Currency Moves and Your KiwiSaver Balance in NZ (2026): Hedged vs Unhedged

Most of a KiwiSaver growth fund sits overseas, so the value of the NZ dollar quietly moves your balance. Around half a typical growth fund is in international shares, and much of that stays unhedged on purpose. Here's how hedged vs unhedged works, and where to find your fund's policy.

TL;DR: Most of a KiwiSaver growth fund sits overseas — around half is typically in international shares ³, so the NZ dollar quietly moves your balance. An unhedged holding rises when the NZD falls and falls when it rises; a hedged holding strips most of that out, at a cost ⁵. Through 2025 the NZD/USD traded roughly US$0.56-US$0.60 ², enough to noticeably sway unhedged offshore returns.

A lot of people are surprised to learn that the value of the New Zealand dollar affects their KiwiSaver. But it does, and for a growth fund it can matter more than you'd expect. The reason is simple: most of what a growth fund owns isn't in New Zealand at all. It's in shares listed in the United States, Europe, Asia and Australia — priced in foreign currencies. When those currencies move against the dollar, your balance moves too, even if the overseas markets themselves did nothing.

This article explains why that happens, how much of a typical fund is exposed, what "currency hedged" actually means, and where to find your own fund's policy. It's general information, not a recommendation about your fund.

Why does my KiwiSaver move when the NZ dollar moves?

Picture owning a parcel of US shares. The shares are priced in US dollars, but your KiwiSaver balance is reported in New Zealand dollars. So your return has two moving parts: how the shares did in US dollars, and how the NZD/USD exchange rate moved while you held them.

When the New Zealand dollar falls, each US dollar your fund owns is worth more in NZD terms — so an unhedged offshore holding is worth more when converted back, even if the US share price never budged. When the New Zealand dollar rises, the opposite happens: those same US dollars convert back to fewer NZD, trimming your return. The market gain overseas can be real and positive, yet a rising Kiwi dollar can quietly eat into it.

This isn't a small or theoretical effect. As at mid-to-late May 2025 the NZD/USD rate was trading in the high-US$0.58 to low-US$0.59 range — around US$0.59 ¹. But it doesn't sit still. Through 2025 to date it traded roughly between US$0.56 and US$0.60, having reached the low-to-mid US$0.50s at points in prior years and over US$0.70 historically ². A swing of that size, on the unhedged offshore part of a fund, is enough to add to or subtract from your return in a given year.

How a strong vs weak NZ dollar changes an unhedged offshore return

The table below takes a single, identical offshore market gain and shows how the same investment lands in your KiwiSaver depending on which way the dollar moved — and whether the holding was hedged or unhedged. It's an illustration of the mechanism, not a prediction.

Illustration of how the NZD direction changes an unhedged offshore return while a hedged one tracks the underlying market. Currency effects are netted against any hedging cost ⁵. Exchange-rate context: NZD/USD ~US$0.59 in May 2025, ranging roughly US$0.56-US$0.60 through 2025 ¹². Sources: RBNZ exchange-rate statistics; provider PDS hedging policies.

The pattern to take from this: an unhedged investor effectively holds the overseas market and a bet on the currency. A hedged investor holds mostly just the overseas market. Neither is "right" — they behave differently, and which feels better often depends on which way the dollar happened to move.

How much of a typical growth fund is invested overseas?

More than most people assume. A typical KiwiSaver growth fund holds roughly 70-80% in growth assets, mostly shares, and the great majority of that share exposure is international rather than domestic. Sorted's Smart Investor comparison shows a representative growth fund holding around half in international shares, versus roughly a fifth to a quarter in Australasian shares ³. So the single largest slice of a growth fund tends to be offshore equities priced in foreign currency.

Provider documents tell the same story. The Statement of Investment Policy and Objectives (SIPO) — the document that sets out how a fund is built — confirms growth funds skew heavily offshore. The MAS KiwiSaver Scheme growth benchmark, for example, allocates about 55.5% to international equities and about 24.5% to Australasian equities, roughly 80% total growth assets ⁴. The bulk of the share exposure is in US dollars, euro, yen and Australian dollars.

Representative growth-fund mix; exact figures vary by provider ³⁴.

The takeaway is that for a growth investor, foreign-currency exposure isn't a side issue — it sits underneath the largest part of the fund. That's why the dollar matters. For the wider picture of why funds invest so much offshore in the first place, see our note on NZ vs global diversification in KiwiSaver.

What does 'currency hedged' mean in a KiwiSaver fund?

