ISN says funds' track records should be considered
The Industry Super Network (ISN) has urged the Productivity Commission review into default funds under modern awards to consider research it has commissioned finding past superannuation performance is a strong indicator of future performance.
The research was undertaken by Deloitte Access Economics (DAE), which analysed official Australian Prudential Regulation Authority data across two four-year periods (2004-2007 and 2008-2011) and ranked 172 multi-asset class funds into the highest, middle and lowest thirds, based on their average net returns in each of the four-year periods.
DAE found there was persistence in performance across the two four-year periods that was "statistically significant" and that was very unlikely to be the result of chance.
ISN chief policy adviser Matthew Linden said the research found that "a good performing fund in one period is likely to be a good performing fund in a subsequent period, and a poorly performing fund in one period is likely to be a poorly performing fund in a subsequent period".
Funds in the top third in the first four-year period were almost twice as likely to be in the top third in the second four-year period, rather than falling to the bottom third, he added.
The relationship was even stronger for the 91 largest funds with over $1 billion in assets, where there was only a 1 in 2000 probability that the outcome was a result of chance, according to the ISN.
"While there can never be guarantees that a particular return in one year can be delivered the next, this new analysis does find that a super fund's relative performance (compared to other funds) is reasonably predictable over time," Linden said.
"Super funds which consistently deliver strong net returns do not do so by chance. ISN urges the Productivity Commission in its inquiry to recognise that a super fund's performance track record is absolutely central to a merit-based selection process."
The Productivity Commission draft report, released last week, recommended a process for the selection and ongoing assessment of default funds as being based on the best interests of members, contestability, transparency, procedural fairness, minimum regulatory burden and the avoidance of instability to the broader superannuation system.
This would mean that all MySuper products would be capable of selection as default funds, including retail offerings such as those from AMP and BT.
Recommended for you
AMP is to launch a digital advice service to provide retirement advice to members of its AMP Super Fund, in partnership with Bravura Solutions.
Unveiling its performance for the calendar year 2024, AMP has noted a “careful” investment in bitcoin futures proved beneficial for its superannuation members.
SuperRatings has shared the median estimated return for balanced superannuation funds for the calendar year 2024, finding the year achieved “strong and consistent positive” returns.
The second tranche of DBFO reforms has received strong support from superannuation funds and insurers, with a new class of advisers aimed to support Australians with their retirement planning.
