Funds are usually split between income and growth assets, depending on which type you choose.
Income assets are things like bank deposits or bonds, which tend to give a more predictable return. On the flip side, growth assets such as company shares might provide higher returns because they're riskier. The type of fund and tolerance for risk determines the mix of these investments.
The KiwiSaver provider managing your investments doesn't get your money. It goes to a custodian who keeps it safe for you. This money is yours and can't be withdrawn by the government, or anyone else.