Wayne Byres told media that the increasing number of complaints from the superannuation sector weren’t reason enough to halt legislating the Your Future Your Super (YFYS) reforms, and that funds would simply have to adjust to their new obligations.
“I take most things with a grain of salt – not dismiss them outright, but I take most things with a grain of salt. I’ve seen many policy changes that were advocated by ourselves and the government, and the response from some interest groups was that the sky would fall in – and it didn’t,” Mr Byres said.
“And the other thing which I would say that may be a bit provocative is, given the number of underperforming funds we have in the industry, a bit more index-hugging might not be a bad thing. It’s not as though we’ve got large chunks of the industry massively outperforming indices.”
APRA has previously said that it doesn’t expect that super funds will have any trouble meeting the new benchmarks – which will see underperforming funds banned from taking on new members – as long as their investment strategies are “appropriately developed and effectively implemented”.
“Inevitably what happens is people will adjust. There might well be some institutions that decide to marginally shift their investment parameters, but I think it’s too early to tell. And I certainly wouldn’t say that’s a concern that leads me to think we shouldn’t proceed,” Mr Byres said.
APRA has already taken action against several funds that have fallen into the “dark red” areas of its heat map, issuing formal notices to trustees for 10 underperforming MySuper products and demanding explanation for how they intend to lift their game.
There is nothing wrong with buying the index so long as you dont pay an actice management fee for it.
What about IFMs index funds. From their website, these index funds aim to provide an efficiently traded portfolio that exploits targeted investment opportunities…….sounds more like an active fund than an index fund. What happens when they make a bad call and it underperforms?
How APRA just sit back and let this misleading product labelling occur is beyond me.
Make superannuation voluntary. If you are still thinking it is ‘your’ money you are not paying attention. Where else would a worker be forced to put 9.5% of his pay into a Fund dictated by his employment, even though he doesn’t agree with that, even if the fund was under performing, told who he can leave his super to, to not have access to it even if his family home was threatened, and, if no dependents a ‘Trustee’ will decide who gets it, and then have the non dependent beneficiary slugged with 30% tax. What a farce. And we are all stupid enough to think we live in a democracy. Don’t be suprised by lockdowns etc. You’ve been living with Communism for 30 years but tell you it is because ‘they’ want you to have a lovely old age. Wake up Australia.
I agree with Wayne Byrnes. I really don’t like how industry funds buy more and more illiquid investments which they can revalue at will and to their benefit. A great example was Transurban dropping 49% in March 2020 but industry fund only marking down their toll roads by 10-15% even though they are the same type of asset plus they are now illiquid.
I also dislike those ‘life stage investments’. It seems that once people hit their 50s and older they pay more attention to their super and are prone to leave an industry fund in a down year. For some reason life stage investments for many industry funds have as much as 60% in cash for the over 50 year olds and that is even though such people’s life expectancy is 30 years. This strategy has the great benefit that it hardly ever makes losses so no leaving by customers but it also hardly every makes meaningful gains, severely disadvantaging their members.
APRA’s changes will make both approaches more risky for the trustees. Well done.