POWERED BY MOMENTUM MEDIA
Industry funds continuing to outstrip retail
Further confirmation has emerged that industry superannuation funds are strengthening in members, assets and cashflow at the expense of retail funds.
That was the key bottom line of KPMG’s third annual ‘Super Insights’ report, which revealed that despite the Royal Commission and other factors, the overall performance of the superannuation industry is strong, with the APRA-regulated sector growing by 10.3 per while the self-managed superannuation fund (SMSF) sector grew by 6.4 per cent.
The KPMG analysis also indicated that increased regulatory and competitive pressures were likely to lead to more fund mergers.
The report, based on 2017/18 figures from the Australian Prudential Regulatory Authority (APRA), found that the APRA-regulated sector ended the year with assets under management (AUM) of $1.8 trillion, while the SMSF sector closed at almost $750 billion.
It said that in total, the assets supporting the superannuation sector closed 2018 at almost $2.72 trillion, some 39 per cent higher than the market capitalisation of the Australian share market.
The report noted that even before the impact of the Royal Commission, the industry fund sector had enjoyed an uplift in new membership, actually increasing total membership over the year by 1.39 per cent.
It said this was largely at the expense of the retail fund sector, where membership declined 5.2 per cent during 2018 resulting in a substantially faster AUM growth rate within the Industry Fund sector, which grew by 16.3 per cent compared to the Retail Fund sector growth of 5.9 per cent.
The research said the public sector showed reasonable AUM growth of 11.2 per cent, while corporate funds continued to struggle with assets declining by 4.5 per cent, mainly due to a number of mergers during the year.
Commenting on the findings, KPMG head of asset and wealth management, Paul Howes said that despite the increased volatility in the market and greater competitive pressures, the superannuation industry continued to deliver strong outcomes for members overall.
“But with the Royal Commission Final Report released in the current financial year, it is likely that the trends identified in our review, particularly between the Retail and Industry Fund sectors, will be exacerbated, driving materially different growth rates across these sectors,” he said.
“We also see an acceleration in mergers in the sector – last year we predicted that the number of funds would halve over the next decade, but we now believe this will be nearer to five years than ten,” Howes said. “Greater regulatory obligations, plus issues such as continued increases in operating costs, and ongoing uplift in churn out of funds placing further pressure on many fund’s business models, is driving consolidation.”
Recommended for you
Jim Chalmers has defended changes to the Future Fund’s mandate, referring to himself as a “big supporter” of the sovereign wealth fund, amid fierce opposition from the Coalition, which has pledged to reverse any changes if it wins next year’s election.
In a new review of the country’s largest fund, a research house says it’s well placed to deliver attractive returns despite challenges.
Chant West analysis suggests super could be well placed to deliver a double-digit result by the end of the calendar year.
Specific valuation decisions made by the $88 billion fund at the beginning of the pandemic were “not adequate for the deteriorating market conditions”, according to the prudential regulator.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Spire Oaktree Opportunities XI Second Close
61.07 3 y p.a(%)
2
Spire Oaktree Opportunities XI First Close USD
59.21 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
31.56 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
31.06 3 y p.a(%)
5
DomaCom 4/27 Crombie Avenue Bundall QLD 4217 Australia
26.81 3 y p.a(%)
