Speaking to Investor Daily, Aberdeen Standard Investment managing director for Australia, Brett Jollie, said that many of the positive aspects of the nation’s superannuation system have been forgotten as the sector continues to face regulatory scrutiny.
“Compared to the rest of the world, Australia is the high-water mark, particularly in the accumulation phase. Yes, we can improve the system through greater transparency and better governance, but I think we are a bit too negative about the super system,” he said. “The investment management fees paid by super funds are cheaper than just about anywhere else in the world.
“I work for a global company. We operate a global rate card. You pick a product, say global equities. Our rate card shows what we will charge for that capability. In Australia, that rate is not competitive so we need to go lower. We can sell mandates at a much higher margin to the US and UK and many other markets.”
Mr Jollie said the low fees charged for investment management in Australia are largely due to the high levels of competition within the superannuation system.
“That gets lost in all the negative talk around superannuation,” he said.
Last week APRA unveiled its new heatmap that compares super funds by performance, fees and sustainability of member outcomes.
Bruce Murphy, director, Australia and New Zealand at BNY Mellon-owned Insight Investments said he was concerned the heatmap could give consumers a superficial understanding of super funds, “with a single-minded focus” on returns and fees.
He also argued APRA should have a deeper insight into fees, especially given costs and a wave of consolidation throughout the super industry.
“There needs to be a balance in our view. If you look at this objectively, the 10-year returns for example of the Future Fund, will be better than the top super performers and yet their fees are reasonably high,” Mr Murphy said.
“So they’ve found those pockets of alpha, they’ve generated that level of performance, they’ve got what they would argue and they’ve put on paper, lower risk, and they pay higher fees.
“At the end of the day, I think we’ve got to be very careful about having a siloed and a single-minded focus on fees. There’s opportunities out there to pick up for alpha that a) we’re looking for and b) will get a better return on investments and net return really counts.”