ASIC chooses industry fund default

The Australian Securities and Investments Commission (ASIC) has chosen Australia’s largest industry superannuation fund, AustralianSuper as its default fund for ASIC employees.

The regulator, which has been criticised by some elements of the financial services for the perception that it has favoured industry funds, selected AustralianSuper as a default on the basis of its change of status as a Government entity.

Those employed by ASIC are now employed under the ASIC Act instead of the Public Service Act.

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The regulator said that as part of the transition process it had selected AustralianSuper as the new default superannuation fund for employees who joined from 1 July this year and who did not nominate a fund.

It said there was no change to arrangements for existing employees, including those who are members of the Commonwealth Superannuation Scheme, the Public Sector Superannuation Scheme and the Public Sector Superannuation accumulation plan.

ASIC said it would be reviewing its default fund arrangements ever four years.




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Proves our theory that all along this mob have affiliations and far more bias towards ISA funds. Please dear God let Morrison have the intestinal fortitude to wipe out ASICs left leaning top tier and utterly change the culture back to a commercially unbiased and realistic approach.

No conflict of Interest here!!
ASIC is once again getting into bed with an Industry Super Fund which it is supposed to be regulating.
How can they review this fund for inappropriate behaviour when it is effectively recommending it to its employees.

Australian Super - the longest and most successful Ponzi scheme in the history of humankind.

Well said. Would love to see who ASIC blames when it eventually does fail.

What's the basis for calling it a Ponzi scheme? bit extreme?

Have a look at the assets.

yeah I have, what's that got to do with a ponzi scheme?

No, no have an intelligent analytical look into the assets, valuations, structuring, cost bases, allocations etc you know like a proper planner/investment analyst should...

yeah mate, and you still haven't answered what's that got to do with a ponzi scheme? Otherwise any overvalued or over allocated sector is a ponzi scheme to you, which of course is rubbish.

Bozo, at least you have the smarts to be able to look at the assets - I suspect Hedware would struggle. With any good ponzi scheme, they are typically great fun on the way up as you can essentially produce whatever return you want (usually just more than your competition will be fine) so long as you have more money flowing IN the door than OUT. There is no problem until then end.

So, overvalued or over allocated sector is no problem? You say rubbish.

1) How much overvaluation is OK
and
2) How long will overvaluation be OK? - it will meet market value at some stage and who do you suggest take the fall in value?

Ok, well at least you talking about valuation. But to put valuation alongside a ponzi scheme means the above people think all asset classes that have had good returns are a ponzi scheme, like australian property for example. But they are not a ponzi scheme, they are just an asset class subject to market cycles. How much overvaluation is ok? Depends on the individuals goal and time horizon. A market might be 20% overvalued but I'm not personally a seller because I like the asset and want to hold it for 50 years. Maybe this is what people are missing when they discuss infrastructure or property. Why do the Stocklands of the world often ''shock'' people by paying seemingly high prices for land? Because they land bank and have a 15 year plan, not a 3-5. As to 2) I have no idea and I when an overvalued may fall as the catalysts are generally unforeseen. I do know it can cost you a lot of money second guessing and waiting for markets to fall. So again, structure portfolios to withstand what an individual can cope with, including a potential fall in risk asset valuations. A ponzi scheme involves fraud, you are drawing a very long bow to equate accounting valuations on super assets in the same category but you are likely costing your clients returns by viewing it that way. Perhaps that's why there is the kicking and screaming about it - people are effectively short the sector and its against them.

Well stated. Absolute nonsense to suggest a
similarity to a ponzu scheme.

Wow, Bozo & Hedware, assuming you have clients and not ISA employees as your diatribe suggests, I would hate to be one of those poor sods! So according to you, the fraudulent 'returns & valuations' are okay, as long as you're not the last one out of the pool? Seems to suggest in your mind that it will last forever, so then it's ok to make up balances for members... Sheesh, I'm thinking the ethics part of the upcoming FASEA exam may be an issue for you with that mentality.

Quick Google search gives that all important definition you're so keen for: "A Ponzi scheme is a fraudulent investing scam promising high rates of return with little risk to investors, that pays existing investors with funds collected from new investors". So answer my questions; how or where are exiting members of funds with over-valued assets paid from? Pretty sure (I mean you may have to check this one, it is pretty tricky!) that the fund doesn't sell off one hallway or office room at a time to come up with these payments. Where logically would you think their greatest cashflow comes from?
a) The amazing investment returns of course
b) It's complicated I'll have to get back to you on that
c) The rivers of gold flowing in from contributions from other/new members.
Hmmmm, sounding a little like that definition I put up there for your edification, isn't it? (Rhetorical that last one, you don't have to answer it).

