The heatmap, which was released on Tuesday, has ranked five-year performance, fees and costs, member sustainability and growth asset allocation across funds.
But the data used to compare super has only analyses parts of funds, not the whole, the Lonsec researcher has said, which could influence consumers into products inappropriate for them.
Among the factors it has pointed as ignored are governance, advice, member servicing structures and insurance, although APRA has indicated the last measure will be introduced into the table at a later date.
Jeff Bresnahan, founder of SuperRatings believes APRA should set the structure under which funds operate and publishing the data morphs the regulatory process into public comparisons, instead of adhering to the agency’s duty.
“The problem is that no one in the industry wants to tell the regulator that they have got it wrong,” Mr Bresnahan said.
“While conflicts of interest were identified as a major issue in superannuation during the royal commission, it seems ironic that APRA has deliberately avoided reporting any measurement of a fund’s governance structure.”
The superannuation consultant has called for the regulator to install rules for consistent fee disclosures, including use of tax deductions and transparency to members, disclosure of risk within portfolios and compulsory disclosure of major asset holders.
It also wants APRA to move members into go-forward products and to remove legacy structures, as well as continue to rationalise member accounts and increase focus on the decumulation phase.
The current heatmap points to a number of players as underperformers, including Westpac’s BT Super for Life and industry funds Christian Super and Mine Super.
Yet SuperRatings has suggested APRA needs to conduct measures to find poor funds such as non-public fee analysis, to look at conflicts of interest as well as investments, governance, administration and insurance.
Low-cost options come at an ‘expense’
Further, SuperRatings has criticised the regulator for leaving out implicit asset fees when measuring net investment performance.
“This methodology can easily overstate the net benefit a member receives,” Mr Bresnahan said.
“Similarly, a low-cost investment option with high administration fees creates the very real possibility of consumers investing monies in cheap investment options that have no chance of outperforming the relevant index over any time period, while getting slugged high administration fees.”
Many leading funds, in terms of balanced option performance, have had higher allocations than the average fund to traditionally more expensive asset classes such as infrastructure, private equity and unlisted property – asset classes which have been noted to outperform cheaper alternatives.
When fees and returns are combined to show their results in dollar terms, SuperRatings has found that funds that added the most value over the long and short term, invested into more expensive asset classes.
“Driving people into low-cost options will come at the expense of future earnings, something that taxpayers will ultimately have to bear,” the analysis read.
But connecting with consumers remains a challenge for the sector.
“Australians are not stupid, but they remain frustratingly unengaged with their superannuation,” Mr Bresnahan said.
Five-year performance too short a period
Like others in the industry, SuperRatings has also criticised the timeframe the heatmaps are based on, saying it is short-term focused.
The first round of data has compared the five-year performance of MySuper options across funds.
While SuperRatings conceded the shorter framework is necessary for the products’ limited history, it noted most funds have existed for more than 25 years and their default option provides an accurate MySuper proxy.
“Given super is a key plank of Australia’s economic future, it seems counterintuitive for the government’s regulator to not measure funds over a more realistic period,” Mr Bresnahan said.
“Certainly, it is commonly accepted that seven-, 10-, and 15-year performance analysis is best practice given the long term (60 years plus) nature of superannuation membership.”
He added a consumer moving funds due to a three-year performance gap, midway through an economic cycle, will be moving for the wrong reasons.
However one positive the heatmap has going for it, SuperRatings has said, is APRA making a call on what constitutes a growth asset and what defines defensive.
“The growth/defensive debate remains loud within the industry but with APRA’s call of Australian Unlisted Property and Australian Unlisted Infrastructure being 25 per cent defensive, at least there is a starting point. SuperRatings [suspects] this will not however be the final position,” it stated.
