Heron Quality Star Ratings Announced for 2008/09

Released: 9 July, 2008

13 funds make upgrade to Five Star Rating.

Prediction of increase in members and employers switching to new funds.

The Heron Partnership has announced the Heron Quality Star Ratings for 2008/09 for both Corporate and Retail superannuation products.  Of the 160 individual products included in the 2008/09 assessment, the highest award of 5 Stars went to 25 Corporate products and 42 Retail products.  When the Heron Quality Star Ratings were first released in 2006, about 100 individual products were assessed, with 5 Stars going to 17 corporate products and 22 retail products.

The highlights for this assessment and the current market environment include:

• Downturn in investment markets has coincided with increased variance in investment performance – leading to more members actively pursuing a switch to a new fund in year ahead and employers coming under real pressure to review their default fund
• Members with higher balances will be influenced to establish their own DIY fund
• CARE Super judged the Top Rated Retail Product for the third time
• ING Corporate Super judged the Top Rated Corporate Product for the fourth consecutive assessment
• Continued improvements to product features, in particular insurance arrangements
• 13 funds are new recipients of the Five Star Rating

The Heron Partnership’s Managing Director, Chris Butler said “We are extremely pleased to announce that the following products achieved the highest overall rating for their respective product classification in our latest assessment:

Top Rated Retail Product: CARE Super
Top Rated Corporate Product: ING Corporate Super

Mr Butler said “The superannuation market continues to be extremely competitive and both Top Rated Products are market leaders, with quality features, especially their insurance and investment arrangements.  CARE Super’s investment performance has consistently rated well and their recent financial planning, education and web site enhancements have been well received.  ING has introduced some member servicing and communications initiatives which are leading edge.”

Separately, Heron announced that AUSfund has again been assessed as the Top Rated ERF Product.  In addition to AUSfund, SuperTrace is the only other ERF to be awarded 5 Heron Quality Stars.

Based on The Heron Partnership's rating system, the Retail products that achieved the 10 highest scores comprised 3 commercial master trusts and 7 industry funds, whilst the Corporate products with the 10 highest scores comprised 9 commercial master trusts and 1 industry fund.

The 42 Retail superannuation products rated as “outstanding quality” and therefore awarded 5 Heron Quality Stars are (in alphabetical order):

Outstanding Retail Superannuation Products

• AGEST
• AMP Flexible Lifetime Super
• AON Master Trust - Personal Division
• Asgard Elements Super
• Asgard eWRAP Super
• ASSET
• AustralianSuper
• Aviva Navigator Personal Retirement Plan
• AXA Summit
• BT SuperWrap Personal Super Plan
• CARE Super
• Catholic Superannuation Fund
• Cbus Superannuation
• Colonial First State FirstChoice Personal Super
• Energy Industries Superannuation Scheme
• Equipsuper - Personal
• First State Super
• FSP Super Fund
• GESB Super
• Health Super
• HESTA
• Hostplus
• Hostplus - Executive
• IOOF Portfolio Service Personal Superannuation
• IOOF Pursuit Core Personal Superannuation
• IOOF Pursuit Select Personal Superannuation
• Legg Mason - The Corporate Superannuation Master Trust - Personal Plan
• Local Government Superannuation Scheme - Accumulation Scheme
• MTAA - Superannuation Fund
• netwealth Superannuation Master Fund
• NGS Super
• Plum Superannuation Fund - Personal Division
• Print Super - mychoice - employer sponsored
• REST
• Skandia Global Retirement Solutions
• SMF - Spectrum Super - Personal Division
• Strategy Retirement Fund
• Sunsuper
• Tasplan
• Unisuper - Accumulation Super (1)
• WA Local Government - Super Solutions
• Westscheme Superannuation Fund

The 25 Corporate superannuation products rated as “outstanding quality” and therefore awarded 5 Heron Quality Stars are (in alphabetical order):

Outstanding Corporate Superannuation Products

• AMP - CustomSuper
• AMP - SignatureSuper
• ANZ - Super Advantage
• AON - Master Trust
• Asgard - Employee Super
• AustralianSuper - Corporate
• AustralianSuper - Corporate Solutions
• Aviva - Navigator Business Super
• BT - Lifetime Super - Employer Plan
• CARE Super - Corporate Super
• Colonial First State FirstChoice Employer Super
• Equipsuper - Corporate
• ING - Corporate Super
• ING - Integra Super
• IOOF - Portfolio Service Employer Superannuation
• Legg Mason - The Corporate Superannuation Master Trust
• Mercer - SmartSuper
• Mercer - SuperTrust
• MLC - MasterKey Business Super
• Plum - Superannuation Fund
• REST - Acumen
• Russell - Russell SuperSolution Master Trust - Employer Division
• Skandia - One Corporate Solutions
• SMF - Spectrum Super
• Sunsuper - Corporate

Since the last Heron Quality Star Ratings were released in January 2008, the following products, in alphabetical order, have been assessed as “outstanding quality” and awarded 5 Heron Quality Stars:

• AustralianSuper - Corporate Solutions
• Catholic Superannuation Fund
• Colonial First State FirstChoice Personal Super
• GESB Super
• IOOF Pursuit Core Personal Superannuation
• IOOF Pursuit Select Personal Superannuation
• Legg Mason - The Corporate Superannuation Master Trust - Personal Plan
• Local Government Superannuation Scheme - Accumulation Scheme
• netwealth Superannuation Master Fund
• Skandia - Global Retirement Solutions
• SMF - Spectrum Super – Corporate & Personal Division
• Unisuper - Accumulation Super (1)
• WA Local Government - Super Solutions – Employer & Personal Divisions

