MySuper will cost people investment returns and should be relegated to the dustbin, according to Chant West managing director Warren Chant.
Chant said that a low cost superannuation product will have unintended consequences on investment returns at an Association of Superannuation Funds of Australia lunch in Sydney yesterday.
"The biggest crime with MySuper is the slogan and that is a simple, low cost product."
"What it would do is encourage retail funds to come out with index products with little alternative investments in them. This will cost members investment returns. That is why MySuper should be relegated to the dustbin," Chant said.
According to research from Chant West, industry funds have on average an allocation of 19 per cent to alternative investments. In comparison, retail funds have a 5.7 per cent allocation to alternatives.
Industry funds, however, have on average delivered a 6.8 per cent return compared to retail funds, which posted a 5.7 per cent return over the seven years to June 2010.
"MySuper is going to have unintended consequences. And those unintended consequences are that retail funds with cheaper products will put pressure on industry funds to change the way they invest," he said.
"In the end, the average worker will miss out on the returns and perhaps not have the retirement savings they expect."
Asset consultant JANA Investment Advisers executive director John Coombe said that, although balanced funds may be attracted to passive investing as a result of MySuper, the focus should be on net returns not cost.
"There will always be a role for active management and alternative investments," he said.
"Superannuation funds will realise they need to differentiate their products from the other funds. One way to do that is by investing in assets that the others are not investing in," he said.
