Fund heads say MySuper implementation expensive, dysfunctional

A large portion of fund executives found the implementation of MySuper "costly, difficult and disruptive", according to a report by the Centre for International Finance and Regulation.

The report, titled ‘MySuper: A Stage in an Evolutionary Process', interviewed super fund executives and found they were vocal about their displeasure on the costs of MySuper, and labelled it dysfunctional.

They said the rules and requirements were ambiguous, changes and updates were frequent resulting in "wasted effort", the changes happened over too short a time period, and MySuper took attention away from managing members' funds.

Others were kinder, saying it is better to consult and modify the process rather than going ahead with it rigidly even if the rules are flawed.

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Some executives lamented the focus on reducing fees and costs, with lower fees perceived as leading to lower active management, alternative assets, services and innovation, which has negative outcomes for market efficiency.

"Some of these default members may end up being worse off through now being invested in funds that are largely passive in nature or funds that strip out some of the bells and whistles to save costs," one respondent said.

"If you go too far on fees, you've done yourself a disservice if it results in you getting rid of asset classes that you could have otherwise been in," another respondent said.

One respondent noted that MySuper did not make a huge difference because funds are essentially doing the same thing, but noted that it was "very disruptive and extremely expensive".

For those implementing lifecycle strategies, there seems to be a focus on tailoring products more to suit members. Five (50 per cent) of the lifecycle participants said they want to customise their products more by collecting more information other than age, such as member balances, market pricing and other factors to add more complexity to it.

One of the main findings of the study was that the industry seems to be focusing more on "perceived" member interests, with executives saying business factors such as performance and fees come second or act as shackles.

The researchers interviewed 28 fund executives from 20 super funds. The funds manage $450 billion of super assets in total and over $210 billion in default fund money as at June 2013.