APRA member Margaret Cole said the prudential regulator is finalising work on the second MySuper performance test.
Following the inaugural performance test last August, it was revealed that 13 funds had failed, with Ms Cole saying that the upcoming results “raise the prospect of funds that fail for the second time having to close to new members” while addressing a Financial Services Council policy briefing on Wednesday (3 August).
“We have engaged closely over the past year with the trustees of those three remaining products to ensure they are prepared to comply with that requirement should it be necessary,” Ms Cole said.
“Trustees are also required to meet their obligation to inform members of their test failure. We will be closely monitoring those products required to close to new members through a targeted data collection to ensure trustees are meeting these requirements of the law.
“Inevitably, there will also be products that fail the test for first time. In those cases, trustees will also need to comply with the law and notify their members of the result.”
Ms Cole also reported at the briefing that of the 13 funds — which include AMG Super, ASGARD Independence Plan Division Two, Australian Catholic Superannuation and Retirement Fund, AvSuper, BOC Gases Superannuation Fund, Christian Super, Colonial First State FirstChoice Superannuation Trust, Commonwealth Bank Group Super, Energy Industries Superannuation Scheme-Pool A, Labour Union Co-Operative Retirement Fund, Maritime Super, Retirement Wrap, and The Victorian Independent Schools Superannuation Fund — 10 have either merged or exited the industry.
APRA will also again publish the Choice heatmap, however, this time using data gathered via APRA Connect.
“As with the performance test, the transparency the heatmaps provide continues to act as a catalyst for trustees acting to address underperformance and improving outcomes for members as a result,” Ms Cole said.
“In response to last year’s inaugural Choice Heatmap, trustees have indicated to APRA that approximately half of the worst performing choice options have now closed or will shortly be closed, and that action is being taken to improve the performance of the remaining underperforming options. This is very good news for members.”
In September last year, APRA was forced to defend its decision to not provide feedback to the 13 funds that failed the performance test during a House of Representatives standing committee.
APRA’s executive director for the superannuation division, Suzanne Smith, said at the time that the information used to calculate the performance test was available to those subject to it.
“The information won’t be a surprise to them,” Ms Smith said.
“Most of them had worked through a lot of that information to get a good sense of where they were going to land.
“Whilst they haven’t got the final number, they would have a good understanding of the basis and the reasons for the outcome they received.”
Meanwhile in June, ASIC revealed that some of the 13 funds obscured the test results following a review into the performance test communications.
“The review found that trustees whose products failed generally complied with the legal obligations to notify their members of the failed test and to disclose the failed test on their website,” the corporate regulator said in a statement.
“However, the communication strategies of some trustees may have risked confusing or misleading members about their product’s performance.”
You could be Australian Super and have a balanced portfolio with 20% defensive investments and 27% “property, infrastructure and private equity”
You could be AWARE and without consulting members borrow money to invest to boost your returns.
You could be CBUS and not have a unit price ??
Industry Funds are in their knees and if investigated properly would be deemed a Ponzi scheme
“In September last year, APRA was forced to defend its decision to not provide feedback to the 13 funds that failed the performance test during a House of Representatives standing committee.”
It is not hard to think that APRA didn’t actually do the work with these super funds to understand why they failed.
At the end of the day it only comes down to three things:
Did the poorer performers have a higher percentage of cash or lower percentage of growth assets? Conversely, did the better performers have very cash and instead alternatives like rent or private equity investments as their conservative investments?
Was it poor investment decisions? Did they go all in on afterpay just before it crashed? Did the better performers invest in unlited assets that weren’t priced accurately?
Was it higher fees?
Cmon APRA, it is not good enough just to use the headline figures. Do some proper research and share your data…
It is amazing that the government has a role in this area. It encourages excessive risk-taking and will ultimately backfire in the next major market downturn. At the very least, it should be ranked by Sharpe ratio although even this is flawed give its assumption that investment returns are normally distributed.
Crazy idea – let people make up their own minds and stop micromanaging the industry…
Past performance does not indicate future performance, unless APRA are the ones making the decisions.
Or – encourages excessive off-market assets = liquidity risk and manipulation of valuations, which to me should exclude a fund from MySuper status.
That’s the one – seems to be aimed at helping comrades.
If only these things had transparent asset allocation bands and deductions for unlisted, illiquid assets. Then it would have more meaning. Funds that ‘underperform’ may be managing risk better. Funds that ‘overperform’ could be taking on too much risk (in order to top the charts) so should that also be considered?