ISA scathing on bank fund performance

Despite some analysis showing retail funds outperformed their industry fund peers in April, Industry Super Australia (ISA) has claimed bank-owned funds are underperforming in the short, medium and long-term.

Pointing to the latest SuperRatings monthly data shows, ISA chief executive, David Whiteley said that on average, industry super funds had outperformed bank- owned super funds by more than two per cent over 10 years.

“The habitual underperformance by bank-owned super funds is a drag on member returns and national savings, they are letting the Australian public down," he said.

“Consistent outperformance by industry super funds over bank-owned super funds reflects the differences between for-profit and not-for-profit business models, which over the last two decades have seen significant different member outcomes.”

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Whiteley said the SuperRatings data had served to highlight concerns over the banks’ profit driven vertically-integrated business models, which seemed to be eroding member’s retirement savings.

“The ‘for-profit’ culture enshrined in the banks business model is weighing down the super system,” he said. “This is the same culture that has overseen countless financial scandals and a loss of trust in the banking sector. It is time that government acted and investigates this underperformance.”

While agreeing that industry fund returns had outperformed retail funds over the longer-term, research house Chant West last week noted that retail fund had outperformed industry funds in April, returning 1.6 per cent compared to 1.4 per cent.

Retail funds are generally regarded as performing better at time of rising markets because of their higher exposures to listed investments, while industry funds have a greater allocation to unlisted investments.