Consistent mid-size super funds come out on top

Consistency has seen mid-sized funds come out on top in the first round of the newly launched Superannuation Fund Crown Ratings, a quantitative rating system launched by data company, FE, and Money Management’s sister publication, Super Review.

The list of funds to proportionately have the most top-rated options, shown in the table below, is dominated with mid-size funds. With the exceptions of AustralianSuper and REST Super at the larger end and BUSSQ Building Super and AustSafe Super at the smaller, it’s largely the superannuation providers whose number of offerings and funds under management (FUM) hover in the middle of the road that have done well.

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Top 15 superannuation funds for highest % of options to receive 5 Crowns

Considering the emphasis of the Australian Prudential Regulation Authority (APRA) and of some larger providers on scale, this is worth noting.

While some of the larger providers had high numbers of four and five Crown options, this was offset by equal amounts of one and two Crown ones. This doesn’t really show strength then, as they struggled as much as they succeeded. Another interesting perspective on scale, then.

There was also little to separate many of the options offered by these top 15 funds.

The chart below, for example, shows the returns of the top ten of these funds’ MySuper options over the last three years (as that’s the performance period upon which the Crowns were determined). The difference in returns between the best-performing, AustralianSuper’s Balanced Option, and the lowest, BUSSQ Building Super’s Balanced Growth Option, was less than five percentage points.

Considering that most of these products have longer investment horizons, this is a negligible difference. Again, consistency is a recurring theme.

Beyond the Crowns themselves, FE has also created peer group missed asset indices. Reflecting that the superannuation industry isn’t managed the same way as traditional investment funds are, the indices seek to provide a benchmark for superannuation fund performance.

Speaking on the benefit of the indices in light of the Crowns’ overarching goal of better informing the public and industry on superannuation fund performance, FE’s head of data for Australia, Stuart Alsop, said: “Being able to asses a fund/product option based on a benchmark of their peers aids with comparability and assists the member in making a more informed decision.”

All of the MySuper options looked at in chart above, for example, also fit into one of these indices. This means that for members going into a fund’s default option, they can better assess the performance of that option against its peers.

The ratings are based on alpha, volatility, and consistency and strength of performance, measured across the three years prior to each rebalancing, which will occur biannually.