POWERED BY MOMENTUM MEDIA
Default funds are a key driver of super
While self-directed superannuation fund investors had marginally better returns than default members at the top percentile, a lot of them did significantly worse, giving default options a strong endorsement, according to a report.
The joint inaugural ‘How Australia Saves 2017’ report by Vanguard and Sunsuper found at the top percentile of a five year estimated total returns to 30 June 2016, self-directed investors returned 8.4 per cent, compared to lifecycle members and diversified balance members both at 8.3 per cent.
However, nearly all the dispersion of outcomes for members outside the default were on the downside.
Vanguard’s senior manager for superannuation policy, and co-author of the report, Paul Murphy said: “That was a little bit surprising because we thought there would be more people with better self-selected outcomes than that but they didn’t”.
“So basically this is saying that there is a strong endorsement for default funds strategy and choice architecture, that’s a key message from this.”
The report noted that lifecycle and single diversified balance option members were generally benefitting from the structure of their option relating to their asset allocation and portfolio rebalancing needs.
“The research shows that default settings and member inertia rather than being something to apologise for are key settings and key drivers of positive retirement outcomes if you’ve got a sensibly structured environment,” Murphy said.
“At the end of the day if you’re in a well-diversified, professionally managed portfolio with rebalancing built into it and maybe a glide path built into a more conservative investment when you get older, then it looks as though that gives you the strongest chance of success in the long run.”
When asked about the proposed alternative default regime, Murphy said that the positive default result that came from the report gave evidence to support the existing default regime.
Recommended for you
A major super fund has defended its use of private markets in a submission to ASIC, asserting that appropriate governance and information-sharing practices are present in both public and private markets.
A member body representing some prominent wealth managers is concerned super funds’ dominance is sidelining small companies in capital markets.
Earlier this month, several Australian superannuation funds fell victim to credential stuffing attacks, which saw a small number of members lose more than $500,000.
Small- to medium-sized funds have become collateral damage in an "imperfect" model for super industry levies, a financial institution has said.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom DFS Mortgage
93.34 3 y p.a(%)
2
Global X GlobalX FANG+ ETF
37.15 3 y p.a(%)
3
GAM LSA Private Shares AU I
33.96 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
29.68 3 y p.a(%)
5
Plato Global Alpha A
28.73 3 y p.a(%)
