20 July 2018
Superannuation funds run by the Big Four banks and other major financial institutions were among the worst performers of the nation’s biggest funds last financial year, while so-called industry funds took out every place in the top 10 returns table.
The latest data from SuperRatings, widely considered to be one of the nation’s best super ratings data sets, shows super funds run by CBA, ANZ, NAB, Westpac, AMP and IOOF were consistently among the worst performers over the past 15 years, the longest time frame for which the most complete data is available.
The SuperRatings data shows the major industry funds, those funds run by employer and union groups, were overwhelmingly the best performers, not just last year but over three, five, 10 and 15 years.
The data looks at the “balanced” options of the nation’s 50 biggest super funds by number of members.
SuperRatings releases only the top 20 performers on the list, saying it is its “long standing policy” to do so, however The Australian has obtained the full list of 50 from a separate source, revealing the underperformance of the “retail”, or for-profit, funds.
Like SuperRatings’ general announcement yesterday, the Productivity Commission’s recent 563-page report into superannuation also did not disclose the names of the worst performers in the super sector in its rankings.
The banks and financial institutions aggressively fight against the ranking of their funds by the best analyst groups because their funds, with more than five million member accounts, consistently underperform, largely due to bigger fees and charges they levy on super account balances.
The top three performers in 2017-18 were the balanced options of industry funds HOSTPLUS, AustSafe Super and AustralianSuper. Those three funds also ranked in the top four performers over five, seven and 15 year timeframes.
The eight worst performing investment options on the list of 50 obtained byThe Australian were the balanced options of funds managed by ANZ, CBA, Westpac and AMP.
The overall performance of funds run by the major banks and financial institutions was likely even worse than reported, however, because those funds report only less than half of their products to SuperRatings, with those unreported products far more likely to be their worst performers.
According to the Productivity Commission report, in 2015, 100 per cent of industry fund super assets could be accounted for by data provided to SuperRatings.
But only 44 per cent of the super assets of retail funds could be accounted for by data those funds had provided to the agency.
The Productivity Commission report found that the further back in time, the less likely retail super funds were to report their performance to ratings agencies.
Data provided to SuperRatings by the banks and financial institutions accounted for 47 per cent of all super assets they managed in 2015, but that figure fell to 33 per cent when looking at 2010 and 27 per cent for assets managed in 2005.
There is more than $150 billion held in so called “legacy” funds, which are funds managed by banks and financial institutions that people joined before 2013, before new laws were introduced.
The funds are “closed” to new investors but continue to fully operate, generally charging far higher fees than funds are able to charge in today’s market, because scrutiny has increased.
As revealed by The Australian this week, Australian Prudential Regulation Authority data — which captures all super investments because funds are required, by law, to provide it with audited data regarding the performance of all their underlying “investment options” — further shows the systemic underperformance of retail super funds.
The APRA data shows the biggest funds operated by each of the Big Four banks, IOOF and AMP delivered returns lower than even the risk-free “cash” rate over the past decade.
Those six funds delivered total average annual returns to members of 2.1 per cent to 3.1 per cent a year in the 10 years to June 30, 2017, roughly half the market rates for similar mixed investments.