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 2012 (the latest data released by APRA in January 2013). APRA will release the next report (for year ended 30 June 2013) in the first quarter of 2014.
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 2012. The report also provides average returns for the 200 super funds over a 5-year period and 9-year period to June 2012.
Despite vocal opposition from some sections of the superannuation industry, APRA continues to release this performance data. Although the APRA report (Superannuation Fund-level Rate of Returns June 2012 – issued 9 January 2013) has its weaknesses when trying to compare individual fund performance, the report still provides some fascinating reading when analysing general trends in investment performance.
Comparing fund performance
According to APRA, for the year to 30 June 2012, the average rate of return (ROR) for large super funds was a meagre 0.5%. The different super fund types delivered the following returns for the 12 months to June 2012:
- Public sector super funds delivered an average ROR of 1.7%
- Corporate super funds delivered an average ROR of 1.0%
- Industry super funds delivered an average ROR of 0. 9%,
- Retail super funds delivered an average negative ROR of -0.6%
In the 10 years to June 2012, the average ROR for large funds was4.4% each year.
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. Since the GFC hit, investment returns have dropped considerably:
- 5-year average rate of returns: In contrast, for the five-year period up to 30 June 2012 (financial years 2008 to 2012), not one of the 200 superannuation funds listed in report delivered a return anywhere near 9%. The highest fund-level rate of return over a 5-year period was an average of 4.7% per year (Challenger Retirement Fund), followed by one fund delivering 3.7% per year (Newcastle Permanent Superannuation Plan), and then one fund delivering 3.4% (CBH Superannuation Fund, for employees of CBH, involved in the grain industry).
- 9-year average rate of returns: The longer-term returns for large super funds, that is, the average rate of return (ROR) for the 9-year period to 30 June 2012 (financial years 2004 to 2012), was considerably higher than the 5-year period to 2012. Even so, the 9-year average RORs still felt the effects of the GFC, with the highest fund-level ROR over the 9-year period being 9% (Goldman Sachs & JB Were Superannuation Fund, a fund for employees of this company), followed by one fund delivering 7.8% each year over the 9 years (Commonwealth Bank Group Super, a super fund for employees of CBA bank), and then one fund delivering 7.5% a year (Worsley Alumina Superannuation Fund, a super fund for employees of Worsley).
According to the APRA report, the top 3 super fund performers over the 9-year period from 2004 to 2012, 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, and represents roughly 60% of all superannuation fund assets in Australia. Although excluded from this 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 not included in the APRA report. More significantly, Australia’s largest 20 super funds, plus SMSF trustees, control roughly 87% of all super assets, leaving the remaining 13% of super fund assets to be managed by the other 180 large super funds, and a further 140 or so not-so-large super funds.
Weaknesses of APRA performance data
Industry association, the Association of Superannuation Funds of Australia (ASFA) has previously 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) and the proposed MySuper product, but not suitable when comparing other investment options offered by a super fund.
Interestingly, last year’s 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. Last year’s results from APRA seem to contradict ASFA’s theory.
The latest APRA performance report indicates that of the top 20 performers over 5 years to 30 June 2012, half of these super funds (10) had more than 90% of fund assets invested in the default investment option. This year’s results neither endorse nor 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 shares only, then the most appropriate comparison is other ‘Australian share’ investment options within superannuation funds.
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 against 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 2012, which means up to 6 months have passed before the APRA data is publicly available (the report is released in the first quarter of the following calendar year). Considering the detail contained in the report, a 6-month delay is a fairly quick turnaround, in my view.
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.
The following SuperGuide articles may also assist you in understanding the APRA200 performance lists: