Industry super outperforms bank-owned funds

Peter Terlato 24 November 2016

time clock savings money returns investment superannuation

Long-term investments and "unlisted" assets pay off with bigger returns.

Industry superannuation funds' not-for-profit structure and long-term investment strategies have paid off for members, delivering greater returns than bank-owned funds, according to new research.

Independent ratings agency Super Ratings has revealed new data which shows over a 10-year period industry super funds consistently outperform bank-owned funds by around 2%.

1 Year3 Year5 Year7 Year10 Year
Industry super funds4.51%7.12%9.31%7.94%5.37%
Bank-owned super funds2.01%4.92%7.38%5.95%3.07%
Outperformance2.50%2.20%1.93%1.99%2.30%

Industry super's performance is greatest over the short term, with first year returns 2.5% higher than that of bank-owned funds. Over three years the gap is tightened to 2.2% but extends to 2.3% after 10 years.

Industry super trustee board members consist of union and employer group representatives, whereas bank-owned funds employ finance professionals.

"Industry super funds delivered better returns to members because their trustee boards are committed to investing for the long term in infrastructure and other 'unlisted' assets such as property, and returning all profits to members," Industry Super Australia chief executive David Whiteley said.

"Industry super funds are deliberately different to the major banks, and will resist any proposals to make their structures and culture more like the banking sector," Whiteley said.

Many of Australia's largest superannuation funds, predominantly managed by the big four banks, have underperformed and under-delivered over the past five years, earning the moniker "fat cat funds".

Satisfaction with industry super funds continues to outshine that of retail funds.

Research released by APRA in September found Australia's retirement savings pool would have been $105 billion better off if retail funds matched industry fund returns over the last two decades.

With an average balance of around $1.2 million and a proclivity for diversifying investments to spur capital growth, satisfaction among SMSFs is gaining momentum at the top end of the scale.

If you're looking to switch funds, consolidate your super, better manage your self-employed savings or take out income protection for your nest egg, it's best to compare options and make the right decision.

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