Rice Warner points to exorbitant fees
Superannuation fund members who choose ethical investments need to be careful they are not putting their emotions ahead of value, according to actuarial research house, Rice Warner.
In an analysis of ethical investment options in superannuation, Rice Warner pointed out that statistical evidence suggests that the rates of return between ethical investment options and non-ethical investment options do not vary materially.
However, it suggests that the small amount of assets in ethical options usually means they are more expensive as they lack scale benefits.
"We don't expect any material difference in returns from the style of investing though there will be differences in levels of investment competence," the analysis said.
"Nonetheless, people don't appear to pick these options to get better returns. In most cases, it appears that the decision for ethical investment is primarily emotive."
It said this primarily emotive approach had created a risk that superannuants would trade off their emotions against value in products.
"Unfortunately, this risk has been realised, with some products on the market which appeal directly to a member's sense of social obligation, charging exorbitant fees," Rice Warner said.
In doing so, it published a table (below) in which it compared the fees of mainstream funds such as Australian Super and UniSuper and compared them to the fees of relatively recently-established ethical funds some of which were nearly double those of the mainstream.
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TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom DFS Mortgage
225.31 3 y p.a(%)
2
Loftus Peak Global Disruption Fund Hedged
121.06 3 y p.a(%)
3
Global X 21Shares Bitcoin ETF
72.47 3 y p.a(%)
4
Paradice Australian Mid Cap A
69.09 3 y p.a(%)
5
Smarter Money Long-Short Credit Investor USD
68.96 3 y p.a(%)
