The amount of money invested in KiwiSaver fell by $1.536 billion to $87.3b in the March quarter as markets around the world plunged in response to the war in Ukraine and fears of rising interest rates, Morningstar research shows.

Tim Murphy, Morningstar director of manager selection for the Asia-Pacific region, said KiwiSaver funds reflected the challenging underlying market condition with most of the multi-sector funds seeing a return of less than -3 per cent.

The average return for the conservative category was -3.9 per cent, for balanced funds it was -5.1 per cent and growth funds -5.7 per cent. Aggressive funds which have the highest percentage invested in shares and property fell on average -6.5 per cent.

Murphy said Covid-19 headlines took a back seat over the quarter as Russia's invasion of Ukraine caused a global shock.

"The shock reverberated through into markets, with equities declining and bond yields rising. Commodity prices soared given Russia is a key producer of several important
commodities including oil, gas and wheat."

Murphy said world shares had already been weak even before the invasion of Ukraine, and the news of Russia's attack sent them lower again in late February and early March.

"Shares then staged something of a recovery, probably because investors felt they were getting a clearer handle on both the likely geopolitical endgame and the likely
evolution of monetary policy."

Despite that recovery, however, the MSCI World Index still ended the quarter down 6.6 per cent.

New Zealand's NZX50 index fell 7.1 per cent. Australia's share market was one of the few bright spots rising 3.9 per cent driven by the resources sector and a strong performance from listed financial businesses.

Murphy said bond yields had also risen over the period with the 10-year government bond yield up 0.9 per cent.

"International fixed interest continued to struggle, the Bloomberg Global Aggregate lost 7.8 per cent in US dollars. Relatively low-yielding subsectors within the asset class have provided little protection, with Global High Yield (low credit quality) down by 6.6 per cent and emerging-markets debt down by 9.9 per cent."

Murphy reminded KiwiSaver investors that the performance of the scheme was best evaluated over the longer term rather than looking at just one quarter.

Over 10 years the aggressive category has averaged 10.1 per cent per annum, while growth funds have averaged 9.9 per cent a year, balanced 8 per cent and conservative 5.1 per cent.

ANZ remains the largest provider with $18.5b followed by ASB with $14b and Westpac with $9.3b.