Last year may well be remembered as the year in which the retail master trusts outperformed the industry super funds but, taken over the long haul, the data still favour the not-for-profit superannuation funds
If the collapse in equity markets in 2008-09 served to reveal the degree to which most retail master trusts are unduly exposed to listed investments, 2009-10 has revealed the degree to which some industry funds have suffered due to their overexposure to unlisted investments.
The result? Retail master trusts broadly outperformed industry funds in the second half of calendar 2009.
However, the degree to which the performance of the master trusts is only as good as the performance of equities markets was reflected by their less than stellar performance in the opening months of 2010 — a period during which industry funds reasserted themselves.
Superannuation is, of course, meant to be a long-term investment, and most experienced commentators argue that looking at superannuation fund returns over anything less than 12 months is irrelevant and that you can really only gain a sensible appreciation of relative performance by looking over three, five and even 10 years.
And it is this fact that has coloured the approach of research house Chant West in generating its 2010 fund ratings — an analysis that acknowledges the relative outperformance of the retail master trusts through 2009, but then points to industry funds being the better bet over the longer haul.
"We don’t rate funds higher or lower just on the basis of one year’s performance. Otherwise we’d have downgraded a lot of master trusts when they performed relatively poorly in 2008 and then upgraded them based on last year’s performance," explains Chant West principal Warren Chant.
"It doesn’t work like that," he says. "What we look for is the quality of their investment philosophy, process and people, including their in-house resources and external asset consultants. That doesn’t move just because markets move against you in the short-term."
Chant says the reason not-for-profit funds achieved higher ratings in the analysis is to be found in their overall value proposition.
"The better industry funds have relatively low administration fees, excellent investment processes, low cost insurance and an increasing range of member services, including some excellent member education," he says.
Chant says it was the total package offered by industry funds that resulted in them scoring highly.
While the Chant West 2010 fund ratings deal with a compilation of factors, including fees, investment processes and service offerings, the tables published in this edition (pages 14 to 17) are based on investment returns to the end of December.
As such, the performance tables dealing with growth place Colonial First State First Choice Moderate in the lead position over one year with a return of 24.2 per cent, followed by BUSS(Q) with a return of 21.7 per cent and then Russell Balanced with 21.7 per cent.
However, when the data is looked at over a five-year period, CBA OSA Mix 70 emerges in top spot with a return of 6.8 per cent, followed by Catholic Super Mod Aggressive with a return 6.5 per cent and Catholic Super Balanced with 6.4 per cent.
Taken over three and five-year returns, the data indicates that more not-for-profit funds appear in the top-10 data on returns than retail master trusts. However, the returns generated by those retail master trusts that consistently rank in the top 10 exhibit less volatility than the not-for-profit funds.
