Industry funds shifting focus to retirement

Industry funds have increased their presence in the pension market throughout the past two years, says Tria Investment Partners – while retail funds have gone backwards.

In its latest Trialogue note, Tria Investment Partners noted that industry funds have typically been “incubators of low-balance, disengaged members” who can be converted into retail advice clients when they approach retirement.

But new initiatives such as digital advice propositions and the government’s proposed Comprehensive Income Products for Retirement (CIPR) regime could give industry funds a “strategic leg up” in the retirement space, said Tria.

When it comes to total super assets, industry funds are continuing to take market share from retail funds – going from 16.4 per cent in 2008 to 21.5 per cent in 2016.

Retail funds have fallen from 28.5 per cent of the total superannuation market in 2008 to 24.9 per cent in 2016.

But the statistics are more concerning for retail funds in the pension market, where they have traditionally been dominant, said Tria.

According to Tria, industry funds have increased their market share from 9 per cent of pension assets in 2014 to 13 per cent in 2016.

Retail funds, on the other hand, slipped from 59 per cent of retirement assets in 2014 to 58 per cent.

“It’s clear that industry funds are rapidly developing the ability to take care of their members’ retirement as well as accumulation phases,” said Tria.

“The share of pension assets is growing more slowly, as you would expect – but industry funds’ recent success in attracting (or, better said, retaining) pension members is an indication of what will be possible.

“There is absolutely potential for industry funds to continue their ascendance. But they shouldn’t expect the next stage of market share growth to be as easy; the stakes are significant and retail funds will defend with fervour. Expect to see similar levels of investment in this part of the market.”