Industry funds to step up but advice still important
Industry superannuation funds will become the 'big end of town’ because of their non-profit status and direct links to consumers, according to industry veteran Chris Cuffe.
Cuffe, who is on the board of industry fund Unisuper as well as financial advisory group Fitzpatricks Private Wealth, was speaking at a Morningstar Investment Conference yesterday and stated that his position with both groups gave him a bird’s eye view of the two sectors.
“In discussions with a colleague I told him that the big end of town will be industry funds because I feel they are more in touch with what consumers want and because they are also non-profit,” Cuffe said.
“However I also believe in the value of good financial planning advice which I am involved with via Fitzpatricks.”
While Cuffe did not elaborate further, he expressed scepticism about the ability of fund managers to perform under the scrutiny they have found themselves in recent years.
Cuffe said his involvement with fund of funds Third Link had demonstrated “that it is bloody hard to get alpha, and I wonder if managers can actually do it”.
“I think there is a small group of managers who can extract value but it has to be over the long term. To see good managers do good work takes at least three years,” Cuffe said.
“Yet even when they have had a bad time, is it really bad? There is a need to look at how well they perform when everything else blows up.”
Cuffe said this inability to extract alpha also extended to fund managers offering global equities, and they were unable to offer viable global equities solutions because they are too beholden to the benchmark.
“Most fund managers cannot stay away from the benchmark because they are concerned about career risk,” Cuffe said.
“Whenever I meet a global equities manager and they tell me about their performance, I ask what is their country allocations and what is their sector allocation relative to the index. In 90 per cent of cases they are very close to it.”
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