APRA accused of inappropriate heatmap comparisons

The Australian Prudential Regulation Authority (APRA) has fallen into the trap of not comparing like for like when it produced its superannuation fund heatmaps.

What is more it had not looked at a core outcome – whether funds had achieved their investment return objective.

NSW-based energy industry superannuation fund, EISS Super chief executive, Alexander Hutchison said that while his fund welcomed APRA’s efforts to compare MySuper funds, it was clear that the methodology required further development before the heatmaps could be relied upon.

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“Chief among EISS’ concerns is that APRA’s use of data did not present an apples and apples comparison of its MySuper product,” he said.

“Our concerns with respect to the publication of the APRA heatmap, that it is essentially a league table, have been realised. We are being compared to other MySuper funds that have a significantly larger exposure to growth assets, so it is not an apples and apples comparison,” Hutchison said.

He said EISS was surprised that the heatmaps didn’t look at whether funds achieved their investment return objective, essentially their promise to members.

“We exceeded our investment target for our MySuper product over three, five, seven and 10 years but it seems APRA wasn’t concerned whether funds were true-to-label and resorted to comparing investment performance against a complex cluster of generic benchmarks,” Hutchison said.

“We believe a better measure of investment performance is to consider actual risk adjusted returns taking into consideration the volatility of the MySuper option. We’re a lower risk, lower cost fund and have been compared with funds that take greater risk and should therefore be expected to deliver higher returns,” he said.

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