Most superannuation funds are getting value for money through their use of asset consultants according to the latest research published by actuarial firm, Rice Walker.
However, the research suggests that superannuation trustees need to look much more deeply and gain a better understanding of how each consultant is adding value.
The Rice Walker research suggests that investors need to ask themselves the following questions about the performance of their asset consultants:
~ “Are the returns generated good relative to the market?”
~ “Do the returns justify the fees that are charged?”
~ “How have the selected managers achieved the results and can they be replicated in the future?”
~ “What are their relative strengths and weaknesses?”
Rice Walker director, Wayne Walker said that implemented consultants marketed themselves on the basis of their investment processes, their ability to diversify risk, portfolio construction and their ability to select managers in each asset class that would perform above average.
However, he said the research suggested that investors needed to look much deeper.
“In some years, the major component of value added, or value subtracted, occurs from the implemented products finding themselves in under-performing asset classes simply because their investment structures remain tied to long-term strategic asset allocations,” Walker said.
He said that rather than relying on the relative performance of asset classes investors might be better served looking at manager selection.
“Good performance that reflects a consistent ability to add value through manager selection is much more likely to be repeated,” Walker said.
