Fund strategy ignorance costing investors

property/disclosure/superannuation-funds/

2 August 2005
| By Zoe Fielding |

Investors have been warned to look more closely at underlying asset allocations as well as performance rankings when comparing superannuation funds.

Commenting on Mercer Human Resource Consulting research released today, the company’s head of industry funds business Russell Mason called for clarity and a deeper understanding by members of a fund’s underlying asset strategy.

He said the research had shown a fund’s exposure to growth assets, as opposed to manager selection, was more predictive of long term investment performance.

The firm prepared an analysis of returns of three hypothetical ‘like with like’ funds with 85 per cent, 75 per cent and 65 per cent exposure to growth assets - typically shares and property - on a year-on-year basis, and annualised over seven years using the actual indexed returns achieved in those years for each asset class.

“Over the past seven years those funds with a higher exposure to growth assets, especially Australian shares, generated the average highest return but under-performed in three of those seven years,” he said.

According to Mason, investors generally paid too much attention to which super funds were delivering the “best” performance under generic titles of balanced investment options.

He said under current disclosure rules, while a fund name could not be misleading, there were no clear definitions as to what the name should represent.

“Just because an investment option is called “balanced” or “diversified” doesn’t mean you can fairly compare it with other options of the same name. Fund members need to dig deeper into the reasons why one fund performed better than another - and also compare over a reasonable timeframe - before using performance as the primary determinant for changing funds,” he said.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

2 months ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

2 months ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

4 months 1 week ago

A Sydney financial adviser has been permanently banned from providing any financial services, with the regulator deriding his “lack of integrity, trustworthiness and prof...

3 weeks 1 day ago

Minister for Financial Services, Stephen Jones, has provided further information about the second tranche of the Delivering Better Financial Outcomes (DBFO) reforms....

2 weeks ago

One licensee has lost 27 advisers in the past week, now sitting at zero, according to the latest Wealth Data figures....

3 weeks 1 day ago

TOP PERFORMING FUNDS