29 August 2021
Cliona O’Dowd – Journalist
A new performance test for the nation’s super funds has been hailed as a win for workers, but on the eve of the first set of results one fund on the wrong side of the pass/fail line is calling for urgent change.
The prudential regulator will this week release to the public the findings from the first annual test of MySuper fund performance as part of the government’s Your Future, Your Super reforms.
Funds that fail the test will be named and shamed and within 28 days must write to members detailing their failure and suggesting they move their money to alternative products.
The assessment will cover an eight-year time period that allows funds to target long-term returns and not blame “one bad year” for underperformance.
But its outcomes show insufficient regard for recent innovations and improvement, according to the main super fund for the maritime industry, Maritime Super. The fund is one of a handful widely expected to be on the “dud” list.
Maritime chief executive Peter Robertson said the test did not take into account the steps the fund had taken to improve member outcomes and has called for further reforms of the assessment before the fund gets another fail mark next year.
“We didn’t wait for performance tests, we knew we had headwinds with scale and liquidity and cash flow,” Mr Robertson said of the fund’s move to shift its assets under management to Hostplus.
“We’ve been trying to come up with solutions for that (through mergers that haven’t come off). The Hostplus pooled superannuation trust is a great solution for that.”
Maritime has for years languished at the bottom of the performance rankings but in February announced it had entered into a strategic partnership with Hostplus in a move that would see the funds combine investment assets.
The partnership, in effect from April 30, saw Maritime pool its $6bn in assets under management with Hostplus’s $60bn-plus assets. It also gave Maritime access to investment opportunities typically not available to smaller funds, including infrastructure, property, private equity and venture capital.
But the move copped hefty criticism due to Maritime retaining its executive team and board members, which will see it pay out millions of dollars in salaries and fees each year despite no longer investing funds on behalf of its members.
Teaming up with Hostplus, which was last year the best performing fund in the country, has seen Maritime’s return in its MySuper product lift 6.6 per cent between May 1 and August 25.
“It’s probably not the last chapter in our book: there is more likely than not, at some stage in the future, a merger. But we’ve got to simplify the fund first,” Mr Robertson said.
Maritime and other named-and-shamed funds will in the coming weeks send letters to members stating: “Your superannuation product has performed poorly under an annual performance test that was introduced by the Australian government … we are required to write to you and suggest you consider moving your money into a different superannuation product.”
This is potentially giving members bad advice and could lead to people being financially worse off in retirement, Mr Robertson said.
“We didn’t wait for the results of the performance test to investigate better options for our members. They’re already in a new product. Legally it’s the same product but fundamentally it’s the Hostplus pooled superannuation trust.
“Our fund has been assessed on investment strategies and risk overlays that are no longer in place, which have no relevance to future returns for members.”
Maritime is not the only fund caught out by the New Test.
Ethical fund Christian Super is also set to make the list, despite delivering an average annual return of 8.34 per cent over the past 10 years. (The best performing funds have delivered returns between 9 and 10 per cent over the same period.)
While Christian Super is one of the fastest growing funds, and one of only four funds that is 100 per cent ethically screened, it has just $2bn in funds under management, well below the $30bn APRA has flagged is needed to remain competitive in the sector.
The fund is in effect “paying the price for virtue” and will be penalised for its ethical and impact investments when the results come out on Tuesday, one industry insider said.
APRA should be recognising funds that are innovating and improving outcomes for members in their performance test methodology, Mr Robertson said.