Australian cash invested in underperforming funds
Digital wealth provider, InvestSMART has found that $414 billion of Australia’s cash is invested in underperforming funds, while many of the country’s biggest fund managers are charging fees for no, or underwhelming, performance.
The firm’s calculations, which were based on analysis of 9,300 managed funds in Australia, revealed that out of the 5,297 funds with a 10-year track record, 78 per cent underperformed their benchmarks by an average of 1.88 per cent, with average fees at 1.74 per cent.
“It is pretty well known in the industry that over the longer term, most fund managers will underperform their benchmark by the cost of their fees,” InvestSMART’s chief executive, Ron Hodge said.
According to Hodge, this was largely due to the fact that benchmarks did not have any transaction costs and were a hypothetical calculation.
Hodge also noted that technology could be a key solution to that if it offered investors help in lowering the total costs of investing and helped them get a better transparency around fees.
“Fund managers fees have fallen globally over the past decade and we believe advances in technology, along with regulatory change, will continue to put pressure on traditional fee models,” he said.
The company said it believed that even though investors could not control the performance of funds, they could have a better control over the fees they are paying.
Recommended for you
As ASIC chair Joe Longo pushes firms to prepare for the upcoming mandatory climate disclosure regime, what skills are necessary if firms are looking to expand their ESG teams?
First Sentier Investors has announced it will close four of its Australian investment teams amid a simplification of the business, with $14 billion expected to be returned to investors.
Over 90 finalists have been chosen to compete at the 36th annual Fund Manager of the Year Awards, to be held in Sydney on 13 June.
Clients may be asking their adviser whether there is still value in the US technology names after their rally, but Fidelity International’s Lukasz de Pourbaix believes they can still offer upside.
