Large Australian Prudential Regulation Authority (APRA) regulated superannuation funds should be considering the use of exchange traded funds (ETFs), according to actuarial research house, Rice Warner.
In an analysis published this week, Rice Warner suggested large APRA regulated superannuation funds had a particularly strong motivation for including ETFs in their member direct investment options.
It said member direct options were largely intended to stem the flow of members with big balances to self-managed superannuation funds (SMSFs), the earliest and strongest supporters of Australian listed ETFs.
“In short, no investment option designed as an alternative to self-managed superannuation would seem complete without ETFs,” the Rice Warner analysis said.
It said that despite the growth in their popularity, the total capitalisation of Australian listed ETFs represented only a minute proportion of Australia’s superannuation and non-superannuation market.
“The influence of ETFs is, however, much wider than sheer dollars suggest,” Rice Warner said. “ETFs and traditional index funds are making investors more aware of the impact of high investment management costs on their real returns and have contributed to the reduction of investment management fees over recent years.”
It said more individual investors and their advisers, including robo advisers, were likely to use ETFs and traditional index funds to provide a diversified, low-cost base to portfolios.
“This should provide more time to focus on individual investment selection, on appropriate asset allocations and on efficient wealth management,” the Rice Warner analysis said.
