Retail super’s poor comparison

Ramani Venkatramani

In a finding that is likely to stir further debate in the financial services industry, a senior officer within the Australian Prudential Regulation Authority has told a recent conference that retail superannuation master trusts have underperformed public sector and industry over the past 10 years.

The senior officer, Ramani Venkatramani, told a banking and finance conference that the 10-year data showed the value of investing $1,000 in the different types of funds over a decade, with retail funds returning just 5.3 per cent while corporate funds returned 7.8 per cent and industry funds 6.7 per cent.

He said the data showed the importance of ensuring that trustees were operating in the best interests of members by optimising their financial position and risk profile.

Venkatramani said this raised the question of how superannuation fund trustees could optimise their position in an environment of investment choice.

“APRA has taken the view that even with investment choice, prudence requires trustees to design investment strategies and menu options that facilitate selections that balance risk and return,” he said. “From a prudential perspective, if there is consistent long-term and material underperformance, it is an issue of interest especially given the predominance of the accumulation category in Australia.”

Venkatramani said that 10 years of data provided some insight into issues such as whether differing performances could be related to volatility or size.

He said it was not for APRA to promote one type of fund over another, but that in relation to the collection of statistical data, simply make sure that the relevant information was made available so that the market, including academic researchers, media and others can form their own judgements.