MySuper fees force super fund to exit high return strategy

The requirement to charge low fees under MySuper has forced one superannuation fund to exit a Principal Global Investments (PGI) strategy that had returned 13% over five years.

PGI chief executive in Australia Grant Foster said that the super fund pulled some of the money out of a real assets capability despite being “very happy investors.”

“They have said that because of the MySuper fee pressure they have to reduce their exposure to this real asset class, which for me is nonsense,” Foster said.

“The focus on fees here continues to press on,” he said, and added that “from our perspective it will be very interesting to see how these products perform, particularly if markets get really difficult the next couple of years. MySuper will find it a bit difficult [to deliver good performance].”

Foster said: “There’s one direct example we can point to where we know this is the cause. But we are also talking to many super funds about being in the real asset space, in the property or emerging market space.

“I don’t want to suggest that this is ramping. But as MySuper products evolve and get ready for 2017 they’re moving to passive -they’re doing it right now- and moving out of these more active options, and that’s going to continue.”

Also speaking to the media, Create Research chief executive Professor Amin Rajan warned that “there is the idea that index funds are cheap and less risky. But they are not less risky. You don’t really know what’s really moving prices there other than the psychological sentiment of investors.

“There is a health warning associated with index funds,” he said.

[via Financial Standard]