If the Federal Government decided to adopt the Productivity Commission’ s recommendation of a “best in show” approach to the selection of default funds, then only around four major funds could be regularly expected to appear on the list of Top 10 funds.
That is the bottom line of analysis which Super Review took into August’s Future of Superannuation Event in Melbourne utilising FE/Fundinfo’s data analytics capabilities.
The analysis covered which funds would have made it onto a “best in show” superannuation top 10 across three six month periods – December 2017, June 2018 and December 2018.
It found that only two of the major funds made it onto the Top 10 list for all three periods – Statewide Super and SunSuper, while the largest industry superannuation fund AustralianSuper only made it into the list for two of the three periods examined.
The data presented to the Future of Superannuation Conference followed on from Super Review in March publishing the Top 15 superannuation funds utilising the FE/Fundinfo’s quantitative Crown Ratings analysis to determine which had plotted the steadiest investment return path in terms of their listed investments.
The best performing funds under the Crown Ratings system are those that prioritise consistency.
The ratings are based on alpha, volatility, and consistency and strength of performance measured across the three years prior to each six-monthly rebalancing.
Specifically, the ratings identify funds that have displayed superior performance in terms of stock-picking, consistency of outperformance against a credible benchmark, and achievement of results at relatively low risk.
The top 10 per cent are rewarded with five Crowns, the next 15 per cent four Crowns.
Thus, those superannuation funds who made it onto the Top 10 lists which were revealed at the Future of Super event were those which had the most consistently performing listed allocations.
A panel discussion accompanying the data at the conference agreed that it exemplified the challenges which would accompany any attempt to develop a workable Top 10 default list.
The panel also agreed that such an approach risked inflicting considerable damage on those funds which failed to make such a shortlist.
The Productivity Commission report proposed the development of a short list of funds most likely to provide good member outcomes and which support safe and simple employee choice.
According to the PC, rivalry to be on that best in show list would create an ongoing dynamic of competition.