Hedging is the tool funds use to manage this. In plain terms, currency hedging means the fund uses foreign-currency forward contracts — agreements to swap currencies at a set rate on a future date — to offset the effect of the dollar moving on its overseas holdings. A fully hedged position removes most of the currency impact, so your return tracks the underlying overseas market regardless of which way the NZD went. An unhedged position leaves returns fully exposed to the exchange rate ⁵.

There's no free lunch here, and it's important to be even-handed about it. The FMA notes that there is a cost to hedging that reduces members' returns ⁵. Hedging also cuts both ways: it protects you when the dollar rises (which would otherwise drag an unhedged return down), but it also means you don't benefit when the dollar falls (which would otherwise lift an unhedged return). Removing the downside removes the upside too.

In practice, funds rarely go all-or-nothing. They set a benchmark hedging policy by asset class. A representative policy might hedge international (US) equities only partially — around 45-55% — while hedging international fixed interest close to 100% (around 95-105%) and leaving Australian equities unhedged ⁶. That pattern is deliberate: funds tend to hedge bonds heavily (because currency swings can swamp a bond's modest return) while leaving a good chunk of share exposure unhedged (because over long periods currency moves on shares tend to wash out, and the hedging costs add up).

Hedged vs unhedged: which is riskier for a Kiwi investor?

This is where it pays to be careful, because "risky" depends on what you're measuring.

If you measure risk as short-term ups and downs in your NZD balance, the answer isn't as simple as "unhedged is riskier." Currency can either add to or dampen the swings of the overseas market. Sometimes a falling dollar cushions a bad year in offshore shares; other times a rising dollar deepens it. The currency is a second source of movement, and it doesn't always line up with the market.

A few things worth weighing up, with the trade-offs honestly stated:

• Unhedged leaves you fully exposed to the dollar. You gain when the NZD falls and lose when it rises ⁵. Over long periods many investors accept this, on the view that currency moves tend to even out and hedging costs are avoided. The downside is real volatility in any given year tied to the exchange rate.
• Hedged strips most of the currency effect out, so your return tracks the overseas market more closely ⁵. The downside is the cost, which reduces returns over time ⁵, and you forgo the cushion an unhedged position gets when the dollar falls.
• Neither is universally safer. A fund deliberately keeps meaningful unhedged share exposure precisely because hedging everything would cost more and isn't obviously better over the long run ⁶. It's a trade-off, not a mistake.

The honest summary: hedged smooths out one source of movement at a cost; unhedged accepts that movement in exchange for no hedging cost and the chance to benefit when the dollar falls. Which suits a particular person depends on their timeframe and how they'd cope with swings — not on a label. If you want to make sense of the underlying numbers either way, our guide to KiwiSaver returns explained is a good place to start.

Where do I find my fund's hedging policy?

You don't have to guess. A fund's hedging policy, its target hedge ratio and its actual hedging level are all disclosed — you just need to know where to look:

• Product Disclosure Statement (PDS) and SIPO — these set out the fund's benchmark hedging policy by asset class.
• Quarterly fund updates — these state the actual hedged percentage and total unhedged foreign exposure for the period.

For example, a growth fund may target 50% hedging of its non-NZD equity exposure and 100% of its non-NZD fixed interest, with the actual hedged percentage reported each quarter ⁷. The Pathfinder KiwiSaver Growth Fund publishes hedge ratios on this basis in its fund updates, illustrating how the figures are disclosed quarterly and vary by provider. Because the exact ratios are provider-specific, the only reliable way to know your own fund's policy is to read its documents.

The simplest starting point is the Sorted Smart Investor tool, run by the FMA. It's free, it's the official comparison tool, and it lets you see any KiwiSaver fund's asset mix and growth-asset proportions before you dig into the PDS for the hedging detail ⁸. So the practical order is: check the asset mix on Smart Investor, then open the PDS or latest fund update for the hedging policy itself.

Should currency exposure change my fund choice?

For most people, the honest answer is that currency is a detail within a bigger decision, not the decision itself. The first questions are still the usual ones: how long until you need the money, how much movement you can live with, and which broad fund type fits. Our guide to KiwiSaver fund types and the note on how to choose a KiwiSaver fund work through those.

Hedging policy sits underneath that choice. Two growth funds can hold similar shares yet hedge differently, which can make their year-to-year returns diverge even when the underlying markets did the same thing. That's worth understanding when you're comparing funds or comparing your fund's return to a friend's — a chunk of any difference can be currency, not skill. It's also a reason not to read too much into a single year's number, since some of it may simply reflect where the dollar sat.

