Industry players that will offer low-cost MySuper products are considering exchange-traded funds (ETF) as a way to differentiate their offering from others.
State Street Global Advisors Australia director of ETFs Amanda Skelly told InvestorDaily the firm had been in discussions with several players that were looking to offer dynamically balanced funds using ETFs.
“The role ETFs play in the MySuper space will largely depend on the size of the institution, but for those who aren’t yet at the scale of an Australian Super, for example, ETFs will provide a low-cost proposition for them,” Skelly said.
“What they can do is access them at a lower cost for their MySuper option, but also by using ETFs, they can dynamically adjust their allocations, which is a way that they differentiate themselves away from their peers.”
However, she said not all superannuation funds and providers of MySuper would adopt ETFs and believed larger players would simply offer very low-cost MySuper options without ETFs.
“They’ll be quite static options that you can’t differentiate from the others and then there will be the smaller players trying to differentiate themselves against the big players – they’re the ones who will widely adopt ETFs,” she said.
In addition, sophisticated investors and those closer to retiring who were engaging with their superannuation would start to become aware of the implementation of ETFs in their portfolios, she said.
“At that point, when people do get more engaged, they will be looking at what they get through their superannuation option,” she said.
“For the masses, if they’re not engaged with their super, they’re not going to know what’s going on.”
The government has announced that MySuper products will replace all existing default funds by 1 July 2013.
From 1 January 2014, employers must make contributions for employees who have not made a choice of fund to a fund that offers a MySuper product in order to satisfy superannuation guarantee requirements.
