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Editorial: Sign of the times
By Mike Taylor
The Conference of Major Superannuation Funds (CMSF) 2008 represents the first in its current form to be held with a Labor Government sitting on the Treasury benches in Canberra. For that reason much attention will be focused on the views of the Minister for Superannuation, Senator Nick Sherry.
Of course, Sherry, who has handled the superannuation portfolio for most of the past decade for the Labor Party, is no stranger to CMSF get togethers, but there is a great deal of difference between being the Opposition spokesman and being a minister responsible for the day-to-day administration of key elements of the Treasury portfolio.
Those expecting Sherry to use CMSF 2008 to deliver on a broad industry fund agenda for change to the superannuation industry will be sorely disappointed. Delegates should expect the same conservative and highly studied approach that has been the hallmark of the Rudd Government in a range of other policy areas, not the least of which being broad economic policy.
Indeed, there were many pointers to the way a Rudd Government would approach superannuation policy throughout 2007, including at last year’s CMSF conference and at the later conferences held by the Investment and Financial Services Association and the Association of Superannuation Funds of Australia.
The bottom line is that the Labor Party frontbenchers who addressed these conferences made clear that they would not be pursuing a program of radical reform. Rather, the spokesmen made plain that the Labor Party would be fine-tuning and improving the existing regime.
This probably explains why priorities with respect to super have related to the implementation issues surrounding the First Home Saver Accounts and pursuing other efficiencies within the broader financial services framework, including more user-friendly documentation such as Product Disclosure Statements.
Nonetheless, there have been clear signs from within some sections of the Government that, ultimately, superannuation will form part of its strategy in containing inflation and, in the broader scheme of things, superannuation funds have an ongoing role to play with respect to infrastructure development both within Australia and overseas.
But while the shape of Government policy will be of abiding interest to CMSF delegates, so too will be the ongoing fallout from the sub-prime crisis, the tightening of liquidity and the harsh reality that the long run of double digit returns enjoyed by Australian superannuation funds has finally come to an end.
It is in the nature of statistics that the latest Intech data published in this issue of Super Re
view reveals another year of double digit returns having been generated by superannuation funds in the year to December 31, but this represents a rear-vision mirror assessment.
Data received by Super Re
view throughout 2008 has painted a very different picture, with the latest SuperRatings data revealing that some returns had dropped by as much as 7.5 per cent to be in modest single figure territory.
The bottom line, according to SuperRatings, was that the January results would mean all major Australian super funds’ balanced options were in the red for the financial year.
Superannuation fund executives and trustees will be hoping that the reaction of their members to this is somewhat more understanding and subdued than was the case in 2002-03, when a spate of negative returns gave rise to high levels of angst, with some of those with large account balances taking the chance to set up self-managed superannuation funds.
Working on the side of the funds is the fact that the Australian media has been providing consistent reports on the sub-prime crisis and its implications for broader investment returns. As well, there has been no shortage of coverage of the declines being experienced by the Australian Securities Exchange or the number of major institutions that have suffered dramatic and sometimes unprecedented losses.
And perhaps it is in these circumstances that the superannuation industry should be satisfied with the relatively modest pace of change likely to be pursued by the Rudd Government. Clearly, it is not wise to pursue radical policy initiatives in a period of high volatility and possible US recession and subsequent global slowdown.
Nor should superannuation fund trustees be spooked into knee-jerk reactions to their declining fund returns and the manner in which those declines are being reported by ratings houses. Short-termism is always to be avoided with respect to superannuation investment strategies and that is particularly the case when markets turn dramatically south.
3 June 2008
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| Related articles for Editorial | | • Less is more in tougher markets (Money Management, 15-Aug-2008) | | • Industry funds score again (Money Management, 15-Aug-2008) |
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