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Truth in labelling needed
Amid continuing debate about comparative performance and fees, Mercer Human Resources Consulting principal has called for more clarity in describing superannuation fund investment options such as “balanced” or “diversified”.
Mason, writing in this edition of Super Review (p24), says research carried out by Mercer shows that there is a huge range of underlying asset allocations applied to investment options described as “balanced” or “diversified”, which in turn will result in a wide spread of investment returns.
“At the same time, the return obviously does not necessarily mean that one option has performed better than another relative to what could be expected,” he said.
Mason said that reviewing a range of public offer master trust and industry funds had shown that the “balanced option” could range from a benchmark low of 50 per cent in growth assets (shares and property) up to 85 per cent.
“Each of these options has called itself ‘balanced’, and in turn these balanced options have been included in surveys made available to the broader community, supposedly on the basis of giving members the ability of comparing one fund’s balanced option performance against another,” he said.
Mason said for the sake of clarity, members needed to have available to them options that were true to label.
“It is fine from a marketing perspective to label an option as ‘balanced’, ‘growth’, ‘diversified’ or ‘active’, as long as there is a clear underlying sub-title which states within fairly tight bands what the option really has in terms of exposure to growth and defensive assets, so that members can better select the option that fits their risk profile,” he said.
AUTHOR
Mike Taylor
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