Super funds continue to offer their members more investment choice. According to Super Review’s Top 300 survey, the average number of investment options offered by larger super funds, including funds that offer no choice at all, is 3.5. That’s a whopping jump from the average of 2.6 in last year’s survey and 2.1 the year before.
And when it comes to those funds that offer a choice of more than one option, the average number of choices soars to 5.0, compared to 3.8 in 2002.
Nonetheless, it should be noted that 115 — or 38 per cent — of the funds in our survey only offer members one option.
If these funds are excluded, public sector funds lead the way with an average of 6.3 choices, followed by industry funds with 5.1. These menus, however, still lag those of master trusts which can offer anywhere up to 100 investment options.
Topping the Top 300 list in terms of number of investment options offered, however, is a corporate fund, the Lend Lease Superannuation Fund, with 29 choices. Its members can choose between diversified options, such as low, medium or high risk, and sector specific options, including cash, fixed interest and international equity. Over the past 12 months, two options have been removed from the menu and two have been added and according to the fund’s chairman Eric Goodwin, these changes were based on investment performance.
Over the past two years, the Superannuation Trust of Australia (STA) has increased its investment offerings from four pre-mixed options to 12 options, to find itself in equal third place on the list of funds offering the most number of investment options.
“Members were starting to want more options, particularly the more sophisticated investors,” says Mark Delaney, STA’s acting CEO. “Also, we are seeing increasing competition in the marketplace of superannuation funds. In addition, the feedback we were getting from tender consultants suggested that more choice was a good thing for members.”
Based on a review recently carried out by STA, the board has decided to introduce a pre-mixed capital stable option in the near future. But, as other parts of the industry are observing, uptake of STA’s expanded investment options has been slow.
The experts say there has been increasing pressure from members to offer more choice. Some younger members, who have a greater investment timeline are wanting particular options, while those nearing retirement are also demanding options specific to their stage of life.
Another factor is that weaker markets tend to make people look at their statements more. As expected, as members’ balances grow, they take a greater interest in their accounts, says Fiona Trafford-Walker, managing director, Frontier Investment Consulting.
So how are funds deciding what the optimal level of investment choice for their members is? Generally, funds are offering more investment options because they can, says Alex Dunnin, director of research, Rainmaker Information Services.
From the consumers’ perspective, there is a certain attractiveness to a fund which offers many options, but distinguishing between the choices offered by funds and the quality of those choices is often a little more complex.
So what does the future hold for member investment choice?
Small to medium sized funds will generally maintain or expand the investment options they offer members in the future. But at the large fund end of the spectrum, we are unlikely to see much change.
“These larger funds are in a better position to let the options they already offer just sit, and allow members get some live experience with them,” says Trafford-Walker.
Over the next few years, we may see the introduction of some newer options, such as hedge funds, although experts agree that a lot of education will need to be provided to members ahead of this step.
We can also expect that funds will differentiate themselves more. This is in recognition of the fact that different people have different needs. Industry funds, in particular, are targeting their specific markets more, says Dunnin.
