Super’s biggest problem likely lies within funds themselves, with many using legacy operational infrastructure ill-suited to the needs of the major financial organisations they’ve become.
The race to the bottom on low cost, benchmark aware solutions for a post-YFYS world has pretty much been run. But while the perception of value currently sits on price, that might not be where it ends up, according to Fidelity’s Simon Glazier.
Compare the pair: the gap widens despite MySuper
Never failing to let a chance go by, Industry Super Australia has analysed the latest super fund returns figures, put them in a 10-year context and, once again, compared the pair – industry funds versus bank-owned funds. The gap, the numbers say, is widening.
The latest SuperRatings monthly data show, on average, industry super funds have outperformed bank-owned super funds by more than 2 per cent a year over 10 years.
David Whiteley, Industry Super Australia chief executive, said: “The growing gap between industry fund and bank-owned fund performance should be ringing alarm bells for members of bank-owned superfunds and the Government.
“The banks and their superfunds are failing to meet their social license obligations as managers of workers’ compulsory retirement savings. Industry super funds’ continued outperformance comes down to asset allocation and the questionable profit orientation of bank-owned super funds which is eroding their members’ nest eggs.
“The decade-long failure of the banks to match industry super funds returns could mean millions of Australians retiring with less or working longer. The data brings into question the legitimacy of bank-owned super funds as a part of the compulsory super system given their chronic underperformance,” he said.
Whitely said industry super funds have also dominated SuperRatings top 10 rankings for balanced options for the year to June 2017, delivering superior returns to their members.
An interesting aspect of the latest analysis, for the past year, is that the headline costs of the bank-owned super funds have been reduced in their MySuper offerings by more than the industry funds’ costs have. This is because the bank-owned funds have much higher allocation to passive strategies, including smart beta.
The uptick in relative performance by industry funds may well come down to their investment strategies focusing not only on unlisted premia such as is available through infrastructure, but also their higher use of active management, including internally run funds.