“When Heron assesses superannuation products we consider about 150 product features grouped under 5 Areas of Importance of Investment Arrangements, Contributions, Ancillary Benefits, Communications and Insurance.  Insurance and Investment Arrangements have the highest weightings of 30% and 55% respectively”, Mr Butler, said.
In respect to Insurance Arrangements the following products achieved the highest rating:

Mr Butler said, “There have been some significant improvements in the insurance offering of many products.  Best practice today means products offer unlimited death cover, TPD insurance up to $3m and a maximum monthly salary continuance insurance benefit of up to $30,000, “own occupation” definition for TPD and SCI and automatic future insurability benefits based on “life stages”.  The top funds also offer SCI benefit payment periods of 2 years and to age 65 with flexible waiting period options, accidental death, TPD and SCI cover during any assessment period of up to $5m, $2m and $20,000 respectively and “free cover” periods on leaving up to 90 days.”

In respect to Investment Arrangements the following products received the highest rating:

In these uncertain times short term investment performance has become the critical focus of members and employers and from Heron’s perspective investment performance is one of the key components of their rating of a products overall Investment Arrangements.  Heron measure comparative investment returns over 1, 3 and 5 years for each product’s multi-manager Balanced Option (45% -64% growth assets), Balanced/Growth Option (65% - 79% growth assets) and Growth Option (80% - 90% growth assets).  Heron’s emphasis is on longer term results and consistency of performance.  The 2008/09 assessment is based on performance to 31 March 2008.

Mr Butler said, “The challenging investment conditions experienced in recent times has tested many managers and we have seen quite diverging investment outcomes.  For the 3 investment options we monitor the 1 year returns to March 2008, have ranged from 6.1% to -7.0% for the Balanced option, from 3.6% to -11.7% for the Balanced/Growth option and from 2.1% to -12.90% for the Growth option.  We would anticipate a similar range at 30 June.”

“Interestingly the average difference between the highest and lowest returns for 1 year to March 2008 was about 14.5%.  The equivalent figure at March 2007 was about 8%.  As is often the case, this reflects that in difficult volatile times the difference between the top and bottom managers is invariably greater.  Maybe that old saying, “when the going gets tough the tough get going”, reflects the situation.

“Once 30 June statements start flowing through to members we expect that more members will consider switching funds, motivated initially by investment performance which becomes a springboard for them to look critically at other aspects of their fund. In addition, employers will come under increasing pressure to switch their default fund.  Through our own business we have started to see this happen already.”  Mr Butler said.
“Funds need to turn negative returns into a positive.”  Mr Butler said, “There is no doubt that negative returns are a magnitude 10.0 on the Richter scale as far as the level of member interest in super is concerned.  Funds will never have members more interested in super and they need to capitalise on this as there is no better time for them to improve member understanding of super, its long term nature and the way investment markets operate.”

The following 5 Star rated products, in alphabetical order, achieved a top ten percentile score for investment performance in Heron’s 2008/09 Quality Star Ratings.

Products Achieving Top Percentile Ranking for Investment Performance

• Asgard Employee Super
• AustralianSuper
• CARE Super
• Catholic Superannuation Fund
• Cbus
• Colonial First State FirstChoice Employer & Personal Super
• Health Super
• HESTA Super Fund
• Hostplus Superannuation
• IOOF Portfolio Service and Pursuit Core & Select
• Legg Mason - The Corporate Superannuation Master Trust
• Local Government Superannuation Scheme
• Mercer SuperTrust
• MTAA Superannuation Fund
• netwealth Superannuation Master Fund
• NGS Super
• REST
• Russell SuperSolution Master Trust
• Sunsuper
• Unisuper Accumulation Super (1)
• Westscheme Superannuation Fund

“Consistency of performance is one way to judge a product and twelve 5 Star rated providers achieved top quartile performance, based on the Heron Universe of products, for each of the 3 periods monitored for at least one investment classification, to 31 March 2008, as follows:

“Due to the variance in features and costs between superannuation products, we recommend individuals seek advice from a financial planner to assist them select the product that best suits their requirements for what is invariably a long term investment.”  Mr Butler said.

When releasing the ratings for 2008/09, Mr Butler, said “The primary goal of the Heron Quality Star Ratings is to provide a realistic and objective representation of the strengths and weaknesses of a product.  The ratings are based on feature specific benchmarks which guide Heron’s assessors to rate the feature objectively, with all products therefore being rated on the exact same basis.  The ratings for each feature are aggregated to an overall numeric rating for each product”.

The Heron Partnership’s product research and assessments are provided through their Heron Advisor internet based research service.  This research service is utilised by an increasing number of product issuers, dealer groups and financial planners as a superannuation research tool, for superannuation advice and corporate super tenders.
The Heron Quality Star Ratings have 5 levels as follows:

• 5 stars - Outstanding
• 4 stars - Commendable
• 3 stars - Good
• 2 stars - Poor
• 1 star - Unacceptable

Details of the Heron Quality Star Ratings, including the assessment methodology and products awarded with 5 Heron Quality Stars, are featured on The Heron Partnership’s web site.  In addition, through the Heron Advisor service, subscribers are able to access the Quality Star Rating for all products as well as the detailed product research.