Last real question for you however; demographically in Australia, what extremely large proportion of population is imminently looking to retire with the potential subsequent reduction not only in workforce but also employer/personal contributions flowing into super?

Seriously, you do not have to be an Einstein to work out why Labor/Unions/ISA are so vehemently attacking both the retail and SMSF sector and willing to take this almighty gamble with members' funds, in order to win not only the feeble minded who subscribe to their BS (hint there boys) but also aiming to win surety of future cash supply so their blatant Ponzi scheme survives a bit longer.

Mind you, I know Comrade HEdware will aim to prevaricate and mindlessly defend ISA/Aussuper to the bloody end, which I find hilarious, but interested Bozo what angle you will come in from.

You're claiming its fraudulent without evidence, other than your own opinion. You'll have to show me the legal argument or actual evidence of the fraudulent accounting, i.e. not in keeping with accounting standards. And if your arguing it is a ponzi because of demographic change, wow, then there's going to be a lot more funds in trouble before this one, including the smaller retail funds where the funds are literally running out the door daily. No problem with which option people want to invest their super into after education on facts, but I won't be using scare tactics to convince them - that should be ok to pass the ethics test, hope you do too.

Bozo, good discussion. I believe the point you might be missing and the issue many Advisers like myself have with Industry Funds is their "classification" of assets (and no I do not believe it is not fraudulent as I am lead to believe there is no legislation on this area) such as Property as a "defensive" asset and the large holding of "unlisted" assets which are then "valued" internally.
Host Plus was if you believe the reports last years "best" performing fund. When you look closely at the asset allocation (have a look at what they call DEFENSIVE and you will see the problem. They also have about $900 Million of venture capital (and who knows how that is valued - but yes valued internally) plus Fixed Interest which is much higher risk that plain vanilla Bonds - very risky stuff.
The PCC report was very simplistic in my view as they simply had a range of asset allocation for a "Balanced" fund with the upper level being 80% growth exposure. Host Plus with their Balanced option feel into this range as they simply classify growth as defensive - and no one at the PCC seems to have noticed. The Host Plus Balanced option is if you look closely closer to 98% growth.
Yes, the return was 12% plus but benchmark for that asset allocation is that - and most well constructed portfolios did better. If you look at the performance of the Industry Funds on asset classes in the PCC report, I believe you will find that the Industry Funds did poorly re performance in all asset classes except Property - which in Industry Funds in mostly unlisted and this is where the ponzy scheme comments stem from.

In short, Industry Fund report a Balanced option with 12% plus growth and the uninformed regulators believe it - but the truth is the return comes from asset allocation of 90% plus to growth (98% in Host Plus) and a large "unlisted" asset class - which never seems to go down.

You can hold an asset, lets call it a "shopping center" and as it is not listed, you value it (not daily on the market). There is a massive temptation and pressure to keep the valuations high and ever increasing - and while the cash flow in the fund is positive (as it is with Industry Funds) you can keep the value of the shopping center well above what the general market will pay - as all withdrawals from the fund can be met from inflows and no need to sell the shopping center at market. You would have seen this in your own life with people holding assets that are not worth what they think.

Regulators seem to miss the issue of investment risk and I understand why. Most are trained as Lawyers and as such, it is difficult to expect them to understand investments in any great detail other than the reported return. One could produce a 20% pa return - just don't look at the assets. While I have more inflows than outflows, all will be fine.

And a question for Hedware - would you really place a retail client into 98% growth assets and how many clients have you complete a risk profile indicating a tolerance for this growth exposure? The reason I ask is you seem to be saying in so many of your comments that most retail clients so be invested this way.

I could go on re Industry Funds re Fees, Insurance, Insurance profit share/commissions, and the best one, if you get advice from an Industry Fund, have a guess what their employed workforce recommends. And don't gt me started on Intra Fund advice. Has ASIC ever investigated an Industry Fund? Up until the recent $12K fine for stating a Fund stating they provide Independent advice (and this was a tip-off) I do not believe so.

