Industry super funds lead retail funds in assets, satisfaction and performance

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Super funds by value of assets ($bn) – December 2017 to December 2018
Customer satisfaction
Differences in returns compound over time

APRA statistics released this week show retail funds have lost nearly $23 billion in value since December 2017, while over the same period industry funds grew by nearly $40 billion.

This represents a change in value of assets of -6% for retail funds and +4% for industry funds.

In December 2017, before the Royal Commission, retail funds had $613 billion of assets under management, nearly 4% larger than the $590 billion invested in industry funds. By December 2018, industry funds were nearly 7% larger ($630 billion) than retail funds ($589 billion).

Part of that drop can be attributed to lower returns over the last 12 months, and retail funds have a higher percentage of members in pension phase, but a significant amount would be retail fund members moving to industry funds following the series of bad press for retail funds during the Royal Commission.

Considering retail funds received total super contributions for the 3 months to December 31 2018 of $7 billion, the decrease in their balance sheets is even more stark.

SMSFs remain the largest type of super fund, but their value shrunk by just under 1% over the same time period ($728 billion in December 2017 to $727 billion in December 2018).

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Corporate funds were also largely stable ($54.6 billion in December 2017 to $54.3 billion in December 2018), while public sector funds saw a rise in assets under management of 5% ($439 billion in December 2017 to $461 billion in December 2018).

The total amount invested in super rose just 1.3% over the same time period ($2.61 trillion in December 2017 to $2.65 trillion in December 2018). This is down from a peak of $2.75 trillion in September 2018, largely due to the sharemarket volatility in the last 3 months of 2018.

Super funds by value of assets ($bn) – December 2017 to December 2018

	Dec 2017	Mar 2018	Jun 2018	Sep 2018	Dec 2018
Corporate	54.6	54.7	56.1	56.9	54.3
Industry	589.8	598.8	631.4	652.7	629.6
Public sector	439.0	443.4	462.1	468.0	461.5
Retail	612.9	602.6	622.5	628.1	589.0
Self-managed super funds	728.1	719.3	746.9	749.5	726.5
Other	194.1	193.6	196.2	198.3	192.3
Total	2,618.5	2,612.4	2,715.2	2,753.5	2,653.2

Source: APRA

Learn more information about the different types of super fund, super fund performance or discover the best performing super funds.

Customer satisfaction

Also this week Roy Morgan released their latest report on customer satisfaction with financial performance with superannuation.

The report measured the six months to January 2019, and showed industry funds scored an average of 62.1% satisfaction, compared to an average of 57.3% for retail funds.

Compare super funds

Super fund	Satisfaction rating
Catholic Super	72.1%
Unisuper	70.8%
HESTA	67.6%
Tasplan	67.6%
Macquarie	65.9%
AustralianSuper	65.5%
CARE Super	64.9%
First State Super	64.7%
Cbus	63.8%
Colonial First State	60.4%

Fund performance: Industry funds vs retail funds

In July 2018 Chant West reported that industry funds beat retail funds in performance for the 2017/2018 financial year, and every other timeframe for the last 15 years.

Performance by industry segment (results to 30 June 2018)

Fund type	1 year (%)	3 years (% per year)	5 years (% per year)	7 years (% per year)	10 years (% per year)	15 years (% per year)
Industry funds	10.3%	8.5%	9.7%	9.1%	6.9%	8.1%
Retail funds	9.0%	6.9%	8.5%	8.4%	6.3%	7.2%

Source: Chant West

Chant West senior investment manager, Mano Mohankumar says: “Over the longer term industry funds, as a group, have outperformed retail funds largely because of the way they have allocated their investments and their preparedness to vary those allocations to suit changing market conditions.

“Specifically, they have always tended to have higher allocations to unlisted assets such as private equity, unlisted property and unlisted infrastructure (currently 21% versus 5%), which have performed well for them. This means they have less invested in traditional asset classes such as listed shares, REITs and bonds. Those allocations to unlisted assets have meant slightly higher investment costs, but those extra costs have been more than justified by the better performance and lower volatility.

Differences in returns compound over time

The difference in the 15 year performance may not seem that much:

8.1% for industry funds
7.2% for retail funds

But that difference of 0.9% each year makes a huge difference due to compounding. Using SuperGuide’s Super fees and returns calculator I calculated would the two returns would make over a 30 year period for a 35 year-old earning $80,000 per year with a $75,000 super starting balance, and only counting the 9.5% employee super guarantee contributions.

Assuming a 1% fee across both funds, and adjusting for inflation of 3%, the results below are shown in today’s dollars.

8.1% returns each year ends up with a super balance of $683,807
7.2% returns each year ends up with a super balance of $566,472

That’s a gap of $117,334, or more than 20% higher for the 8.1% return. When you may have 30 or 40 years of retirement that can make a huge difference to your standard of living.

Important: It pays to remember though that these figures are averages of all industry funds and retail funds. Some industry funds will perform better than the average, some will perform worse, and the same with retail funds. Past performance is no guarantee of future performance, and in the end we have to choose a specific fund that is right for us, rather than a type of fund.