Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
Weaven at FEAL: how to retain members… and more
(Pictured: Garry Weaven)
With big super funds under increasing pressure to retain high-balance members because of an onslaught from SMSF service providers, new research indicates that the situation will only get worse over the next few years. SMSF trustees are getting younger and their number is tipped to double.
The research, conducted by Macquarie Bank in conjunction with SPAA (the SMSF Professionals’ Association of Australia), says that one in 12 adults say they plan to start an SMSF within the next three years – the equivalent of 1.4 million people. According to APRA, there were 503,320 SMSFs, with 958,000 members, as of March this year, managing a total of A$496 billion.
A further one in five people say they will have an SMSF at “some stage” of their lives – equal to more than 3.3 million people, according to the Macquarie/SPAA research, published last week.
Against this backdrop, the FEAL National Conference in Melbourne on August 8 includes a session entitled “Looking Beyond Investment Returns for Member Retention”, which features Garry Weaven, the chair of Industry Funds Management, Patrick Liddy, the principal of MSI Group, and Graeme Arnott, the COO and deputy CEO of First State Super.
Weaven asks: “Can larger super funds give the current/potential SMSF market most of what it wants?” He says he will speak about what industry funds can offer, such as:
– Strong investment performance
– Connection to banking
– Connection to residential property and aged care
– Connection to affordable health care
– Multi-level financial advice
– Compulsory pensions.
Liddy said the session was designed to stimulate thought among funds to look outside the square for ways to retain their high-balance members, through things such as the member-directed investment options with which he has been involved in the past two years. He said member-directed options, such as those adopted by Australian Super, Telstra Super and HostPlus, were likely to become more sophisticated with the provision of model portfolios and an increased range of potential investment strategies.
The Macquarie/SPAA research, which followed an online survey of 2,017 people in February this year, plus an analysis of aggregated data of Macquarie Cash Management Account holders, Macquarie Wrap clients and Macquarie Mortgages data, showed that 46 per cent of people who had set up an SMSF in the past three years (recent investors) were under the age of 30. This compares with only 12 per cent in that age bracket for established investors who had set up an SMSF more than three years ago.
The Macquarie report says: “Recent investors have a strikingly different demographic profile to more established SMSF investors.” For instance, one in five recent investors are daughters who have no children and live with one or both parents. Also, a remarkably high proportion – 23 per cent – represent single-parent families.
Information about the FEAL National Conference: www.feal.asn.au