Yes, I'm not arguing with any of that. I'm simply saying it's not a fraudulent ponzi scheme. And also, the Funds themselves are not valuing the properties - they are required to have external valuers do this to the periods determined by APRA. Now to the degree that those external valuers are influenced by the amount of work they get from the super funds, I can't say, and the conflict must exist, comes back to the professional trust and them following the accounting standards for valuation. So if people have a beef with that, than argue that. It's not a hard argument to make- you only have to remind clients what the ratings agencies did with sub prime mortgages before the GFC. If you have a beef with Asset class definition, as I do, then argue that. But this emotive their ripping every one off scream, just underscores the lack of professionalism in the debate, and I know you are not suggesting these things, no problem. Have a good day.

what's even more interesting about the PCC report (Dec 18) Page 9 is that the Retail Funds Unlisted Property performance was actually better than the Not for Profit Funds. So if someone is arguing against the valuations process, it is likely the guiltiest party is the retail funds. I accept the weightings are less. But a retail fund can have a lower weighting if it is using even shonkier valuations to outperform by 2% per annum the same asset class the not for profits have. Also, by and large all the managers beat the benchmarks at the asset class level ( survivorship bias) but this means most super members get an ok outcome. The difference? Fees. And as the retail funds become more and more in line with not for profit funds, this is issue goes away.

Bozo, if you have a copy of today's Financial Review - have a look at the article about Blue Sky on page 11. I know it is not the only issue here but the valuation of property can have many devastating effects. I suspect the Industry Funds can still get away with not correctly valuing their unlisted assets for some time yet as their inflows are so large but at some stage, the problem will be a problem.

No disagreement - but the inflows have nothing to do with the valuation of the assets. They are valued according to accounting standards. The inflows mean they can meet their liquidity needs, but not related to increasing valuations. And yes Blue Sky, combination of illiquidity/gearing/valuation issues, agree. But not quite the same probs and certainly no ponzi scheme, just investors who didn't do enough due diligence perhaps.

There's some posters here who do not understand valuations, and how they are determined and how they are accounted.

Please explain it then Hedware.

Another Rivers of Gold fantasy story. You should stop reading this stuff. Next you will be saying the Future Fund is just a ponzi scheme because it invests in unlisted assets and that its chairman has turned criminal/communist/socialist/unionist - take your pick.
Hope this amuses.

Oh it does, it does. You never fail to deliver the sh*ts and giggles in these forums, especially on a Friday, my friend :)

And to add to the hilarity, now you're trying to throw the Rivers of Gold into dispute? Amazing, didn't think even you were that blinded or delusional. How about this as a little exercise; do like a forensic financial investigator and work backwards following the money trail, but I will make simplistic so even you can follow: Millions in donations to the Labor political party from Unions: millions in 'consulting fees' or representative agreements or commissions to unions from ISA (helps that Chloe Shorten is the dubious head of that cronyistic organisation - but that's all kosher, right comrade?); even more millions spent by ISA in political advertising for Labor; union membership numbers significantly reducing year on year but their income increasing by millions each year. Hmm, one of these doesn't really add up does it? But no, "Rivers of Gold' is only an urban legend and increasing union revenue is simply like 'manna from the heavens' that magically appears in their accounts each night, bit like the inflated returns in ISA funds...

Didn't realise you were such a romanticist that believed in wonderful fairy tales, would have thought that was against the socialist code?

So I gather in your version of reality, control of more and more superannuation money is vigorously and fought for by ISA/unions via any Machiavellian means possible, simply because they are so pure and guarding us all against those terrible banks and SMSF's?

One has to wonder though Hedware, how much of what you write you actually believe, and if you do, what educational background you originate from.

'Rivers of Gold' written and produced by the IPA as part of its ongoing anti-employee campaign.

Just in case you don't know. John Roskam of IPA is a close friend of that terrible unionist fiend Bill Shorten whom you rail against all the time.

I see your Attention Deficit Disorder extends to actually answering any part of a prior email's questions or points - well done for consistency if nothing else, old mate. Have you considered running for politics? Shorty's position is open, you'd fit the Bill perfectly.

ASIC are now conflicted, they will never investigate and put Aus Super under an EU.

So just how long ago was this being considered 1 day, 1 month, 6 months - maybe during the RC. No conflict to see here. I guess just goes to show when you own the rulebook, you set the level of transparency and conflict. I must be living in another world.

No surprises here, hey? ("out of little things, big things grow")

Good luck with the staff member's TPD claims when they arise. But at least they'll get 20,000 Frequent Flyer points for joining.

One has to ask why ASIC had to be moved out of the Government control.
Does this mean the Government will now tender the duties of ASIC periodically?
Further more,Who actually owns ASIC?
If it is the Government then why the need to move from the Government Super Fund?
Effectively ASIC is saying Australian Super is THE BEST super fund to use.
Wait for the Australian Super ads...as used by the superannuation regulator, ASIC.
The answer to all these may lie with the question....When in doubt, ask why? and follow the money trail.

