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MTAA Super to reveal secrets of balancing act
Liam Egan
MTAA Super is set to release an “investment reference handbook” in an attempt to explain the its award-winning balanced option, which has earned the criticism of some financial planners.
The fund hopes that the widespread availability of the handbook will help end some of the criticism it has been experiencing.
Retail financial planners in particular have been critical of MTAA’s embrace of a strategy it names as a ‘target return portfolio’, which allows for investments in alternative asset classes in its balanced option.
The planners have been particularly critical of MTAA’s use of the portfolio in its balanced option, which, as a consequence, has a current weighting of about 48 per cent to alternatives, including infrastructure, private equity and direct property.
MTAA acting deputy executive director John Jones told Money Management
last week that the “comprehensive” handbook would be released within weeks to intermediaries, research organisations and industry commentators.
“It covers all of our investment options, but obviously the balanced, conservative and growth options, which are the pre-mixed options that have access to the target return portfolio, are explained in more detail.
“The nature of the assets in the portfolio is also explained in detail and, in turn, this detail explains that whole risk versus return issue (underlying the portfolio’s investment process).
“Essentially, what we are doing on behalf of our members is accessing alternative assets, meaning infrastructure, direct property and direct equity type assets, to try and access that known cash flow (of these assets),” he said.
Jones was approached for comment after an Adelaide planner contacted Money Management last week criticising the MTAA Balanced option as “falsely labelled” and the target return portfolio as “non-transparent”.
Andrew Gaston, director of JGL Financial Solutions, said during the course of an appraisal of the MTAA Balanced option on behalf of a new client he was “astounded to find that the option is 97 per cent invested in growth assets”.
“This places the fund in the category of an aggressive fund, even higher than an assertive fund, let alone a balanced fund, which is traditionally based on a 60-40 or 70-30 investment ratio of growth and defensive assets.”
Gaston said MTAA was giving a “false impression” to clients (including his own) of what is invested in its balanced option and, as such, is unfair to the 96 per cent of MTAA’s 267,000 members that it claims use the balanced option (default fund).
“It is also unfair that the fund doesn’t have a balanced allocation similar to other balanced funds but is rated as a balanced fund by some rating agencies, appearing regularly at the top of their annual performance tables.”
Jason Clarke, chief operating officer of SuperRatings, one of the agencies to whom Gaston referred, responded that MTAA “insists its balanced option fits into the balanced fund category by definition, as does their investment consultant Access Economics”.
“It’s been an argument for a while, and MTAA, in particular, has been getting hammered from some quarters over its definition of a balanced option – but we can only report on what we are told by the fund managers,” he said.
26 September 2007
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