Former CIO Macquarie picks the best super fund of 20 years

‘Playing’ the system

The index’s release comes as markets await the final 2021-22 financial year super fund league table to be published, after researchers Chant West and SuperRatings projected average losses in funds to balance between 3 and 4 percent.

But Mr Swanger said the methodology used by most research houses, and the government’s official YourSuper portal, was flawed because they measured with arbitrary constructs from the period ending June 30.

It also leaves league tables vulnerable to “play” by funds – a widely recognized issue where funds reassess the value of their unlisted assets in time for critical deadlines.

“The problem with most ratings is that they use one blunt time period — one year, 3 years, 5 years, 7 years, 10 years — but each period ends on the same date,” he said.

“Unless you own a DeLorean, you cannot invest on a specific date in the past. You can only invest in the future… Looking at different historical periods gives you the best chance of choosing a mutual fund that will perform well under whatever conditions may occur over the next 20 or 40 years.”

Recommended Robo

Of the group of top 15 funds that make up the index, auto-suggestion software Super Fierce recommends one based on the customer’s personal circumstances, such as age and income.

For example, high-growth fund AustralianSuper was ranked first for women over the age of 30 with a balance of $60,000 and a salary of $105,000, while balanced index options Sunsuper (now part of the Australian Retirement Trust) was at the top for 50 years. -Old man with super $220,000 earnings and $155,000 earnings.

The ATO’s YourSuper tool, and APRA’s annual performance test – both results of the Morrison government’s controversial Your Future Your Super (YFYS) reforms – examine only the default MySuper fund, while the Fierce Performers Index assesses 104 investment options in the top 15 funds.

Cost factor

But while Super Fierce takes the position that choosing the right super fund requires tailored advice, Mr Swanger says all of the top 15 funds have some key ingredients in common.

Nearly all of them are industrial or non-profit funds and while Mr Swanger says he has no bias towards bank-owned and retail funds, their glaring omission from the list is primarily a function of the higher fees charged historically.

The top 15 funds outperformed their peers by an average of 0.80 percent per year (or 80 basis points) and nearly half of that performance (36 basis points) was attributed to costs.

“While past performance is not an indicator of future performance, there is a caveat: past performance caused by high costs is a predictor of future performance,” he said. “Bad funds because fees are high will still be bad funds if fees stay high.”

SuperFierce chief executive Trenna Probert, also a Macquarie alumni, added: “We have the principle that lower cost is better.”

Retail funds such as those operated by AMP, Colonial First State and BT Financial Group have begun to lower costs in recent years, and some argue that higher administrative costs include a wider range of quality member services beyond investment management.

But they are still at a disadvantage in both the annual performance test and the Fierce Performers Index due to high admin fees.

Passive power

Most of the top funds (12 out of 15) were also found to offer passively managed index options – that is, those that track market performance rather than actively selecting investments to try to beat the market.

Across the retirement landscape, index options outperformed actives by 1.66 percent over 10 years. “That’s well above the level of statistical significance,” Swanger said.

But he said that doesn’t mean all funds have to go into passive investing or opt for index options (which are popularly favored by investors). Barefoot Investor books), appropriate for all members.

To be considered a Fierce Performer, a fund needs to have a set of actively managed options and a “feel” investment style that caters to consumers’ personal preferences, such as an ethically or environmentally conscious portfolio. “Our methodology is not active punishment,” says Swanger.

This inability to consider these styles and preferences within asset classes, is a major weakness of the government’s YFYS performance test and comparison tool, Probert said.

“We were excited at first [about YFYS] but when we get under the hood, we get really worried that people don’t get the whole picture and will make decisions that are not right for their financial well-being,” he said.

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