YFYS to have dramatic effect on asset managers

1 July 2021
| By Laura Dew |
image
image
expand image

The Your Future, Your Super reforms will have a “dramatic effect” on asset managers as super funds may opt to in-source their investment if their asset manager fails to perform, EY believes.

Under the reforms, which were passed in June, super funds would be subject to an annual performance test.

Those which failed this would need to inform their members of the underperformance and provide them with a super fund comparison tool. Funds that continued to underperform and failed two consecutive annual underperformance tests, would not be permitted to accept new members. These funds would not be able to re-open to new members until their performance improves.

This could lead to problems for asset managers as they would be under more scrutiny from their super fund to perform and find themselves taking fewer risks in order to avoid potential underperformance.

Rita Da Silva, Oceania asset and wealth management leader at EY, said: “The impact of Your Future, Your Super will have an effect on asset managers thanks to stapling and heatmaps. It will have a dramatic effect on the asset management industry as they will be scrutinised on the performance. Will super funds just opt to in-source their investments if the asset manager is failing to perform?

“There is a risk that now they are all being measured against a benchmark, that firms will be too scared to take risks to beat that. They won’t want to find themselves either plus or minus the benchmark, they will only want to be in line with it.”

Super funds were already moving towards in-sourcing their investments as they rationalised and Da Silva said they were attracting talent away from asset managers to do so.

“Super funds are already choosing to do Australian equities and global equities in-house so asset managers in that space might need to re-align their offerings to not just be product providers but solution providers,” she said.

“There might still be a place for asset managers but they will need to differentiate themselves.”

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest developments in Super Review! Anytime, Anywhere!

Grant Banner

From my perspective, 40- 50% of people are likely going to be deeply unhappy about how long they actually live. ...

1 year ago
Kevin Gorman

Super director remuneration ...

1 year ago
Anthony Asher

No doubt true, but most of it is still because over 45’s have been upgrading their houses with 30 year mortgages. Money ...

1 year ago

The future of superannuation policy remains uncertain, with further reforms potentially on the horizon as the Albanese government seeks to curb the use of superannuation ...

8 hours ago

Super funds had a “tremendous month” in November, according to new data....

4 days 7 hours ago

Australia faces a decade of deficits, with the sum of deficits over the next four years expected to overshoot forecasts by $21.8 billion....

4 days 12 hours ago