Warren Chant
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Industry superannuation funds have outperformed their retail master trust competitors for nine of the past 10 years, but their outperformance has been attributable to their investment strategies and asset allocations rather than lower fee structures, according to research house Chant West.
Chant West principal Warren Chant this week confirmed the bad news that Australian superannuation fund members had experienced their worst ever year for investment returns since the introduction of compulsory superannuation in 1992, but argued that superannuation remained a solid investment.
However, looking at the outperformance of the industry funds, he said it was not due to fees because, if anything, industry funds’ investment fees were higher than those of mater trusts.
“Rather, the difference in performance is due mainly to the different investment mix (asset allocation) adopted by the two groups,” he said.
“Industry funds have had higher allocations to unlisted assets including property, infrastructure and private equity.
“With less money exposed to listed markets and more assets that are only revalued infrequently and in arrears, they have been less affected by the market reaction to the global financial crisis,” Chant said.
He said another important difference between the two camps had been the preparedness of industry funds to make medium-term tilts to their portfolios when they had felt that markets had moved too far from fair value.
“Most master trusts, in comparison, tend to set their long-term allocations and stick to them through disciplined rebalancing,” Chant said.
The research house has offered a silver lining after super fund returns saw the end of a five-month streak last month.
A survey of almost 6,000 fund members has identified weakening retirement confidence, particularly among those under 55 years of age, signalling an opportunity for super funds to better engage with members on their retirement journey.
The funds have confirmed the signing of a successor fund transfer deed, moving closer to creating a new $29 billion entity.
A number of measures, including super on Paid Parental Leave, funding to recover unpaid super, and frameworks to encourage investment in the energy transition, have been welcomed by the superannuation industry.
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