Debate over Australia's superannuation fees should be focused on overall performance rather than cost, the Australian Private Equity and Venture Capital Association Limited (AVCAL) believes.
In its second round submission to the Financial System Inquiry (FSI), AVCAL chief executive, Yasser El-Ansary, said that Australia was "trapped" in a policy and regulatory debate over fees and costs, while other developed economies were focused on net returns.
"The interim report form the inquiry directed much of its attention to fee competition within the superannuation industry, but what was missing was a comprehensive analysis of how the policy and regulatory system could change to shift more of the focus towards enhanced competition on net returns," he said.
"In the end, superannuation has to be about ensuring that the retirement outcomes of Australians are optimised, which is necessary in order to reduce the dependency of retirees on the age pension.
"And while keeping superannuation fees down is important, research has consistently shown that an optimal shown that an optimal diversified portfolio is framed around striking the right balance between a variety of asset classes — some of which might be low-fee, and others that offer high above-normal returns, such as private equity and venture capital."
AVCAL's submission also called for the introduction of a national innovation system focused on removing barriers to growth in the venture capital industry.
El-Ansary said Australian super funds were missing out on the long-term opportunities offered by the domestic private equity market, as they have just one per cent of the $1.8 trillion in fund under management invested in the venture capital industry, despite private equity outperforming the S&P/ASX300 Index by 185 basis points a year over the last 15 years on a net-of-fee basis.
