Past performance is not necessarily an indicator of future performance with superannuation or in predicting the winner of the Melbourne Cup, warns KPMG's Damian Ryan, who was 'in form' last year. Can he do it again?
Over the last few years, we have been working with many Australian superannuation funds as they raced to the market with their own MySuper product – a low-cost, default option with a single diversified investment option, a level of insurance and standardised disclosure around costs/fees.
Funds are now turning their attention to the development of similar default products in pension phase.
As a consequence of the greater focus on members in pension phase, funds are turning their mind to the question of whether they should segregate or not.
That is, given the growing pool of members now in the pension phase and hence the growing size of funds under management, whether to segregate the assets held to meet current pension liabilities from the balance to meet the different needs of accumulation members.
One rationale for segregating the assets between pension and accumulation members is that those members in pension phase have a different risk/reward appetite to those still in accumulation phase.
Using a similar approach, I have taken on a rather different challenge today. That is, for the total sum of $100, to develop a Segregated Melbourne Cup product.
Given the number of overseas horses that are now in the Melbourne Cup field, with their different form lines, the time has come to segregate the field in order to find a winner!
As a starting point I have segregated the Melbourne Cup field into two pools.
Pool A – consists of the 'locally' training horses, although when I say 'locally', the majority of these horses whilst training and racing in Australia now, were often bred overseas and started their racing careers there.
Pool B – consists of the overseas horses that have been brought to Australia via the quarantine centre at Werribee. Some of these have had one start in Australia (Caulfield Cup, Geelong Cup, Cox Plate) while others will be having their first run in Australia in the Cup.
Similarly, my advice to the investment managers within each sector is that:
Past performance is not necessarily an indicator of future performance.
No matter how good the horse, if the horse cannot stay the 3,200m, it won’t.
Weight stops even the best horse – this is why it is a handicap.
Good barriers count.
A good ride by a top jockey can improve a horse by a couple of lengths.
Track conditions on the day may improve or decrease some horses chances.
So with this in mind, my MyMelbourneCup segregated option is as follows:
No 2 – Criterion $10 e/w – David Hayes has done a terrific job since taking over the training of this horse. The class Australian horse in the field.
No 15 – Preferment $10 e/w– last year’s VRC Derby winner and unbeaten at Flemington, with Hughie Bowman in the saddle and Chris Waller training. What more can I say?
No 3 – Fame Game $10 e/w – was their anyone who missed the horse’s great 'trial' in the Caulfield Cup – even the stewards noticed!
No 9 – Red Cadeaux $10 e/w – even he doesn’t know how old he is!
Flexi Box Trifecta – 2,3,9 and 15 for $20
Best roughie – For those who have a spare $5 and would like to invest a little extra in their alternative asset class, a small wager on “Who Shot the Barman” may be in order. Although I suspect if he gets up, the Barman will be the most popular person
Good luck and happy punting.
Please read the MyMelbourneCup product disclosure document.
This guide is of a general nature only and should not be relied on.
Individual investors should seek their own advice specific to their financial circumstances.
Damian Ryan is a partner, tax, at KPMG.
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