An article in The Age newspaper published on the 18th of April highlighted the great performance of industry funds over the past 5 years up to 31st December 2006. The article used data from SuperRatings regarding "balanced" funds. These funds were used on the basis that the majority of people have their superannuation savings invested in balanced funds. The results are very flattering for industry funds with them picking up 8 of the top 10 results.
(Source - http://www.theage.com.au/news/superannuation/industry-funds-dominate-field/2007/04/17/1176696767356.html)
The article goes on to suggest that the common characteristics of these industry funds are that they are low cost, the funds' trustees adjust their asset allocation in response to market conditions and they have embraced "alternative asset classes" like private equity, infrastructure funds and hedge funds.
The results are indeed impressive so I took the opportunity to find out more about these funds from their web sites. All but one fund, AMIST, had detailed information about the funds in question. As I read through the PDS for each fund, I became intrigued with the reporting of alternative assets by some of these industry funds. Some fund managers treated these assets, or a healthy percentage of them, as defensive assets (like cash and fixed interest) whereas they seem to have greater levels of risk and could be better classified as growth assets.
Based on this contention I re-classified some of the top 10 funds to reflect the more aggressive and risky nature of their "alternative assets", and then compared them with the portfolios that we develop for clients at ?A Clear Direction'. The following table includes the returns for our portfolio plus funds on a portfolio size of $100,000, after all fees have been deducted. These results would improve for larger portfolios as % fees start to reduce for larger portfolios.
|
(Based on $100,000) |
5 Year Returns |
Growth Allocation |
Basis of Growth Allocation |
|
Portfolio Plus - 90% Growth |
13.61% |
90% |
|
|
MTAA Super - Balanced |
12.80% |
90% |
Estimated |
|
Portfolio Plus - 85% Growth |
12.78% |
85% |
|
|
Portfolio Plus - 75% Growth |
11.95% |
75% |
|
|
Portfolio Plus - 70% Growth |
11.53% |
70% |
|
|
AMIST- Balanced |
11.00% |
NA |
|
|
HostPlus - Balanced |
10.90% |
75% |
Estimated |
|
AustralianSuper - Balanced |
10.80% |
75% |
Benchmark |
|
Westscheme - Trustee's Selection |
10.50% |
89% |
Estimated |
|
Equipsuper - Balanced Growth |
10.50% |
70% |
Benchmark |
|
Telstra Super Corp Plus- Balanced |
10.40% |
70% |
Benchmark |
|
CARE Super- Balanced |
10.40% |
75% |
Benchmark |
|
REST - Core Strategy |
10.30% |
70% |
Benchmark |
|
Intrust Super - Balanced |
10.30% |
75% |
Benchmark |
As you can see, we are very impressed with the results of the portfolio plus portfolios, beating all of SuperRatings top 10 ?balanced' options on the basis of growth asset allocation.
Of course, past performance is no prediction of future performance and we would not expect such returns to continue to occur but we do expect our investment philosophy to remain competitive amongst equivalent fund managers.
Regards,
Scott Keefer