What currency exposure usually shouldn't do is become a reason to chase the dollar — trying to switch funds to time the exchange rate is the kind of guessing that tends to go wrong, in the same way as trying to time markets. The more durable approach is to pick a fund type that suits your situation, understand roughly how it handles currency, and leave it to do its job.

Do I need to do anything about currency risk?

For most KiwiSaver members, no immediate action is required — currency exposure is a normal, built-in feature of holding a globally invested fund, and it's already managed for you within the fund's policy ⁶. You don't hedge your KiwiSaver yourself; the fund does it (or chooses not to) according to its stated policy.

What's reasonable is to understand it rather than ignore it. A few sensible steps:

• Know roughly how offshore your fund is. A growth fund is mostly overseas shares, so currency matters more than it does for a conservative fund ³.
• Check the hedging policy once. Look it up on the PDS or fund update so you know whether your fund is largely hedged, largely unhedged, or a mix ⁷.
• Don't over-react to one year. A strong or weak year can owe a lot to the dollar. Currency moves tend to wash out more over long horizons than over short ones.

If you're unsure how your particular fund handles currency, or whether its overall mix still suits your timeframe, that's exactly the sort of thing a review is built to work through. This is general information, not advice about your situation.

Frequently asked questions

Does the New Zealand dollar really affect my KiwiSaver? Yes, especially in a growth fund. Around half a typical growth fund is in international shares priced in foreign currencies ³, so when the NZD moves against those currencies, your balance moves too — even if the overseas markets themselves were flat. Through 2025 the NZD/USD traded roughly US$0.56-US$0.60 ², a range wide enough to noticeably affect an unhedged offshore return.

What's the difference between a hedged and unhedged KiwiSaver fund? A hedged holding uses currency forward contracts to offset the effect of the dollar moving, so your return tracks the underlying overseas market — at a cost that reduces returns ⁵. An unhedged holding leaves you fully exposed to the exchange rate, so you gain when the NZD falls and lose when it rises ⁵. Most funds use a mix, hedging bonds heavily and shares only partly ⁶.

Is unhedged riskier than hedged? It depends what you mean by risk. Unhedged adds the exchange rate as a second source of movement, which can either deepen or cushion a market move ⁵. Hedged removes most of that movement but costs money and gives up the cushion when the dollar falls ⁵. Funds deliberately keep meaningful unhedged share exposure, so neither is simply "safer" ⁶.

How do I find out if my KiwiSaver fund is hedged? Check the fund's Product Disclosure Statement, SIPO and latest quarterly fund update — they state the target hedge ratio and the actual hedged percentage ⁷. Start by looking up the fund's asset mix on Sorted's Smart Investor, the FMA-backed comparison tool, then open the PDS for the hedging detail ⁸.

Does hedging cost me money? Yes. The FMA notes there is a cost to hedging that reduces members' returns ⁵. That cost is part of why funds often leave a portion of their share exposure unhedged rather than hedging everything ⁶. Whether the cost is worth it depends on the fund's strategy and your own preferences — it's a trade-off, not a flaw.

Should I switch funds based on the exchange rate? Trying to switch funds to time the dollar is a form of market timing, and it tends to go wrong. Currency moves are hard to predict and tend to even out over long periods. The more durable approach is to choose a fund type that suits your timeframe, understand its hedging policy, and leave it in place. This is general information, not advice about your situation.

Unsure how currency exposure affects your fund? A free KiwiSaver review with a Smiths Financial adviser can talk through your fund's hedging policy and whether its overall mix still suits your timeframe. Book a review

General information, not personalised financial advice. It does not take into account your particular financial situation, goals or needs — consider whether it's right for you and seek advice tailored to your circumstances before acting. KiwiSaver is a long-term savings scheme; government contributions, contribution rates, withdrawal rules and tax (PIR) settings are set by the Government and can change. Returns are not guaranteed — the value of investments can go down as well as up and you may get back less than you invested; past performance is not a reliable indicator of future performance. Figures are correct as at 22 May 2025; check current rules at ird.govt.nz, kiwisaver.govt.nz and sorted.org.nz, and the relevant scheme's Product Disclosure Statement. Craig Smith Business Services Ltd (FSP712931), trading as Smiths Financial, holds a Class 2 licence issued by the Financial Markets Authority and is a member of the Financial Dispute Resolution Service (FDRS). Written by Henry Smith, Financial Adviser; reviewed by Craig Smith, Principal Adviser. Last reviewed 22 May 2025.