Persistent claims by industry superannuation funds of superior performance when compared to retail superannuation funds are not necessarily valid in terms of final member objectives and outcomes, according to the Australian Prudential Regulation Authority (APRA).
APRA member, Helen Rowell, has told a Sydney forum that for a range of reasons such comparison may not be valid.
She said that while she regularly saw commentary about investment performance by industry segment, particularly focusing on comparisons between industry and retail funds based on average fund-level performance over various time periods, these were unlikely to be meaningful.
“For a number of reasons, such comparisons are not meaningful in assessing whether investment objectives, and hence outcomes for members, are being achieved over the long term,” Rowell said. “Firstly, members’ benefits are determined by the performance of the particular options in which they are invested, and this can vary significantly from overall performance at fund level. This is particularly the case for retail funds, where a much smaller proportion of fund assets are held in the default investment option,” she said.
Rowell said that, at fund level, particularly for the retail segment, overall investment outcomes would be very heavily dependent on the particular options which members choose, and the asset allocation of those options which were often more heavily weighted towards more defensive cash and fixed interest asset classes rather than growth asset classes such as property and infrastructure than was the case for industry funds.
“This difference in asset allocation, and hence the investment performance, for retail funds will be largely driven by the investment choices of individual fund members, given the relatively low proportion of assets in the default options for these funds,” she said.
