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Shadow minister slams self-confessed ‘genius’ super fund managers

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“Every bit of research I’ve read says 75 per cent or more of fund managers over the medium term don’t even track the average. Therefore, mutual funds do not perform three quarters of the time.”

Active under-performance

Tracking an index would have been a “better outcome for members of the 13 funds that performed poorly”, the shadow minister said, referring to the funds that fared worst in the test’s first round last year.

Research released by London-based investment platform AJ Bell last month found less than one third of actively managed equities funds around the world outperformed their (generally lower cost) passive peers in the first half of the year. In the UK, the cohort of outperforming active funds slumped to 12 per cent.

However, top-ranked super fund Hostplus – one of just three MySuper providers to report a positive return over the year to June 30 – attributed its performance to active investments in unloved energy stocks and infrastructure assets.

Mr Roberts’ comments indicate the intent of the policy was, at least in part, aimed at encouraging super funds to deploy more capital to low-cost passive investments such as index-tracking exchange-traded funds.

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They distance the Dutton opposition from comments by then-financial services minister Jane Hume – now shadow finance minister – that super funds should continue to pursue “alpha” and attempt to beat the market despite the benchmarks baked into the performance test.

That came after criticism from super trustees and their investment consultants that the performance test would take the sector down the “path to mediocrity” and discourage investment in unlisted infrastructure and other illiquid assets.

Mr Robert also criticised Labor’s election policy to grant a reprieve to faith-based super funds which may find their ethical investing strategies punished by the performance test.

“Faith-based funds should not be allowed to perform more poorly because they are faith-based,” the Member for the Gold Coast seat of Fadden said.

“Why should someone who attends a mosque, a synagogue or a church receive less in retirement? … They can have an ethical preference, but that doesn’t mean they can lose money.”

‘Soft dollar kickbacks’

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The Coalition would continue to take a hardline reading of the legal duty for super trustees to act in the best “financial” interests of members, he said. The previous government tightened the wording of the obligation from just acting in members’ “best interests”.

The rare foray into portfolio construction topics by a federal MP comes as the government faces an opposition and crossbench challenge to its proposal to water down disclosure obligations for super funds.

Mr Robert confirmed the Coalition would move a disallowance motion against the proposal if legislation came before the Parliament and said he was hopeful of support from the Greens.

“They’ve said transparency and integrity are important so we’ll take them at face value,” Mr Robert said. “No-one wins when you hide $85 million worth of soft dollar kickbacks.”

But the government and supporters say the measure, which is still at the draft regulation phase, would reduce compliance costs for funds and improve member outcomes.

Financial services minister Stephen Jones this week said the government would “consider all submissions [to Treasury’s consultation] carefully and in detail before providing a response”.