Underperformance not adequately punished

The Australian superannuation fund market has not sufficiently punished underperforming funds, according to new research commissioned by the Australian Institute of Superannuation Trustees.

The research, undertaken by the Faculty of Economics and Research at the University of Sydney, has pointed to the outperformance of industry funds compared to their retail counterparts.

It said there had been an expectation by policymakers that at some point in time competition would lead to better performing funds being rewarded, but this was not necessarily occurring.

"It would also be heroic to think that such a competitive market is a realistic prospect in the foreseeable future," the research analysis said.

It said this was because the superannuation fund market did not work to equalise returns and this meant sustained differences in performance could continue.

The research suggested that conflicts of interest between fund members and fund managers were structured in different governance models.

However, the principal of research house Chant West, Warren Chant, said the difference in performance between funds was not just about governance but also asset allocation.

He said the exposure of retail funds to listed equities had been a key differentiator in returns.

Chant said the value of liquidity delivered by exposure to listed investments could also not be underestimated.