ERF sector improving

Publication Date: 12 June 2009
Publication:: SuperReview
Journalist:: Mike Taylor

Referring funds may have to look more closely at eligible rollover fund fee structures in circumstances where the latest Heron Partnership research has pointed to some fee structures being unsuited to lower balances.

The eligible rollover fund (ERF) sector may be improving but many ERFs remain a problem, particularly where their transparency and fee structures are concerned, according to the latest assessment conducted by the Heron Partnership.

The Heron analysis pointed to a general improvement in the sector, with four ERFs gaining the company’s top five-star quality rating, but it also identified a wide gap between the best and worst performing funds.

The most telling part of the Heron assessment of the ERFs was the impact of fess, with the research house finding that some funds were better suited to lower account balances than others.

Heron Partnership executive director Wendy Barton said the company’s analysis had found variations in fees deducted from member accounts and different applications of the member protection rules.

“Some funds have a fee structure that suits higher balances while others are better for lower balances,” she said.

“We understand the importance of a feeder fund selecting the most appropriate ERF, but while ERFs offer only one investment option and may have a fee bias for different account balances, that decision is difficult to make across a whole membership base,” Barton said.

She suggested that the ability of the feeder fund to select the most appropriate ERF on an individual member type/amount basis might result in a better initial matching of the small account balances and lost member accounts.

The four ERFs to gain the Heron Partnership’s top five-star rating emerged as AUSfund, AMP ERF, National Preservation Trust and Super Trust.

Heron Partnership managing director Chris Butler said it was the first time four ERFs had been awarded five stars and it was a reflection of much stronger competition than previous years, with little separating the top four ERFs.

“The most pleasing aspect of this year’s assessment is that many products have significantly improved their product features, transparency and service offering,” he said. “However, there remains a serious gap between the high quality ERFs and some of the lower rated ERFs.”

The Heron Partnership analysis of the ERF sector follows other analyses that pointed to fees and transparency as being key issues.