AMP tops chart for poor super performance

The fund is managed by high profile AMP chief economist Shane Oliver and head of dynamic asset allocation Nader Naeimi, and was lauded as one of the country’s best-performing funds as recently as 2015.

“This is the first time over the eight years we’ve done this report that we’ve ever seen a balanced fund with negative five-year returns,” Stockspot founder Chris Brycki told The Australian Financial Review.

“The performance of this dynamic asset allocation fund puts to rest the idea that chief economists have any edge in timing markets or asset classes. Super members would have been much better off ignoring AMP’s economic views and simply investing into an index fund.”

Rather than any increase in fees, the fund’s negative performance was likely a result of having been overweight in exposure to oil markets and underweight to the technology sector, and especially US-listed tech stocks, Mr Brycki said.

The sector has proved particularly buoyant during the first months of the coronavirus pandemic, when super funds lost a collective 15 per cent from the value of member retirement savings.

“Over time, there will always be variations in the way individual investment funds perform, but we also recognise the need to strengthen investment performance and have undertaken a significant process to simplify our superannuation offer,” an AMP spokesman said.

Advertisement

The 171-year-old company is in the process of revamping its super product suite, consolidating its seven separate super funds into two, and moving them to a single superannuation trustee. The project will reduce 70 super products to just six and investment options cut to about 50 from more than 150.

It is also conducting a strategic review which could see AMP broken up or sold to a third party, following shareholder, staff and public outrage over its handling of sexual harassment allegations against senior executives and the lingering fallout from the Hayne royal commission.

Research house Rainmaker Information has concluded that super fund consolidation and merger activity has historically led to fee decreases of about 20 per cent.

But Mr Brycki said while “small fee reductions” may be made available through consolidation and merger activity, that more meaningful cuts to rate cards would be required to turn around the fortune of the fat cat funds.

“There is all this politics and debate about the $30 billion being taken out [of the system in fees], but if the funds just considered the best interests of members and kept fees lower that could be avoided,” he said.

‘Apples with apples’

The best-performing super fund providers – labelled “fit cat funds” by Stockspot – were UniSuper, AustralianSuper and the non-OnePath IOOF funds.

These funds tended to have higher exposure to US tech stocks and sustainable investments, and lower exposure to emerging markets and blue chip Australian shares, Mr Brycki said.

Advertisement

“But fees are the big differentiator,” he added. “Even if you picked the right strategy, if you charge 1.5 per cent per annum, it is very hard for you to be on the “fit cats” list.”

Certified Financial Planner Wayne Leggett told the Financial Review that comparing super funds is notoriously difficult and the concept of a league table was a “hangover from the past”.

He said consumers should consider fund fees but also functionality, an important element not picked up in the Stockspot analysis. Some funds allow greater customisation and choice of investments for example.

Fellow Certified Financial Planner Adele Martin, of Firefly Wealth, said members should keep track of fund performance and fees, but warned that switching between funds could trigger transaction costs and insurance implications.

“You also have to be careful you are comparing apples with apples,” she said, echoing Stockspot’s concerns over labelling.

“A ‘balanced’ super fund for one provider could have 80 per cent exposure to shares and the other also called balanced could have only 60 per cent so you aren’t comparing the same thing.”

The Australian Prudential Regulation Authority has begun ranking funds on fees and performance by way of its controversial heat maps, but has limited the analysis to low cost MySuper funds. It has plans to extend the heat maps to so-called choice funds in the near future.