Currency Retail super yields lower returns October 09, 2008 AAP
Retail superannuation funds on average generate lower net returns than not-for-profit superannuation funds largely as a result of higher fees and taxes, according to research released on Thursday by the financial services regulator.
The Australian Prudential Regulation Authority (APRA) released the results of a performance study of 90 large APRA-regulated superannuation funds over five years from July 1, 2001, to June 30, 2006.
It found that there are few significant differences in returns between not-for-profit funds, which comprise corporate, public sector and industry funds.
But retail superannuation funds sometimes had some significant differences compared to the other types of funds.
"While some retail funds earned relatively high net returns, and some not-for-profit funds earned relatively low net returns over the five-year period, retail trustees using balanced or growth investment strategies for default investment options generated significantly lower net returns on average than not-for-profit trustees using balanced or growth investment strategies," APRA said.
Expenses accounted for most of the differences in net returns between fund types.
"Retail fund expenses, explicit and embedded, lower the net earnings of the retail sector relative to the not-for-profit sector," APRA said.
The study also showed that, on average, retail funds had higher annual, entry and exit fees than other fund types.
Differences in net returns between fund types were not explained by asset allocation or investment manager skill, according to the study.
"Thus, from 2002 through 2006, superannuation funds were selecting similar asset allocations, using investment managers with similar skills, but the costs involved with this was significantly greater for retail funds on average," the study said.
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