The involvement of financial advisers and the higher proportion of older members in retail superannuation funds makes seeking to compare retail fund performance with that of industry funds a complex exercise, according to Colonial First State (CFS).
In a submission filed with the Productivity Commission (PC), CFS said it backed the views of Australian Prudential Regulation Authority (APRA) deputy chair, Helen Rowell that average sector-to-sector superannuation data was not meaningful.
CFS pointed out that the PC deputy chair, Karen Chester had herself questioned the validity of suggesting that industry funds had consistently outperformed bank-owned super funds.
“The returns on superannuation depend on the assets and investment mix of the fund and how those investments perform over time,” it said. “Retail funds such as CFS have a much higher proportion of older members who are more conservatively invested, which means that, compared to funds with younger members, they will have lower returns over the long term.”
“Further, aggregate retail fund asset allocations are driven mainly by financial adviser recommendations which are in turn determined by a member’s needs and objectives, and tolerance for risk,” CFS said. “Hence the fund asset allocation is a product of thousands of decisions made by investors and their advisers when they are constructing their own asset allocation based on their individual circumstances.”
“It is therefore meaningless to compare fund or sector level returns,” the CFS submission said.
It said that while the Productivity Commission had sought to adjust the APRA performance data in order to compare returns, CFS believed that this had required too many assumptions and that the resultant comparisons were not appropriate or meaningful.