand, or council planning changes. That kind of concentration can add risk rather than reduce it, even if the broader investment mix appears diversified on paper.
Professional managers can mitigate this by spreading exposure across different property types (residential, commercial, industrial), regions, and tenant profiles. It’s important for investors to understand how wide or narrow their fund’s exposure really is and how it complements what they already own.
Transparency, Valuation, and Liquidity
Unlisted property investments come with a few features that make them different from listed shares or bonds and understanding those differences helps set realistic expectations.
-
Pricing: Because unlisted assets aren’t traded daily, their values are updated periodically using professional valuations or models. This can smooth short-term volatility but may also delay how quickly market changes are reflected in the fund’s price.
-
Transparency: Detailed information about what’s owned and how it’s valued is often less frequent, making it harder for investors to see exactly what drives returns or costs at any given time.
-
Liquidity: Buying or selling unlisted assets can take longer, particularly in periods of market stress. That can limit how quickly a fund can adjust its holdings or pay out withdrawals.
These features aren’t necessarily negative, they just work differently. For some investors, the trade-off between stability and flexibility is acceptable; for others, it may feel less comfortable. The key is to understand how much of your KiwiSaver fund is tied up in assets that don’t move or value as frequently as listed ones.
The Bottom Line
Including unlisted property within a KiwiSaver fund can make sense in some strategies, particularly where the exposure is modest, diversified across sectors and regions, and supported by clear valuation and liquidity policies.
However, for many New Zealanders whose personal wealth already leans heavily toward property, adding more of the same inside KiwiSaver doesn’t always provide the diversification they expect. Whether unlisted property improves or reduces balance depends on how it fits within the broader portfolio.
At Lifetime, our focus is on helping clients build portfolios that are broadly diversified, transparent, and aligned to their goals. Through a range of managed fund and wrap portfolio options, we work to balance stability and growth so KiwiSaver remains part of a well-considered financial strategy, not an extra layer of property exposure.
This article is for general information purposes only and does not constitute financial advice. The content is based on information current at the time of writing and may be subject to change.
Lifetime Group Limited is a licensed Financial Advice Provider. For advice specific to your situation, please speak with a Financial Adviser. You can view our Disclosure Statement here.
All investments involve risk and are not guaranteed. Any examples or projections are for illustration only and should not be relied on as advice.
The Growing Divide: Why Private Medical Claims Are Surging in New Zealand
It feels like there is another headline about our public health system being under pressure every week. Long waitlists, staff shortages, and hospitals struggling to keep up. It is no surprise that more Kiwis are turning to private healthcare to get the treatment they need and faster.
A Great Way to Get onto the Property Ladder and Get Ahead
If I were 22 years old again and wanting to get ahead, one effective option would be to buy a personal house and then have flatmates.