Report exposes ‘Fat Cat Funds’

ANZ (OnePath) has been named Australia's leading ‘Fat Cat Fund' provider, with a combined total of 277 managed investment and superannuation funds being named as some of the country's poorest performing funds, when compared between fees charged and long-term fund performance.

Coming in second was the Commonwealth Bank (Colonial First State) with 67 funds, followed by AMP/AXA with 64, Westpac (BT) with 60, and NAB (MLC) with 39 funds.

These were some of the key findings coming from the ‘2015 Stockspot Fat Cat Funds' report, which is an analysis of 3,390 funds, representing one-quarter of the Australian superannuation and investment system.

According to Stockspot chief executive, Chris Brycki, this year's results revealed 701 ‘Fat Cat Funds', which equates to just over 20 per cent of the report's total sample size.

"The biggest take away from these results is consumers are being kept in the dark by their banks and advisers about the devastating impact that high fees are having on their long-term savings," Brycki said. "Seventy-two per cent of ‘Fat Cat Funds' come from the big four banks or AMP, and the total fees paid by consumers to these funds is $790 million per year."

However, the report also lists the funds that are performing well and delivering consistently better performance than their peers. The report lists 560 such funds, with Investors Mutual, Lazard Asset Management, Retail Employees Super Trust (REST), Legg Mason Global Asset Management, SG Hiscock and Vanguard Investments all leading the way as providers of better performing funds.

In relation to industry superannuation funds versus retail superannuation funds, Brycki said the results show that industry funds come out on top. However, while retail superannuation funds performed better pre-fees, after fees, they delivered a significantly poorer result.

According to Brycki, the report's findings clearly show how the average Australian's retirement fund can be significantly diminished if caught in a ‘Fat Cat Fund'.

"For instance, a 30-year-old male in a ‘Fat Cat Fund' could pay close to $250,000 in fees by the time he gets to the retirement age of 67. A woman, of the same age and in the same fund, is likely to incur just over $200,000 in fees by the time she reaches age 67," Brycki said.

"All things equal, if they switched their superannuation from a fund charging 2 per cent per annum to 0.5 per cent, they could increase the superannuation they'll have at retirement by 41 per cent."

He added that if an investor is in a fund that charges above 1.5 per cent per annum in fees, there's a much greater chance it's going to be a ‘Fat Cat Fund'.

The results of the 2015 Stockspot Fat Cat Funds report is based on an analysis of 3,390 funds with at least five years of performance.