Analysis points to leakage of funds
The advent of choice of superannuation fund and the continued growth in do-it-yourself (DIY) superannuation is likely to see a leakage of funds out of the retail managed funds industry, according to an analysis compiled by Citigroup Smith Barney.
The analysis, Trends in Wealth Management, a copy of which has been obtained by Super Review, states that the growth in DIY superannuation looks set to continue despite a tougher regulatory environment and heavier scrutiny on the part of the Australian Taxation Office.
The analysis also points to a leakage of funds driven by the possible growth in industry superannuation funds, adding weight to recent claims that industry funds boast substantially lower fees.
“One of the problems for the retail managed funds industry is that currently not much of DIY superannuation gets directed towards managed funds,” the analysis said. “The possible growth of industry funds under super choice is also an obvious threat to retail funds as industry funds typically offer much lower fees.”
However, the authors of the analysis said they remained confident that “net retail flows would continue to increase at a steady rate and more than offset any leakage to DIY funds”.
“Our confidence emanates from the confluence of a number of factors that include our expectation of continued wages growth, the abolition of the superannuation surcharge with effect from July 1, and the lagged effect that the recent bull run in equities is expected to have on prospective retail inflows,” the analysis said.
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