The super contradiction: Pass YFYS, fail on heatmap

A new analysis of the Australian Prudential Regulation Authority (APRA’s) superannuation fund performance test and its heatmaps suggests you can pass one while failing the other.

The analysis, conducted by Frontier Investment Consulting, points out that the Your Future, Your Super performance test incorporates administration fees together with investment fees while, in contrast, the heatmap only consider the investment fees when assessing performance.

“This difference can lead to the situation where a fund passes the YFYS test but fails the APRA test,” it said.

“Based on the data provided by APRA, all the single strategy MySuper options which failed the YFYS performance test also failed the APRA Heatmap test,” the Frontier analysis said. “However, there was one fund which passed the YFYS performance test but failed the APRA Heatmap test. This is due to the fund’s lower administration fees.”

The Frontier analysis claims the YFYS performance test only assesses a small part of member outcomes by assessing how well a fund has implemented its chosen strategy, not whether it is a good strategy.

“A fund with an investment strategy which will deliver poor long term member outcomes, but is well implemented, will be judged better than a fund with a good long term investment strategy but its implementation has been poor in the short term,” it said.

“Ultimately, the focus should be on improved outcomes for members of the long term.”