Super funds understating costs
Warren Chant
Many super funds are failing to disclose their true investment costs to members, according to a fees study by researcher Chant WestFinancial Services.
The study estimated “conservatively” that the quoted fees of a typical balanced fund with growth assets of 61 per cent to 80 per cent were understated by as much as 30 to 60 basis points.
“This represents a material difference when you consider that the reported total management costs are commonly in the range of 60 to 80 basis points,” according to director Warren Chant.
The discrepancy is occurring because the “industry as a whole has been steadily increasing its allocation to alternative assets (mainly infrastructure, private equity and hedge funds) through fund-of-funds vehicles”, he said.
“While there is nothing inherently wrong with the fund-of-funds concept, and indeed the diversification it provides reduces manager risk, these funds do introduce a multi-level fee structure.
“Everyone takes their cut.”
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