13 super funds head for the exit

22 February 2019

Thirteen superannuation funds have accepted they can’t cut the mustard under the Australian Prudential Regulation Authority’s (APRA’s) member outcomes arrangements and are exiting the industry.

APRA chairman, Wayne Byres has told the Senate Economics Committee that the regulator had identified an initial group of 28 funds which it believed where delivering poor outcomes for members “across a range of dimensions”.

He said the trustees of those funds were challenged by APRA to justify how they were delivering value for members.

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“Of these, 13 have looked at the evidence and have exited or are exiting the industry, and another seven have changed product pricing or fees in some way to make their offerings more competitive,” Byres said.

He said that, of the remainder, five were deemed on further exploration to have better performance than first appeared, and actions in relation to the other three were expected to be agreed shortly.

The APRA chairman told the committee that further consolidation in the industry was likely as a result of the regulator’s action.

“It is difficult to argue that Australia needs as many as 200 superannuation funds or 40,000 plus investment options. But that well-worn adage remains true: past performance is not necessarily a good guide to future performance,” Byres said. “We also need to ensure that new competitors to the marketplace, who will inevitably start without a track record and potentially high costs until they can generate scale, are not prohibited from entering the system.”

He said that, for these reasons, APRA continued to advocate an approach that looked at performance of trustees across a number of dimensions, and did not rely solely on measures of historical returns over a particular time horizon as the only determinant of success or otherwise.

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I'd like to know more about this bit "five were deemed on further exploration to have better performance than first appeared".
Surely APRA would have a consistent way to measure every fund on the same metrics?
What new information did they find that changed their mind?

Might also depend on the information provided by funds. The ratings firms themselves have difficulties in providing consistent and comparable data across firms and funds (and some useful data for comparative analysis is not collected by ratings firms). Without the ratings firms, then it would be impossible to compare (and trust) data provided by individual fund managers. Good performance needs to be acknowledged and rewarded by inflows from superannuants,
Despite the considerable amount of information released by fund managers and by ratings firms, the financial literacy of Australians is disappointingly low.

Agree financial literacy levels can disappoint. But even if Fund A clearly outperformed Funds B and C in each of the last three years, will it so outperform in the next three? Without being able to explain outperformance in words, the figures may as well have come from Lotto balls.

Spread of risk across asset classes does reduce the impact of volatility of individual assets in any one year.

200 superannuation funds or 40,000 plus investment options generates a lot of fees.

Dare I say it; might all come back to having the Future Fund as a National default ???

Which funds were these ??

Which super funds are closing and what happens to members money?

Agree with question of which super funds are exiting..... Where does that leave the people who have invested in them?

Can a super fund just 'close up shop'?

It shouldn't be about which Fund performs the best or which Fund at any given point in time performs the worst.
It should about Fund Manager investment philosophy and what they do to protect investors funds, particularly managing the downside risk.
No one bats a 1000 and always gets things right, 100.0% of the time.
Advisers don't and neither do Fund Managers.
You need to know what Fund Managers got wrong, what did they learn from it and would they do it again ?
The questions are really simple and if you ask them, I've never found a Fund Manager who wouldn't provide the answers.
It's the adviser that's in the client's gun sights when things go wrong and they lose money, not the Fund Manager.
Not all managers stick to their mandates and unless you find that out, you're all leaving yourselves open to criticism and angst from clients.

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