Treasury points to 21 MySuper under-performers.

Its official. 21 out of 77 MySuper products are regarded as underperforming, according to the Federal Treasury.

What is more, Treasury has told a Parliamentary Committee that those 21 funds held over $100 billion in assets across three million accounts and charged $1.2 billion fees.

Treasury’s harsh assessment has been revealed in an answer to a question on notice to the Senate Economics Legislation Committee review of the Government’s Your Future, Super legislation with the department’s answer implying that many fund members were being kept in the dark about the relative under-performance of their funds.

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"Under the current system, the members holding those accounts receive no notification that they are in an underperforming fund, and there is no trusted source of information for them to make their own informed judgements,” the Treasury answer said.

“There is also no prohibition today on a persistently underperforming fund receiving contributions from new members. Under the Your Future, Your Super reforms a fund that fails an objective performance based test in any one year will need to inform their members of that underperformance and be listed as underperforming on the YourSuper comparison tool until their performance improves,” the Treasury answer said.

“Funds that continue to underperform and fail two consecutive annual underperformance tests, will not be permitted to accept new members. These funds will not be able to re-open to new members until their performance improves. Every year that a fund underperforms they will need to continue notifying their members.”

The Treasury also gave a significant plug to other facets of the Government’s legislation arguing that “superannuation that follows you, by removing the problem of multiple unintended accounts, will lead to an aggregate increase of superannuation savings of $2.8 billion over 10 years”.

“More members making informed decisions about their superannuation and increased engagement via the YourSuper comparison tool will provide an additional benefit of $3.3 billion over 10 years. By improving underperformance, superannuation balances will be $10.7 billion better off over 10 years. Less waste of members’ money through greater transparency and accountability will boost members’ savings by around $1.1 billion over 10 years.”

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"......and there is no trusted source of information for them to make their own informed judgements,” Treasury
At least we know what Treasury thinks of Financial Planners.

A harsh criticism of Treasury for presenting the facts that people are disadvantaged by poor performing funds.

If by implication the financial planners are not advising their clients to leave poorly performing funds then financial planners should be harshly condemned.

The more likely scenario is that people who are in poorly performing funds are not using financial advisors and therefore shows the value of financial advisors. But where are the organisations representing financial advisors? A good marketing opportunity.

Guaranteed the underperformers are largely retail funds, supported by advisers... but we will see. Perhaps some corporate funds and small industry funds also.

Poor performance can be easily fixed - simply increase exposure to growth assets to full throttle, unlist these assets and value them yourself (with the help of some well paid experts who if they want more work will understand). Just tell the investors you are the best - many will believe you.
I would hope Financial Planners are not "supporting" these type of funds - but some funds employ their own "Advisers" now - so you could be right.
Thanks for the tip Truebee.

This is about MySuper funds, which are not known for investing in uplifted investments, private capital, derivatives, etc. It's a balancing act of short term and long term, and investing for the future and paying out for the present.

You dictating what can be invested in now?

Underperforming against what? An average or mean? There has to be underperformers in any statistical analysis otherwise the numbers don't work. What is the asset allocation of these underperforming funds? Do they have less growth assets than comparative funds? Have they underperformed during various market conditions?

Hedware (who I reckon is in Treasury) has all the answers I believe.
Hedware simply moves from the best performer two years ago to the last best performer - what could go wrong?

You are wrong on so many things.

I have been wrong before - have you?

The Your Super Your Future performance test uses the option's SAA (which they get from APRA) and compares it to a benchmark index. So they are essentially checking to see if the fund is outperforming the listed benchmarks and ignores the SAA decisions which are arguably more important. So a fund could outperform all the listed benchmarks and look good in this test but they could have a 99% allocation to growth assets in a downmarket and actually lose members more money than a fund that was more conservative.

"Relatively underperforming" does not mean performing poorly. How about some facts?

I always thought that past performance was no guarantee of future performance

Yes Joe, these words are similar to the disclaimers on all return forecasts...........

These words are a cop out and allow fund managers to get away with inconsistent returns. It is not good when a fund cannot out perform its related index. Sporting teams could not get away with this sort of cop out statement.

Hedware you like Treasury seem to have it all figured out - it is just us idiot conflicted and ethically challenged Financial Planners (and Fund Managers) who can't seem to pick the best performers year after year.
A question - what Fund and what Investment option for the best (ie above Benchmark and the highest return above benchmark) performance financial year 2021/2022? You can list them in order from 1st to 3rd best if you like.