Great question and what analytics did they use, what ultimate retirement benefits above and beyond the employees existing Gov super fund would be a compelling best interests basis for ASIC making this decision, what external resources did they call into play to do their due diligence and what was that groups mandate, where there any 'artificial sweetners' thrown in that should have been utterly ignored due to early release/sole duty complications (eg 20,000 QFF points/employee or worse, employer incentives like corporate boxes to games or business class flights for ASIC exec's). Perhaps an investigation into ASIC and their processes/conflict management and governance should be #1 on ScoMo to do list?

Perhaps this is one of the reasons ASIC refuses to release it's 2018 gift/conflict register? I wonder...what have they been doing?

keep asking ASIC they cant ignore it forever

Good points here - amazing - doing better.
Lets take your suggestions further and make every reasonable sized employer answer your check list and make them advertise their reasons for selecting particular house funds.

Laughing again, well done!

Actually agree (for once) totally for employers having to disclose that type of information as really they should also have certain duties and obligations to employees welfare.

Of course however, they also are not a supposedly impartial and unbiased regulator who should have absolute transparency on all dealings, especially those dealings involved directly in the areas that they're supposedly regulating. Kind of like the Catholic Church and their priests looking after the souls of their congregation

But yes, there should be complete disclosure by employers and quasi-gov departments like ASIC how and why they chose their employee super funds - in fact would absolutely love that, especially if it led to ISA funds cutting those high priced incentives and corporate boxes, sports sponsorship etc out of the equation altogether that we all know do not benefit their members at all.

Careful what you wish for as incentives might be disclosed from funds other than just ISA funds as one of the Parliamentary Committees found.

Again you surprise me by actually saying something I agree with 100%

It would be the optimal solution to stop all incentives systems from any form of superannuation, ISA, retail, corporate or otherwise. Sole test should be scrupulously applied to every facet of superannuation provision (yes, including fees to advisers as well as commissions and payments to third parties such as unions for dubious 'consulting').

Our current system is hodge-podge and absurd; there should be strictly enforced rules that apply to one level playing field on all aspects , (including definitions for asset allocations, restricted contractors used in building projects determined solely by Union bias and control, asset valuation methodology & timing etc that I have rallied against in the past as well as your criticisms of retail funds).

Anything at all with the taint of having a purpose or expense other than for the direct benefit of the member(s) themselves should either be eliminated completely or need to go through a formal vetting system to ensure it is for the longer term good of all members (e.g. new software development etc).

Good points made.

A future easy board job with Australian Super part of the deal for a couple of the ASIC management???

ASIC had to pick a superannuation fund for its employees and so picked one.

Would you lot be saying the same things if ASIC picked a for-profit superannuation fund as the house fund?

The Royal Commission and the Productivity Commission have given some good pointers to help select (or not) select a house superannuation scheme. The flood of people from for-profit funds to not-for-profit funds shows that ASIC is not alone in making such a choice.

Individual employees are able to select any other fund. It is their choice if they want to pay higher fees and to get poorer returns for using a fund other than the selected house superannuation fund.

Agreed they had to pick one. What was the criteria used? If insurance was a key factor (and it absolutely should be) their TPD deifnition goes far beyond the SIS definition. Based on my research there isnt really even a premium advantage for the more restrictive conditions. I would like to see ASIC's replacement policy advice details as well as the alternative products they considered and reasoning for discount. No problem with Industry Funds, I use them quite frequently but I cant in good concience (let alone Best Interest Duty) recommend Aust Super if TPD cover is a key objective.

Be careful throwing out assertions that the house selected fund has lower fees and superior returns. I've got high growth clients who made in excess of 20% last year, sure they paid 2% for the privilege but it's a damned sight better than 6% for a 0.5% ICR.

That's what a good financial adviser does for his/her clients.

Correction: 'for-profit' and 'not-for-member profit but Union-profit' you mean...

This whole thing stinks, but then again we should be used to the stench of hypocritical ASIC BS!!!

Can u pls do a segment on death benefits and REST. I will happily tell u my story with them and their left leaning decision. Disgraceful to have to bury ur son and then go thru what REST did to us.

Mike - as a reader I have held you in high regard for being impartial and insightful - I & others would be very interested to hear what this person has to say, can you reply on here please whether this is possible?

Hopefully MM looks to source real and original stories, not just journalism by media release or conference junket notes

Crickets Hedware? Not hearing any smarmy reply to this...

Nor any considered rely from you. I dont know the story and so dont wish to discuss a personal hurt.

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