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.
AUTHOR
Oksana Patron
Recommended for you
Six months after scrapping its planned deal with KKR, Perpetual is yet to make significant headway on the sale of its wealth management division but is focusing on alternatives for product development.
Platinum Asset Management’s NPAT has fallen by 89 per cent in FY25, with the firm confirming that it will be renamed as L1 Group following the expected completion of its merger with L1 Capital.
Statutory NPAT at Pacific Current has almost halved in FY25 to $58.2 million as the result of an investment restructure.
Being able to provide certainty about redemptions is worth fund managers pursuing when targeting the retail market even if it means sacrificing returns, according to Federation Asset Management.
