Note: Every year we update this article with the latest data released by the Australian Prudential Regulation Authority (APRA) on the performance of Australia’s largest 200 super funds. This article contains information about the fund performance data for the year ended 30 June 2011 (the latest data as at March 2012. APRA will release the next report (for year ended 30 June 2012) in the first quarter of 2013.
The Australian Prudential Regulation Authority (APRA) has released its latest report on the performance of Australia’s largest 200 superannuation funds for the years 2004 to 2011. The report also provides average returns for the 200 super funds over a 5-year period and 8-year period to June 2011.
Despite vocal opposition from some sections of the superannuation industry, APRA continues to release this performance data. Although the APRA report (Superannuation Fund-level Rates of Return June 2011 – issued 29 February 2012) has its weaknesses when trying to compare individual fund performance, the report still provides some fascinating reading when analysing general trends in
Comparing fund performance
According to APRA, in the year to 30 June 2011, the average rate of return (ROR) for large super funds was 7.8% per annum. Industry super funds delivered an average ROR of 9% per annum, public sector funds delivered a ROR of 8.9% per annum,
In the 10 years to June 2011, the average ROR for large funds was3.8% each year. The top-performers for the 10-year period were public sector funds delivering an average ROR of 4.7% per annum.
Sharp drop in long-term returns due to GFC fallout
Before the Global Financial Crisis (GFC) hit in October 2008, around a third of Australian super funds delivered returns averaging at least 9% per annum over the five-year period from 2004 to 2008, while 10% of super funds were delivering double-digit returns over this same period, according to performance data released by APRA in August 2009.
In contrast, for the five-year period up to 30 June 2011 (financial years 2007 to 2011), not one of the 200 superannuation funds listed in report delivered a return of 9% or above. The highest fund-level rate of return over a 5-year period was an average of 7.1% per year (CBH Superannuation Fund, for employees of GBH, in the grain industry), followed by one fund delivering 5.2% per year (Goldman Sachs & JB Were Superannuation Fund, for employees of this financial organisatioin), and then one fund delivering 4.7% (Officers’ Superannuation Fund, for employees of Commonwealth Bank).
According to the APRA report, the top 3 super fund performers over the 5-year period from 2007 to 2011, were corporate superannuation funds, that is, super funds set up by companies to look after the superannuation needs of employees.
Note: The data covers the 200 largest super funds in Australia which represents 99% of the assets of all super funds regulated by APRA. Although not included in the data, APRA-regulated super funds also include small APRA funds (four members or less), exempt public sector superannuation schemes and pooled superannuation trusts. Note that self-managed super funds, which hold more than 30% of all super assets and are regulated by the ATO, are also not included in the APRA report. According to APRA, when you take into account SMSFs, exempt public sector super schemes, small APRA funds and pooled super trusts, then the APRA200 list represents 60% of all super assets.
Weaknesses of APRA performance data
Industry association, the Association of Superannuation Funds of Australia (ASFA) has warned consumers that the APRA performance data will be of limited assistance when checking the relative performance of superannuation funds.
ASFA CEO, Pauline Vamos, has previously stated that she holds the view that the super funds at the top of the APRA returns list (for the first APRA report) had relatively few investment options and most money was invested in the default option. Accordingly, ASFA accepts that the APRA return figure for these funds is in line with the return of their default, balanced fund, investment option. In contrast, ASFA has asserted that with the more complex funds with multiple products and investment options – such as retail funds – the APRA return is not indicative of the performance of specific investment options within each super fund.
The inference to be taken from these observations is that the APRA report is suitable when comparing default investment options (typically, a balanced investment option), but not suitable when comparing other investment options offered by a super fund. Interestingly, the latest APRA performance report indicates that of the top 20 performers over 5 years to 30 June 2011, only 25% of these super funds had more than 90% of fund assets invested of fund assets in the default investment option. The latest results from APRA seem to contradict ASFA’s theory.
Even so, the point that ASFA makes is valid when trying to compare your super fund’s investment performance with other super funds. For example, if you have your super money invested in Australian
ASFA, along with the private fund rating agencies, consider that the rating agencies provide more detailed and more current investment performance information to the media and the public than the APRA performance data.
The following are the two major complaints directed towards the APRA performance data:
- returns quoted in the APRA report are for the total assets of a super fund, rather than for the different investment options within the fund
- reported returns in APRA report only represent investment performance up to 30 June 2011, which means up to nine months have passed before the APRA data is publicly available (the report is released in the first quarter of the following calendar year).
According to APRA, the performance data is sourced from annual audited returns submitted by the funds’ trustees. APRA does not currently collect investment option data from super funds.
You can access the APRA performance report listing the returns for Australia’s largest 200 super funds by clicking on this link: http://www.apra.gov.au/Super/Publications/Documents/June%202011%20Annual%20Superannuation%20Bulletin.pdf
On this first brief glance through this material it looks good!
I would love to know how these figures are calculated.
Actual increase in value of investment over its entire life?
Average of % return for the current year (which doesn’t consider the loss of principal in previous years)?
A wild guess based on what the fund manager thinks might sound good to the investors?
The real return on my super (with one of the supposedly top ten retail funds) over the life of the investment is in fact 2% per annum – i.e. taking inflation into account, the fund is going backwards.
I can make better returns on term deposits even after paying income tax.
The only ones making money out of superannuation are the wealthy who can afford to salary sacrifice, fund managers and the Tax office.