Industry funds still dominate, but retail closes the gap

While industry funds maintain their lead in Australia’s superannuation market, retail funds have been showing signs of recovery.

Industry super funds now command 35.1 per cent of the local superannuation market, up from 35 per cent last quarter, wealth data has said.

Looking into the latest super fund data for the June quarter released by APRA, Wealth Data founder Colin Williams said that as recently as 2018, fund types had nearly equal sway in the market, holding around a quarter of total assets each.

Now, industry funds manage an impressive $1.2 trillion in assets, with retail funds trailing at $690 billion, public sector funds at $513.2 billion, and corporate funds at $57.1 billion.

According to Williams, this shift comes as industry funds have experienced impressive flows in recent times.

“The June quarter is usually strong, with industry funds totalling a net inflow of $21.06 billion,” he said.

At the same time, transfers to self-managed super funds are rising after a slowdown during COVID-19, with industry funds seeing a significant increase in transfers to SMSFs, currently at the highest rolling 12-month rate of -$3.36 billion.

Retail funds, meanwhile, experienced their highest quarterly net inflow in over 17 years, at $9.16 billion.

This marks a significant divergence from a trend that has emerged since 2017, where retail funds generally experienced more outflows than inflows.

This segment of the industry is also showing improved returns, Williams said, noting “retail funds trailed industry funds this quarter, but over five years, they’re now less than 1 per cent behind, down from a 2 per cent gap in the past”.

In terms of asset allocation as of March, APRA’s latest findings also revealed that industry funds increased their direct investment to 70.78 per cent up from 64.32 per cent in December 2023, while retail funds are significantly less engaged in direct investing at 11.8 per cent.

Specifically, Williams said that industry funds have captured 11.04 per cent of infrastructure assets, compared to just 3.84 per cent for retail funds, with most industry holdings being unlisted.

Based on recent APRA data, infrastructure ranks as the third most favoured asset class in industry fund portfolios, trailing behind equities (55.4 per cent) and fixed income (19.8 per cent).

“Property holdings are similar, with industry funds at 7.36 per cent and retail funds at 6.17 per cent, but industry funds prefer unlisted property holdings,” he said.