Industry funds spreading the love

A large proportion of industry super funds have high numbers of relatively small investment mandates, ultimately driving up the cost of investment management for members, according to analysis by Citigroup.

Citigroup analysed Plan for Life data to reveal the nature of the relationships between industry funds and investment managers.

The group found that a quarter of the industry funds in the Plan for Life dataset employed between 21 and 30 fund managers. One third of the funds employ between 11 and 20 fund managers.

“This suggests that despite their size, industry funds do not offer particularly large mandates to reduce the cost of funds management, something which [Cooper Review chairman Jeremy Cooper] encourages proposed MySuper funds to do in order to keep investment management costs down.

“Indeed, 34 industry funds have average mandate sizes less than $100 million, and all but five funds have average mandate sizes below $500 million,” the Citigroup analysis said.

Citigroup said larger funds tend to use more managers, but also have larger mandates per manager.

Australia’s biggest super fund, AustralianSuper, uses the second highest number of fund managers — 53 in total. AustralianSuper’s mandate size is also the second largest of the industry super funds, Citigroup said.

The largest average mandates, of $812 million, were issued by TWUSUPER.