WTW urges caution on APRA heatmaps

International consultancy Willis Towers Watson has encouraged superannuation funds to use the Australian Prudential Regulation Authority’s (APRA’s) heatmaps with caution because they could be misleading for some funds.

The company has published its first superannuation update for the year urging caution on the basis of the data and timeframes used by the regulator.

“We would encourage trustees to use the heatmap with caution, as there are areas where it could be misleading for some fund,” it said.

“APRA has only included three and five-year return comparisons even though many MySuper products were established by rebadging the previous default investment option and so would have a longer performance history.”

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“Funds with active management may have underperformed over this period but would be expected to have better performance over longer periods such as ten years,” it said.

“Further, APRA’s assumptions underlying its Simple Reference Portfolio and Benchmark Portfolio may not be appropriate for some funds, while the fee comparisons are not appropriate for members for whom employers meet administration costs.”