Treasury details problems of Choice heatmaps

Treasury is in discussions with the Australian Prudential Regulation Authority (APRA) and superannuation funds about the presentation and quality of data in the Choice heatmaps.

Appearing before the Senate Estimates, the department said it had discussed with APRA and superannuation funds on opportunities for improvement in the next iteration of the heatmaps.

In the first Choice heatmaps last December, around 60% of Choice superannuation funds delivered returns below the APRA benchmark. This was a higher rate than for MySuper products (45%).

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However, there had been feedback from industry organisations around the appropriateness and accuracy of the assessment.

During the hearing, Senator Jenny McAllister, asked what areas of improvement had been suggested to the regulator.

Meghan Quinn, deputy secretary for markets group, said the Choice heatmap had been more complicated to collate than the MySuper ones as there were challenges around the funds’ histories and risk ratings.

She said: “Some of the presentation issues would be the same as issues raised in the MySuper space with different funds and different products having different focus on and weighting on the different elements.

“It's much more complex to do comparisons outside the MySuper product space because they have a lot of different risk ratings, different history and length of time. For example, how do you deal with a product that's only been available for a third of the time of another product? And is it appropriate to compare them against the same time period versus shorter time periods?... How do you take account of volatility in the period of which a shorter product has been in place?

“There's a very long list of technical issues that the funds raised with APRA in their measurement heatmap. In terms of our discussions with APRA, it's more around what that implies for transparency and comparability, which is what's important for consumers.”

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why is a government body even doing this?!! It's a free market.

"... it's more around what that implies for transparency and comparability, which is what's important for consumers"

LOL no one other than industry insiders even bother with this detail and when you misrepresent the risk reward you are actually misleading.

What is the point of the Govt Heatmaps ?
When so called “Balanced” Industry Funds have 94% Growth Assets according to APRA and ASIC do zero about it.
Yet ASIC are in the press banging on about False and Misleading Fund information.
If ASIC and APRA do absolutely nothing about such blatant false Industry Fund advertising, what is the point of these benchmarks if there are no definitions of asset classes or what APRA calls a growth asset but Industry Super call defensive.
You can’t compare Asset allocation apples and intentional Asset allocation lies and make any sense.
You can’t have Industry Funds calling Property both defensive and growth assets in the same fund and provide zero research or explanation of how that can be.
You can’t have Industry Funds calling Infrastructure a defensive Asset.
You can’t have Industry Funds calling CDOs a defensive asset.
When APRA correctly call them all growth assets.
Another bloody Govt shambles.

Not arguing that this doesn't need more consistency across the industry but APRA doesn't "correctly call them all growth assets", they took the approach of 75% growth 25% defensive for unlisted property and infrastructure and 50/50 for commodities and other alternatives for the Heatmap. Most people recognise growth/defensive is a spectrum and not binary, we just need a consistent approach which should be enforced by the regulator.

So on your info how did Hostplus Balanced have 94% growth assets ?
I don’t think your approach adds up.

It's not my approach, as I said, APRA did that. Have a look at the latest versions of the Heatmap, Hostplus Balanced showing as 79% growth. They also cover it in their frequently asked questions

The Heatmap was a mess, a lot of funds didn't take much care in the SAAs they submitted over the years until APRA started using it to benchmark their performance, then suddenly all these funds resubmitted data to APRA. If a fund didn't say whether their property was listed or unlisted it was recorded as listed so when APRA started doing the Heatmap they all went back and said well actually that should have been submitted as unlisted.

The complexities around all these issues are why qualified and experienced advice is needed. Its pointless trying to compare anything over a differing time periods. The Heatmaps are quite simply useless andcan only lead people to make poor choices. Should a so called underperforming fund that markets and prides itself on being defensive and protecting capital be penalised after a strong bull market? This is all heading in a dangerous direction. A massive consolidation through mergers to a few mega funds will also end in tears. Diversification and choice in investments is critical to a healthy market. Over regulation and paternalistic meddling governments are going to do more harm than good in the super space just as they have in the FInancial advice space.

For the government to get involved like this is beyond bizarre. Why don't they just take control of everything and become fully socialist?

For the government to get involved like this is beyond bizarre. Why don't they just take control of everything and become fully socialist?

Anyone not the recent (belated) clamp down on fund switching by directors and insiders (is ISA funds that strike historic crediting rates).....won't this hurt their performance or more important blatant arbitrage activities? LOL ASIC and APRA. You attempt to correct your post RC public profile is still in tatters

Just another example of government based employees having a below common level of intelligence about markets they regulate. Also a perfect example of using up taxpayer resources to target an outcome that has the least beneficial impact on people's lives. I'm on a Rick Roll Hamster Wheel here.

Yet just another costly Govt debacle interfering with superannuation on a mass scale.
Just bloody well allow advisers to provide quality advice in a timely and cost efficient manner to the consumer.
….and once you have that right stay the f**k out of financial services legislation and concentrate on what you are meant to be doing.

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