ISA questions banks’ governance lobbying

Outperformance of industry superannuation funds compared to retail and bank-owned super funds calls into question banks' lobbying efforts to pull apart the governance model of industry super funds, according to Industry Super Australia (ISA). 

ISA has used its analysis of data from the Australian Prudential Regulation Authority (APRA) to illustrate the outperformance of industry super funds compared to its retail counterparts, and argued members could be tens of thousands of dollars better off in retirement in industry super funds. 

ISA analysis of APRA data showed that over 10 years to 30 June 2016, industry super funds delivered a 5.4 per cent return to members compared to retail super fund returns of 3.6 per cent. 

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The analysis also indicated that for public offer funds with report 10-year returns, 13 of the top 15 were industry super funds, while 15 of the bottom 15 performing public offer funds were retail funds. 

ISA chief executive, David Whiteley said the figures illustrated it was absurd to change super laws to, what he claimed, suit the vertically integrated business model of the major four banks. 

"These performance figures are a timely reminder of the need to place public policy imperatives ahead of the commercial imperative of the banks," Whiteley said. 

"Handing the default super system to the banks could ultimately mean many Australians will be forced to work longer or retire with less."

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Industry super funds have proportionately larger investments in direct infrastructure and/or unlisted companies -- the "other" asset class. These "other" assets are not exposed to the blowtorch of market valuations. There is no mark-to-market valuation as there is no market. As we all know, one generally gets the valuation they pay for -- Independent Experts' reports are a classic example -- and this directly impacts reported performance. It is often unclear how these assets are being "valued" but the cohort of industry funds include this valuation in annual performance calculations.

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