Industry funds reign supreme
Sunsuper, QSuper and UniSuper are among the top funds announced at the annual Chant West Super Fund Awards.
The $75 billion Sunsuper won Super Fund of the Year, Best Fund: Member Services, and Corporate Solutions Fund of the year.
Geoff Peck head of client development at Chant West says: “SunSuper is a very strong all-round fund. Four years of strategic investment in its operations processes has led to a very strong and robust platform – it is very easy to deal with members, employers and advisers. The focus of its investments is its well-diversified core of unlisted assets. It also has the right amount of liquid assets to provide liquidity at times like this.”
QSuper and UniSuper were named as the two runners up for the Superfund of the Year 2020 award. QSuper won the Best Fund: Investments 2020 award and Pension Fund of the Year while UniSuper won the Best Super Fund: Advice Services.
Peck says QSuper’s won best pension fund and an award for investments as its investments are its most important differentiator and they are especially well-suited to pension members as it’s well-diversified compared to other funds and designed to provide a smoother ride.
“QSuper operates in a very different way to other funds and at the beginning of the year, it only has 29 per cent of the balanced option in equities compared to around 50 per cent of its peers. It has high investment in long-duration bonds meaning they have been able to smooth the long-term investment performance and manage the downturn we have experienced,” Peck says.
UniSuper won the award for best advice services as it has consultants and advisers in every university location where it has members.
“It also has superannuation consultants delivering general advice and 31 financial advisers giving comprehensive advice and another 15 review advisers that help with the follow up that help with the annual review of its members,” Peck says.
The purpose of the Chant West Super Fund Awards is to celebrate the funds that provide the best investments and services to members to help them meet their retirement goals.
Other winners include Cbus for Specialist Fund of The Year, NGS Super for Best Fund: Insurance, VicSuper for Best Fund: Integrity and CFS FirstChoice Wholesale for Best Fund: Longevity.
Ian Fryer, head of research at Chant West says: “And on performance, it’s not about the one-year numbers but about the value funds add to members’ retirement income through strong performance over the long term. The best funds are those that keep their eye on the long game.”
The awards come as superannuation lost around 12 per cent in February and March. However, the median growth fund bounced back 3.1 per cent in April on the back of rallying share markets.
This still leaves the return for the ten months of the financial year to date in the red at -3.3 per cent.
Chant West senior investment research manager Mano Mohankumar says: “Unfortunately, super funds have already seen some members hurt themselves by locking in losses in March by switching to a more conservative option perhaps with the intention of switching back later as markets rallied.
“This is the very thing we caution against. Trying to time markets is a risky proposition at any time.”
However, despite these recent losses, all risk categories have met their typical return objectives over 7 and 10 years.
All growth and high growth returned 7.5 per cent return over 10 years, growth returned 6.9 per cent, balanced 5.9 per cent and conservative 5.1 per cent.
The majority of members have super invested in the growth category however, there is a growing number of Australians that are in retail lifecycle funds where members are allocated to an age-based option that is progressively de-risked as that cohort gets older.
Over longer periods those higher-risk options, which cover the younger cohorts born in the 1960s or later, have performed better, although not as well as the median MySuper Growth option.”
The cohort born in the 1960s returned 4 per cent over five years, followed by 1970s at 4.4 per cent, 1980s at 4.6 per cent and 1990s at 4.7 per cent compared with the median growth option of 5.6 per cent.
Mohankumar says: “The reason these younger cohorts in retail lifecycle funds have underperformed the MySuper Growth option is that, while they are generally well-diversified, these funds don’t have the same level of diversification as many of the not-for-profit funds.”
Industry funds generally have a higher allocation of about 21 per cent to unlisted assets compared to 5 per cent for retail life cycle funds.
The older cohorts born in the 1950s or earlier are relatively less exposed to growth-orientated assets so you would expect them to underperform the MySuper Growth median over longer periods.