Major funds considering merger show little difference in returns

Following two major industry super funds, First State Super and VicSuper, announcing earlier this month that they had entered early merger talks, Super Review took a dive into the performance data of each fund to look at whether either half of the union currently offered much more than the other by way of returns.

First State Super’s MySuper offering was outperformed by that of VicSuper across the five, three and one-year periods to last quarter’s end, according to data from FE Analytics. VicSuper’s FutureSaver growth option and First State’s balanced option, both being each funds’ default, delivered returns of eight and 6.93 per cent respectively over the last five years, 9.45 and 8.12 per cent over the last three, and 7.11 and 6.59 per cent over the last one.

As the names suggest however, VicSuper’s default sits within the growth sector, rather than the naturally more cautious offerings available to balanced funds. When comparing apples with apples, or balanced options with balanced options, a far more equal picture between the two funds’ investment performances is painted.

The performance of both funds’ balanced options for the last year to March’s end was within 0.3 percentage points of each other, with VicSuper’s FutureSaver Balanced option returning 6.56 per cent for the period and First State Super’s Balanced option 6.59 per cent. The options were similarly close over three and five years too, with differences of 0.34 and 0.46 percentage points respectively. Both options had also received the top rating of five FE Super Crowns.

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These yearly returns far outstripped the ASP Mixed Asset Balanced sector average of 5.51 per cent for the period, with both funds’ options also outperforming the sector over longer time-frames. Indeed, they both also outperformed the ASP Mixed Asset Aggressive average returns over one, three and five years, as the chart below shows, in quite remarkable performances considering this sector typically contains funds’ highest growth strategies.

Source: FE Analytics

The differences in performance lay more in choice options, although here it was again negligible. The best performing option across to the two funds over the three years to March’s end was First State’s international equities offering, returning 12.71 per cent, while over the last year First State’s property option led the pack with a huge 15.31 per cent. VicSuper’s ethical offering outperformed First State’s, with its FutureSaver socially conscious option returning 10.21 and 6.58 per cent over the last three and one-year respectively.

At the other end of the scale, both funds shared in lower performance options too. Both unsurprisingly delivered returned under two per cent for their cash options for the three years to last quarter’s end, and the cautious options offered by both came in within half a percentage point of each other over the last year.

Should the merger go ahead, a recommendation about which each funds’ boards expected around the middle of this year, the funds combined would become one of the country’s largest, managing more than $110 billion for over 1.1 million members.