AUSfund tops Heron’s ERF ratings for 4th time

Released: 21 April, 2010

"Too many ERF’s in market and fees too high" – Heron

The Heron Partnership has finalised its 2010 Heron Quality Star Ratings assessment of Eligible Rollover Funds revealing continued service improvement but there are too many funds for the market and average fees are about twice that of retail funds.

AUSfund has been named the Top Rated ERF and ISPF and SuperTrace awarded 5 Heron Quality Stars. This is the first time that ISPF has been awarded 5 Heron Quality Stars.

The Heron Partnership’s Managing Director, Chris Butler, said "For the 4th time we are delighted to announce that AUSfund has been assessed by us as being the Top Rated ERF Product and for the 3rd time SuperTrace has been awarded 5 Stars. These 2 products along with ISPF are to be congratulated for their overall offering."

Eligible Rollover Funds
Australia’s Unclaimed Super Fund (AUSfund)

Eligible Rollover Funds
ISPF ERF
SuperTrace ERF

"We are also very pleased to congratulate AERF, AMP ERF, NPT and Super Safeguard for being awarded 4 Heron Quality Stars due to it being judged as a ‘commendable’ product", Mr Butler said.

"The combined assets in ERFs peaked at $5.7b as at June 2007 and since then have been steadily decreasing principally due to the global financial crisis and are now at about $5.1b. Increased and improved relocation activities undertaken by more ERFs has resulted in the rate of increase in membership being historically the lowest it has been at 1.8% per annum for year ending 30 June 2009. Membership increase rate peaked at 15.8% for year ending 30 June 2004. Membership is now about 6 million, double what it was in 2001, whilst average account balances have reduced from $1,030 in 2001 to $850 in 2009."

Methodology

The Heron Partnership utilises a holistic methodology to assess and rate the various components of an ERF based on 4 key Areas of Importance. These Areas of Importance and there weighting are, Organisation (10% weighting), Impact of Fees (20% weighting), Investment Arrangements (30% weighting) and Relocation Activity (40% weighting).

Through Heron’s assessment, the ERFs that received the highest scores in each Area of Importance were:

Wendy Barton, an Executive Director of The Heron Partnership again led the latest ERF assessment process. Ms Barton said, "Overall we found the ERFs more responsive and transparent than in previous years. Many have continued to make improvements to their product. For example, we have seen the most significant improvements, in terms of relocation activity. Key performers in this most critical area are AUSfund and SuperTrace, followed by AMP ERF, ISPF, Super Safeguard and Super ERF. They are all providing a proactive relocation service for members."

"However, we continue to have the view that the size of the market does not require 16 ERFs. It is interesting to note that the 5 largest ERFs represent 90% of total ERF assets, at an average size of about $900m. The average size of the other 11 ERFs is about$50m."

"We are also concerned that many ERFs continue to charge high fees. Fees vary between funds and size of a member’s balance, but on average it is well over 2%. By way of comparison, a retail superannuation fund with all bells and whistles, including investment choice and regular contributions with the full support of call centres etc would have an average fee around 1.15% of assets. The logic of paying more for less continues to astound us."

"To assess the impact of fees we selected four account balance sizes ($100, $1,000, $2,000 and $10,000) for fee comparison purposes. For a $100 account balance the fee range was 1.45% to 12.29%, for $1,000 from 1.45% to 3.91, for $2,000 from 1.11% to 3.91 and for $10,000 from 0.73 to 3.91. For each of these cases we had regard to all fees, including the asset-based fees that have been deducted before the crediting rate has been set."

"The 5 largest funds, for average balances have fees below the average overall fee, thus demonstrating in a meaningful way that scale can deliver efficiencies."

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