Super members disengaged with allocations

There is an aversion by Australian investors to engage with their superannuation fund allocations, according to a global Morningstar study.

The study, which surveyed 14 countries, found Australian investors were reluctant to get involved in the asset allocations in their super.

Asset allocation engagement and decision-making was low with default options dominating super, mostly to a growth portfolio. Those who opted for a conservative fund were usually those who had sought advice on their risk tolerance.

“Most default funds generally have an exposure to growth assets of around 60% to 80% of the total portfolio. Hence, growth assets, primarily equities, dominate superannuation assets. The mix of equities will quite often favour domestic equities, but a more balanced approach between domestic and global equities is becoming more popular.

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“More balanced or conservative asset allocation is normally found by investors seeking financial advice from a licensed adviser who undertakes a risk-tolerance assessment.”

However, it did say Australian investors were more likely to have a higher risk tolerance because of the defined contribution system compared to those in countries like Japan which had a defined benefit scheme.

“The increasing domination of defined-contribution retirement schemes in several markets, which commence upon entry to the workforce, means that investors are familiar with equity market volatility and tend to build or be defaulted into more-aggressive portfolios with higher equity weightings and lesser bond and cash exposure.

“In contrast, markets with defined-benefit schemes and, in some cases, supported by universal healthcare and a comprehensive social security net, show a reduced need for self-reliance and feature investors who are typically more conservative and take lesser equity market risk in portfolios.”