Superannuation fund performance is a critical input into retirement planning conversations. Our recent webinar on Super Fund Performance and Trends shed light on key areas that advisers need to consider and understand including median returns, asset allocations, and the importance of understanding the drivers of both short and long-term fund performance. Below, we summarise the answers to the questions we didn’t get time to cover during the webinar.  

Median super fund returns: Net of investment fees & tax 

One of the primary concerns for advisers is understanding the nature of super fund returns, particularly whether they’re reported net or gross of fees. During the webinar, we shared median super fund performance figures and these are net of investment fees and taxes. This means that the reported returns reflect the actual gains that members can expect after deducting investment-related costs and taxes. However, it's important to note that when discussing unlisted asset class median returns, these figures are net of fees only and do not account for taxes. This distinction is important when evaluating fund performance, as it directly impacts the comparability of returns across different asset classes and fund types. 

Asset allocation: Understanding the 5.5% in 'Hedge funds/Other' 

Asset allocation is another pivotal area where advisers need to have a detailed understanding to better support their client conversations. The webinar revealed that at March 2024, on average, 5.5% of the asset allocation for growth options is designated to 'Hedge Funds/Other’. However, within this category, hedge funds account for just 0.5%, while the remaining 5% is allocated to a variety of alternative assets that do not fall neatly into other categories, such as infrastructure, private equity or hedge funds. 

These alternative assets include mid-risk credit/private debt, agriculture, insurance-related investments, commodities, and various opportunistic strategies. It's estimated that mid-risk credit and private debt make up about 60% of this 5% allocation. Given the diverse nature of these investments, advisers should be aware that most super funds have some level of exposure to this asset class. Detailed information on specific funds and strategies within this allocation is not publicly available, but you can find this information through our comprehensive investment rating reports available on Zenith’s investment research platform, Mosaic. Through Mosaic, advisers can access insights into major super funds such as Australian Retirement Trust, Australian Super, Aware Super, Cbus, Care Super and UniSuper.  

Request a Demo of Mosaic or try it for free for 7 days.  

The importance of ongoing fund performance monitoring 

Performance monitoring is an important responsibility for financial advisers, especially in light of the guidelines provided by regulatory bodies such as ASIC. During the webinar, the need for advisers to go beyond a set-and-forget approach to portfolio management was emphasised. Instead, advisers should actively monitor the performance of all funds within their clients' portfolios, particularly watching for any signs of underperformance. 

According to ASIC’s Report 779, advisers are expected to document and justify their decisions, especially when retaining an underperforming fund. This could be particularly relevant if the underperforming option invests in each asset class differently from market indices or if the super fund forms part of a broader, more diversified portfolio of funds and investment vehicles. The Your Future Your Super performance test results, therefore, serve as a vital tool for identifying funds that may require a more detailed review when they form part of client portfolios. 

FAQs from the session: