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Super funds need firm handle on manager fees
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| Jack Gray
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Superannuation funds need to take more control of the fees they pay fund managers because the current market structures are dysfunctional, according to the adjunct professor of finance at the Paul Woolley Centre for Capital Markets, Jack Gray.
Gray, who formerly headed up Sunsuper, told a Pensions and Investments Summit on the Gold Coast that the existing market dynamic was dysfunctional because the pricing power was owned by managers rather than the members of superannuation funds.
He said the degree to which the markets had become dysfunctional was also reflected in the generous packages paid to executives in the financial services industry.
"Outrageous levels of compensation are being paid and we need to take control of it," Gray said. He said this was particularly the case in circumstances where the available evidence suggested that the financial services industry did not create as much wealth as other sectors of the economy, yet continued to extract huge fees.
"The finance industry does not add much value at all," Gray said. He said much of the blame for the global financial crisis could be attributed to rationalist economics and the belief that markets could be trusted to prevail when this had certainly not proven to be the case.
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