Retail and industry performance gap widens

The widening performance gap between industry and retail superannuation funds is “alarming”, according to Industry Super Australia (ISA).

Pointing to the latest figures by the Australian Prudential Regulation Authority (APRA), ISA said not-for-profit industry funds outperformed bank-owned retail funds by a widening margin of 2.89 per cent over one year, 2.44 per cent over three years, and 2.13 per cent over five years.

ISA chief executive, David Whiteley said while it was well known that industry funds dominated the performance tables, it was less known that the performance gap between industry and retail funds was widening.

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“For those Australians who entrust their savings to a bank-owned super fund, the trend is alarming,” he said.

“For the average income earner a two per cent performance gap may be a difference of around $200,000 at retirement. The new figures show the performance gap edging dangerously close to three per cent.”

He noted that retail super fund underperformance was the elephant in the room in public policy debates.

“Policy-makers serious about strengthening the retirement income system, must look at cross-selling, profit flows and performance within vertically-integrated financial institutions,” Whiteley said.

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Interesting how David Whitley is able to manipulate the media. On face value, it could be the case where one fund may out perform the other. If we could take AustralianSuper's Balanced Fund as an example; It has a 12% exposure to cash and fixed interest which are the defensive investments, 6% credit investments and the balance of funds ,82% are invested in growth assets of with 7% exposure to direct property, 13% infrastructure and 3% private equity. A retail balanced fund is usually 70% growth and 30% defensive. He is not comparing apples with apples and his arguments are starting to unravel. What can I say?

Beg to differ but it is apples with apples as far as the investment option is concerned. Its not a comparison between asset classes but between investment options. The strategic asset allocation of an investment option is controlled entirely by the fund. In this example, the retail fund chose not to dial up on growth assets in their Balanced option. A decision made by the retail fund that eventuated in its members getting a lower rate of return.

Is there a point for Super Review, money management et al to have an author if it’s just a cut and paste from ISA media release? Any side can just release whatever fake news they like. For example, the story is based on APRAs June Quarterly Superannuation Performance June. A quick look at the source and it looks as though its not to compare performance, rather report on the balance sheets of each part of the sector. It reports on total SUPER ASSETS by sector e.g industry, gov, retail etc. A balanced review of the data may reveal a different story? For one, ISA has a dozen super funds compared to probably 100s retail funds & options. Remove some outliers from retail sector and you may have diff story? Black & while on APRA’s report 5yr ROR has ISA 2.10% better. Not consistent with what is report here. Retail has way more in cash & FI. They may have investors who select this (rather than default) what not note that caveat. Most Industry use Bal default.

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