Members switching to direct to client funds

The fastest growing funds are the new generation direct to client (D2C) funds, according to an Investment Trends report.

According to the "Investment Trends 2015 Member Sentiment and Communications Report", one in ten super fund members switched funds, the highest rate since 2010.

The report said the clear beneficiaries of the switching activity are the new generation of retail funds that are marketed directly to banking clients.  

"Punching above their weight by attracting 12 per cent of switches D2C funds appeal to a significantly younger demographic, with half of those who actively chose one of these funds aged under 30," the report said.

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Investment Trend's analyst, Irene Guiamatsia, said existing banking relationships are the strongest driver of the D2C growth.

"Some banks have been very successful at using their retail banking channel to grow a base of young members," she said.

"If they become 'customers for life', like transactional banking customers have been, then these funds could transform the Australian superannuation space quite radically in the next few decades."

The report also found that MySuper funds are set to outperform self-managed super funds (SMSFs) on the back of good overseas investment returns.

Australian shares have provided good returns this year when dividends are taken into account but not as well as overseas markets, the report said.

"Super funds with a significant allocation to unhedged overseas assets have a very strong story due to the strong growth in overseas share markets and the decline in the Australian dollar," the report said.

According to the report, SMSFs had an average exposure to overseas listed equities of seven per cent of assets, far less than MySuper funds which have 31 per cent on average. SMSF cash holdings were much higher at 21 per cent, compared with four per cent.