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Small v Big choose wisely

More than half of under-performing choice super funds exit

By Mike Taylor23 June 2022

More than half of the 220 underperforming Choice superannuation funds identified by the Australian Prudential Regulation Authority’s (APRA’s) heatmaps are now closed or about to close.

APRA has revealed the startling statistic in a speech by its chairman, Wayne Byres, to a Trans-Tasman business forum at the same time as the regulator reinforced its view that, overall, larger funds perform better than smaller entities.

While claiming that it was not preferencing large funds under small entities, the regulator made clear it believed the way ahead was via larger, better-performing funds.

Byres presentation also claimed that its heatmap approach had also been effective in driving an almost immediate drop in fees.

The APRA presentation also noted that in the 10 years since APRA incorporated superannuation into the prudential framework, the number of funds it regulated had fallen from about 330 to 145 today and that at least nine mergers were either in progress or under serious consideration.

Mike Taylor

Mike Taylor

Managing Editor/Publisher, Financial Newswire

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1 day ago

Mike, you may want to correct your headline to:

‘Over half of investment options identified as under-performing in APRA’s Choice Heatmap closed or will be soon’.

It is the investment options that have closed, not the super fund, albeit some super funds may have chosen the Merge or complete an Successor Funds Transfer as a result, however I suspect most just closed the investment options and created new ones that can more easily meet APRAs expectations of low-cost and suitable performance, probably turning to passive fund managers who can track the SAA Benchmark Portfolio (benchmark APRA uses for assessment) and/or a higher proportion of illiquid investments (which always outperform the market for some reason).