I’d have to charge you for that information.

What? No "name and shame"?

If this had been about advisers, they would be listed...

These poor funds need to go to "Marketing Super funds 101". Do what a couple of well known industry super funds do....either remove returns altogether during poor times, or just manipulate the reporting period...Using April 2020 till April 2021 is a great period. That time frame could stay on there website for at least 4 years i reckon.

I'm a registered, licensed financial adviser who has passed the FASEA exam and who is obligated to act in my client's best interest by law.
Yet, under the current system, it is up to the super fund trustee to decide if their members can pay for my advice fee from super. ONLY ONE industry super fund allows for my advice fee to be deducted from super. If a super fund member in an industry fund approaches me for advice on their super and wishes to pay for their advice from super I am automatically put in a conflicted situation as an adviser: I would need to roll them into another fund in order to get paid. The simple solution is for the government to allow registered advisers who have superannuation advice accreditation to have their advice fee deducted from ANY super fund. This would remove all conflict and advisers can truly act in their clients best interest. Clients would be able to afford superannuation advice that is unbiased and money would flow to the better super funds over time as more and more members received advice from advisers that are not employed by super funds. Makes you wonder why this is not already happening?

Logic applied to wheat farms
Let's apply this logic to wheat farms.
The govt gives a diesel rebate to farmers.
This is gov't assistance - why should the gov't give assistance to underperforming wheat farms?
Put then on the watchlist. Take them off after 3 yrs underperformance.
Oops - an indequate model was used.
It did not rain as much on those farms.
Cyclical factors had not yet cut in.
In the same way, value stocks can have periods of underperformance.
And then it rains....

Hi Goblin,
I'm about to recommend an Industry Fund and the client will have to pay me from their own funds. That's nice and pure, but it's not the best way for this individual to pay for advice. For all the rubbish put forward in reports and commissions and research papers, we advisers are still not given the opportunity to assist average people with average questions in a cost-effective manner.
It's almost as if every regulator, commentator, government official and super fund representative is so well paid, so academically rigid in their outlook and so far removed from the average person that they have lost all ability to act on behalf of the average person.
As for super fund comparisons - they are a joke.
I admire the attempt to benchmark super funds - it's way overdue. I cheer on the idea that fund member performance should be shared with members. But I've yet to see anything that is straight-forward and user-friendly to the extent it is actually useful to the "average person".
Just look at the millions of dollars stolen from average people using the internet to compare investment returns.
Frankly, I'm a little tired of all the high-mindedness parading as "member's best interest". Most of it is superficial rubbish, dressed up as intelligent research.

The compulsory super started by Paul Keating had one fatal flaw it should never had let this money go out to the private sector.the gov,t should have its own super fund with a guaranteed return of say 5% the huge amount of money could then been used by the government,t to build roads etc

Totally agree Philip Smith. There is a clear conflict between the operation of the compulsory super scheme and Australia’s super and advice regulations.

Compulsory super is a deferral of salary income. As such, it belongs to the individual. Yet the provision of tax advantages has brought an underlying assumption of government control of this pool of individual funds. This plays out in many ways. Trustees are competing to retain fund size, scale and consumer favour. The only game in town that achieves this is performance, which means tilting assets in favour of volatile growth investments. This is fine in some ways but would never cut the custard in terms of individuals actually understanding the risks they are taking.
A far more appropriate system would be a government fund offering a variable guaranteed rate of return, a basic level of insurance cover and a deferred annuity option to deal with the average person’s longevity/capital difficulties for later life. All of this would be achieved at minimal cost, and global cover would allow options not available in the competitive retail space.
Any qualified adviser should be able to put forward a tailored plan, and move part or all of that government account.
Instead we have “Industry Funds” competing with “retail funds”, corporate and public funds. There is nothing available in the open market that allows an uninformed investor to compare funds, and even little to assist industry participants. It’s a joke of massive vested interests that rollerballs over anyone attempting to offer genuine advice separate from product.
Well-funded industry fund lobbyists have even managed to use member super fund fees to further their non-super financial ambitions. It’s such a joke that old folk like me find it hard to believe such foolishness can be supported by any sane individual.

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