Super funds are now eagerly embracing Member Investment Choice (MIC) and their offerings have advanced significantly over the past three years, according to Towers Perrin’s Member Investment Choice 2001 survey.
The 2001 survey, which examined a range of corporate and industry super funds, found that 75 per cent of those funds that have introduced MIC since 1998 (when Towers Perrin’s last survey was conducted) were larger corporate funds and that these now offer members more flexible administration, greater investment choice and more advanced communication strategies.
Investment choice has increased, with 80 per cent of the funds surveyed laying on more than three investment options in 2001, compared to 42 per cent in 1998.
According to Towers Perrin, 70 per cent of large corporate funds are now constructing investment options from sector specialist mandates, compared to 55 per cent of other funds. This has given them greater flexibility to offer eight or more multi-sector and sector specific investment choices.
However, while Towers Perrin expects Australian funds to follow the US example, where 80 per cent of funds offer more than five investment options, it also anticipates that the choice of options may be limited to eight at some point. Indeed, US research reveals that investors can be overwhelmed by as little as eight investment alternatives.
Going forward, 75 per cent of super funds expect member and industry pressure to “push them towards offering more flexible administration arrangements”. This includes providing more frequent unit pricing (replacing crediting and interim rates), more frequent switching opportunities and the introduction of buy/sell spreads on unit prices.
About 60 per cent of corporate funds surveyed now offer unit pricing on a weekly or daily basis.
“The difficulties of integrating an administration system for a fund offering unitisation across an increasing range of investment managers (via a custodian) should not be underestimated. Little wonder that almost 40 per cent of funds surveyed found administration to be a major constraint to the introduction of MIC,” notes Towers Perrin.
