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Superannuation funds hampered by diversity illusion: Perpetual
A focus on achieving better superannuation fund member outcomes requires trustees to abandon the "illusion of diversity", according to Perpetual head of diversities Michael Blayney and senior portfolio adviser Sandi Orleow.
Orleow said that while funds believe they are diversified, often with the knowledge that up to 50 portfolio managers are working to achieve diversification, traditional balanced funds are diversified across asset classes with one allocation decision which skews the level of real diversity.
She said the superannuation industry was full of agents whose purpose and function was to achieve good member outcomes, and that increased market volatility meant traditional portfolio construction did not answer questions of mitigating risk while achieving good returns.
Blayney said the problem with old-style balanced funds is that they all broadly follow the 70/30 investment strategy with 70 per cent invested in equities.
"They kind of all looked similar so that blending four of them you got back to the same thing as where you started because they all look so similar," he said.
He said surveys and peer group risk drive superannuation funds to herd together and follow the pack, whether it be with balanced funds or default super options.
Blayney said the strength in new approaches was that they were markedly different to the norm. Orleow said the beauty was the fact no one was constructing new balanced fund portfolios the same, lending them to diversity.
He said the trustee now had more onus to ensure good outcomes for members, because members of traditional retail funds often received advice about their decision, while many super members just defaulted into the easiest option.
They agreed that as more Australians moved into the 55-plus age bracket, the industry needed to think about alternative approaches that focus on achieving an objective of Consumer Price Index-plus, and to marry the funds' objectives with those of the members.
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