Investor PsychologySMSF Strategies
An overview of super performance
20 Dec 2021
5 month(s) ago
APRA has issued a heatmap on super performance in Australia.
APRA has issued an Insights Paper MySuper and Choice Heatmaps, which provides some unsurprising observations about super returns and fee structures.
First, it says that investment returns are the primary driver of underperformance, listing 20 super funds that underperform or go close to underperforming:
The report says that fees and costs for MySuper products are declining, but there remains considerable scope for further reductions:
“Intense supervisory engagement with the trustees of the most expensive products has resulted in fees trending down, converging to the median. In December 2019, one quarter of MySuper products charged total fees and costs of more than $646 per annum for a member with a $50,000 balance. Total fees and costs consist of administration fees and investment fees and indirect costs.The equivalent
figure in December 2021, was $582, a reduction of $65 or more than 10 per cent.
“However, the fees of the most expensive products can reduce further. The majority of products identified as charging high administration fees in the 2020 MySuper
Heatmap continue to charge fees that are significantly higher than other MySuper
The report says that more than 60 per cent of investment options in the Choice Heatmap had returns less than APRA’s heatmap benchmarks, with 25 per cent of
options delivering significantly poor returns.
“Poor performing choice products are concentrated in the hands of a few trustees. In addition to considering the investment returns of individual choice investment options, it is useful to look at the investment returns across options offered by the trustees. Multiple poor performing investment options indicates broader issues with the trustees’ approach to investments and their product offerings.
“The Choice Heatmap identifies that there are 31 trustees with at least one significant poor performing investment option (for a total of 101 investment options). Of these 31 trustees, eight trustees with eight products have a majority of options with significant poor investment returns in the Heatmap (for a total of 43 investment options).”
The report said that the performance of choice products varies considerably more than MySuper products. With the poorest performing options there is a very long tail of poor performing options in all growth asset categories.
Reader note: This is general reporting only and should not be considered in any way to be investment or tax advice. It does not take into consideration the investment objectives, financial situation or particular needs of any particular investor. For more information please read our disclosure statement.