APRA publishes MySuper heatmap

10 December 2019

The Australian Prudential and Regulation Authority (APRA) has released its MySuper heatmap and have contacted trustees of the worst performing products to provide plans on how they will address identified weaknesses.

In an announcement, APRA said that if underperforming funds could not make sustantial improvements within a certain timeframe it would consider pressuring them to consider a merger or exit the industry.

APRA said the ‘MySuper Product Heatmap’ provided additional transparency on the outcomes being delivered by all trustees providing MySuper products.

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APRA deputy chair, Helen Rowell, said: “Australia’s superannuation system delivers sound outcomes for most members, but APRA is determined to weed out the industry’s underperforming tail.

“Since releasing an information paper and sample heatmap last month, APRA has engaged with industry to ensure trustees understand the heatmap, and how they should use it to improve member outcomes.

“In particular, we directly contacted the trustees of the worst performing products and asked them to provide or update action plans outlining how they will address identified weaknesses. If they are unable to make substantial improvements in good time, we will consider other options, including pressuring them to consider a merger or exit the industry.

“However, no-one should be complacent. We expect all trustees to use the heatmap to reflect on the drivers of their current performance, and identify where they can do better.”

APRA also published an information paper that outlined some of the key insights from the data including:

  • Member outcomes vary widely across the industry, and underperformance is evident across all industry sectors and investment risk profiles;
  • Higher fees are generally correlated with lower net returns, although there are exceptions;
  • More single strategy products outperform the investment benchmarks than lifecycle product stages; and
  • Low balance accounts are most impacted by administration fees, while high balance accounts are most impacted by percentage-based fees.

“Creating a single document that robustly assesses the outcomes provided by products with widely different risk profiles and asset allocations has been challenging,” Rowell said.

“We have needed to make certain assumptions with the data in some areas. But we are confident in our methodology and the overall conclusions that can be drawn from the heatmap on areas of relative underperformance of MySuper products.

“We will continue to refine our models and methodology in response to industry feedback. However we stand behind the heatmap as an important piece of work, and a key plank supporting APRA’s key strategic goal of lifting outcomes for superannuation members.”




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Good to see APRA is spending the Tax Payers learning the basics of investments - all very primary school stuff. Amazing, investment returns differ. WOW.

Fees differ; trustees differ; senior executives differ; honesty differs; trust differs; competency differs; self interest differs...
Yes returns differ sometimes because of all of the above.
Simplistic criticisms rarely differ.

"Heat maps" are all well & good, but the returns over the past 1 to 3 years have been just as interesting, but not reported by the regulator. In reality, a past return from 5 years ago is totally meaningless to a new member who only joined a year ago.

So where Westpac has hired a new senior fund manager who used to work at SunCorp (which had some good returns a few years ago), it should come as no surprise that for the past 1 to 3 years, the Westpac fund returns have either matched or beaten AustralianSuper (none of which is revealed in this "heat map").

Watching who is actually managing the fund going forward is far more important than historical returns (under previous ex-management). This is why you need access to advice to discover these facts when making investment decisions.

Also, when reviewing the "heat map", fund members invested in the higher return fund (net of higher fees), than in the lower return fund (net of the lowest fees), would still be miles ahead in the first fund with higher fees. It's basic maths. Give me high fees with far higher net returns any day.

Finally, if you are a growth investor, you could have easily beaten all of these default funds over the past 5 years, via a SMSF or a full menu platform, even after higher fees. Reviewing fees costs on a $10,000 fund is a total joke - soon the ATO will be confiscating $10,000 funds, up from $6,000. $50,000 should be the bare minimum starting point, if not higher.

You missed the point - the heat maps are about MySuper products.

Read this - must be fake news.
Of the MySuper products that flash dark red on the regulator’s gradient colour scheme, Maritime Super, which oversees $6 billion, had a net investment return relative to APRA’s simple reference portfolio of minus 1.1 per cent on a five-year basis. EISS, which also manages $6 billion, came in at minus 0.83 per cent and Christian Super, which looks after $1.6 billion, was minus 0.84 per cent.
Other MySuper funds that came up dark red include LUCRF.

Great to see a number of retail funds' lifecycle options are delivering great outcomes - to industry fund marketing teams!

Great to see retail funds 'revolutionary' lifecycle options delivering great outcomes - to the PR teams at industry funds!

The answer to APRA's heat map for a Fund Manager is simple. Simply focus on return over the period in which APRA will be judging, and remember, winners take all and there is no second place - as being in the lower performing 1/2 will mean you are merging and out of a job.
This means, it is no longer important or relevant to protect the clients capital - returns and being in the top of your peers is all that matter. It is a win or go home scenario. May as well participate in all asset bubbles (can't afford not too) and go after returns.
It is more important to get the best return - not protect capital. Guess what will happen?

Your point about protecting a client's capital is a good one. Protecting a client's capital as well as getting the client a good return is an even better result.

It's all about returns now - nothing else matters.

@headware
Your point on good returns is valid. Hopefully these funds listen to you.
Of the MySuper products that flash dark red on the regulator’s gradient colour scheme, Maritime Super, which oversees $6 billion, had a net investment return relative to APRA’s simple reference portfolio of minus 1.1 per cent on a five-year basis. EISS, which also manages $6 billion, came in at minus 0.83 per cent and Christian Super, which looks after $1.6 billion, was minus 0.84 per cent.
Other MySuper funds that came up dark red include LUCRF

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