APRA to judge super funds on more than investment returns

Superannuation fund trustees have been placed on notice that almost all facets of their investment and service delivery will be taken into account to determining whether they are under-performing.

The Australian Prudential Regulation Authority (APRA) wrote to all superannuation funds detailing its approach and making clear that it will be looking well beyond investment performance and towards factors such as insurance and scale.

The letter, signed by APRA deputy chair, Helen Rowell said the regulator would be updating and expanding its analysis of underperforming funds based on metrics spanning four key areas: net investment performance; fees and costs; insurance; and scale and sustainability.

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“This analysis will include consideration of products beyond MySuper where reliable data is available,” she wrote. “This area is more complex, given the broader range of asset class exposures (and hence risk and return outcomes) from different investment options.”

“Clearly, obtaining more granular and meaningful data will be a component of this analysis,” Rowell’s letter said.

“APRA will use our own outcomes assessments as part of our review of those conducted by superannuation trustees under the new prudential requirements. We also intend to regularly publish our view of performance at a more granular level across the industry,” she said.

“In cases where, in APRA's view, trustees are persistently underperforming, supervisors will discuss with trustees how this may be promptly addressed and whether they may need to consider a restructure or exit from the industry.”

Rowell said APRA would use the potential stronger directions powers (currently pending in legislation before Parliament), where needed, to compel trustees to take appropriate action.

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