ISA pressures Govt to ditch dud Choice super funds
Industry superannuation funds are using the latest Australian Prudential Regulation Authority (APRA) choice heatmaps to launch a targeted attack on Government policy around applying the Your Future, Your Super performance test to ‘choice’ superannuation funds.
According to Industry Super Australia (ISA) the choice heatmaps which confirmed one in five funds falling short of the mark the Government should now end the carve-out of historical administration fees and subject all funds overseen by the Australian Prudential Regulation Authority to the performance test.
As well, the Australian Institute of Superannuation Trustees (AIST) has called for APRA to be empowered to direct the transfer of members from under-performing funds to better funds in line with a 2018 Productivity Commission report.
The industry funds who make up the ISA are making it very clear to the Government and the Assistant Treasurer and Minister for Financial Services, Stephen Jones, that they do not believe enough has been done to identify and eliminate under-performing choice products.
The ISA said that simply stopping under-performing funds from taking on new members did not go far enough in circumstances where people were left stapled to dud funds.
Today’s Choice APRA Heatmaps found that two thirds of products that are closed to new members were poor or ‘significantly’ poor performing products, ISA deputy chief executive, Matt Linden said.
The Your Future, Your Super sanction of closing funds to new members will have no impact on these funds and not stop their existing members from being fleeced.
To make matters worse their members will be stapled to these dud products, which can cost each of them up to $230,000 at retirement1.
The Heatmaps found 80 Choice options were ‘significantly poor performers’, 49 of these products are still accepting new members. As half the system is yet to be examined there likely far more dud products lurking in the Choice sector.
About a third of the products assessed by Heatmaps were a dark crimson for their ‘significantly’ high administration fees, and the median Choice administration fee is far higher than the median MySuper administration fees.
Yet the government recently decided to continue a carve out of historical administration fees from the Your Future, Your Super performance test – which hides the product’s true performance and opens the test to manipulation.
Earlier this month the government announced it would ‘fine tune’ the Your Future, Your Super’s performance test by extending the assessment from eight to 10 years and tweaking underlying benchmarks. But it made no moves to extend the coverage to all APRA regulated products, including retirement products.
The government should commit to all APRA regulated funds being tested, including those in the retirement phase from this year. All members deserve to know if their fund is a dud including retirees.
but first should mandate full disclosure and asset valuation methodology reflects current market value (including ‘unlisted’, ‘other’ and ‘alternatives’), determine appropriate labels for blended portfolios (e.g. ‘Balanced’ asset allocation ranges) and ensure that the retirement savings of a nation aren’t being fraudulently misreported and mishandled – particularly by the Labor Union aligned den of purported miscreants called the ISA.
ISA hypocisy knows no bounds. The asset value of their funds, if measured objectively, is going to fall off a cliff, so they want to dilute their exposure to the carnage.
Chant West give Australian Super 5 Apples – Highest Quality Investments 2023
We sack managers when they come close to capacity or have these sort of conflicts!
Why is no one in the media picking up on this whilst they are spruiking their size and past performance?
Deep in the report state the following:
3.5 Issues to consider
Issues that investors may need to consider include:
• AustralianSuper has a relatively high exposure to a single fund manager, IFM, where AustralianSuper is both a major shareholder and a substantial client. IFM manages a selection of Australian listed equities, private equity, infrastructure, fixed interest and cash portfolios on behalf of the Fund. Each mandate is chosen based on how its investment rationale fits with the philosophy and objectives of the whole portfolio. At June 2022, IFM managed about 21% of all member assets. All transactions with IFM are made on normal commercial terms, under standard conditions and at market rates.
• AustralianSuper’s internally managed concentrated Australian large cap equities strategy may approach its capacity limits within the next two years. Chant West will continue to monitor any developments regarding the strategy’s risk and alpha targets.
• While AustralianSuper has made solid progress in recent years to reshape its unlisted property portfolio, its legacy retail exposure continues to be a drag on performance. AustralianSuper has recently completed a full review of the unlisted property strategy.
I wonder how much money flows out from IFM to other industry super causes? political donations, union member reps, etc. Seems a bit dangerous that they have this level of allocation to one (conflicted) fund manager too. What happens when they underperform? Do Aus Super cook the books to hide it and maintain their performance, or do they scrutinise and then replace the manager?
Plenty….and since they are marking their own homework they can conceal the amount in the amplified performance figures they can make up on the fly…
IS are playing a dangerous game. Keep making noise and one day the regulator may look at how your ‘returns’ are being created. Does the regulator realise that 95% of returns come from the market return, so asset allocation is the key. Are these bureaucrats going to tell super funds how much to allocate to growth/defensives or do they honestly think a $300bn behemoth like Aust Super can add alpha. They are indexing their equity exposure now, as they are too large. The clowns are running the circus now. Smart people who understand investing are either too afraid to speak up or are speaking and are being ignored. It is indeed Clown World now.
Wow the massive self interest & conflicts of interest of the ISA in this is mind boggling! And don’t get me started on their high level of illiquid and related party investments plus their related dodgy valuation methods to inflate their results! What we see here is typical far left marxist/commuist policies of wanting the run the whole super system for their own benefit/control and nanny state everything! Remember ISA it’s not your super funds it’s each Aussie member and it should be totally up to them what they do with their super and when not you corrupt/conflicted totalitarians! :(((
I think it’s reasonable to aspire that members receive competitive returns relative to risk with their retirement savings.
However I don’t think that it is reasonable that those with enormous vested interests in the outcome of this process be commenting on such matters.
Matters regarding the transparency, accountability and scrutiny of ‘unlisted assets’, in my opinion, remains highly concerning.