Super returns fall but fees spike

Publication Date: 6 February 2009
Publication:: InvestorDaily
Journalist:: Christine St Anne

Investment fees have spiked by as much as 20 per cent while the performance gap between superannuation funds has widened, according to a report by The Heron Partnership.

The report provided an assessment of 154 corporate, retail and industry superannuation funds, including their fees and investment returns.

"Over the past 12 months many products have increased their ongoing fees, in particular investment fees," Heron Partnership managing director Christopher Butler said.

"We have observed increases in investment fees of 10 to 20 per cent if not higher for some products, excluding performance fees, which incidentally will continue to apply for many products." 

Funds with greater allocation to private equity and infrastructure assets tended to attract higher investment fees, according to Butler.

Administration fees remained static, he said.

The range of investment returns for the balanced/growth option of superannuation funds also widened.

The differences ranged from -8.6 per cent to -29.5 per cent over one year and 4.6 per cent to -10.7 per cent over three years.

"The balanced/growth option tends to be the default option for most people. There is growing concern about these differences and some funds will have to question whether it is still viable to operate," Butler said.

The report also compared investment returns for the balanced option and growth option of each of the superannuation funds over a one-, three- and five-year period.

Only 11 superannuation funds achieved top quartile performance for at least one investment option for all three periods monitored, the report found.

All 11 funds were industry or government superannuation funds with REST achieving the top quartile performance for all three investment options monitored.