The Australian Prudential Regulation Authority (APRA) is not going to shut down small superannuation funds because of lack of scale, APRA deputy chairman Ross Jones has said.
"There seems to be some misunderstanding in the way in which scale tests are going to be applied," Jones said at an Association of Superannuation Funds of Australia (ASFA) presentation on Monday.
"APRA has no concern whatsoever if a small fund is performing well.
"Our concern is . the best interest of beneficiaries.
"A well-performing small fund may not fear that APRA is going to use any of its scale-related powers that we got last week [with the passage of the prudential standards].
"Our concern is with long-term performance.
"APRA would be concerned if a small fund had long-term poor performance and that poor performance was caused by high costs and those high costs are a function of small scale."
But even in this case, the prudential regulator would try to come to a mutually acceptable strategy to improve performance rather than shut a fund down.
"The other regulators are enforcement agencies. When they come and knock on your door it is usually not good news," Jones said.
"But when APRA knocks on your door it is to establish a relationship.
"Somebody once asked me: 'On the first of July 2013 is there a wish to close us down?' The answer is: 'Of course not.'
"We are not taking any action against any small fund solely because it didn't have the performance in the short run."
APRA currently publishes whole-of-fund performance tables and will be required to publish the performance of MySuper options on a quarterly basis.
Asked whether the publication of quarterly performance figures of MySuper options would not cause further peer risk issues as league tables had done, Jones emphasised again that the focus needed to be on long-term performance.
"While we will report quarterly, we now also publish seven-year rolling averages to provide members with a better understanding of what the issues are all about," he said.
"You certainly don't want people making decisions based on one quarter."
And although individual funds seldom show top performance year after year, performance tables were helpful in identifying consistent underperformers.
"Interesting thing about that is that people talk about 'past performance is not a [reliable] indicator of future performance'," Jones said.
"Well, one thing I can tell you, statistically, from our data, is that past poor performance is a very good indicator of continued poor performance, there is no doubt about that one.
"The top moves around, the bottom doesn't."
