Industry super funds

An industry super fund is a type of super fund that operates to benefit members. These members usually work in a particular industry or sector. Many industry super funds were initially only available to workers in a certain industry, for example, hospitality or retail. However, today, most industry super funds are open for all Australians to join. Industry super funds aren't owned by a major bank or financial institution. Instead, they're owned by the members of the fund. Industry super funds are not-for-profit funds, as they don't exist to make a profit for a parent company or shareholders, but instead exist to benefit the members of the fund.

Industry super funds typically have the following features:

• A lot of members from a particular industry
• Low fees compared to some major retail funds
• Strong long-term performance figures
• They're not owned by a bank or financial institution
• Large investments in Australian infrastructure (unlisted assets)
• Will sometimes have the Industry Super Australia symbol on their branding and marketing materials

A lot of the biggest super funds in Australia are either industry super funds or retail super funds. Industry super funds and retail super funds have many similarities. Both offer solutions for Australian workers to save money for retirement. Both industry and retail funds offer members a range of investment options, including default MySuper or balanced options as well as high growth and conservative options. Both types of super funds offer members insurance cover within their super.

However, there are a few differences between retail and industry funds to be aware of. The main differences between these two types of funds lie in their ownership structure, which ultimately affects their fees and investment returns.

Profits

Industry super funds are member-owned, not-for-profit funds. They're not owned by a bank or financial institution like retail funds. They also don't have shareholders to pay (or please!) as they're not publicly listed companies. Profits go back into the industry super fund to benefit the members.

Retail funds are owned and operated by large financial institutions like banks or insurance providers, so they're not owned by members. Because retail funds are often owned by publicly listed companies on a stock exchange, the super fund pays some of its profits to shareholders (in the form of dividends), investors and also executives and board members employed by the financial institution.

Because retail super funds aim to make a profit, they often charge higher fees than industry funds. However, this isn't always the case, so make sure you compare your options before committing to one fund over another.

Attracting new members

Industry super funds don't pay commissions to financial planners to sell or recommend the fund to consumers. This means that, in theory, the money the industry fund generates goes back into the fund to benefit new and existing members.

Industry super funds do, however, spend a significant amount of money on advertising to attract new members. This has been described by critics as not fitting in with the "profit-for-members" philosophy. However, the funds argue that the more members it has, the more it has in funds under management, which will ultimately benefit all members in the long term.

Retail funds, on the other hand, are known to pay commissions to financial planners to sell their super product to clients. The money used to pay these financial planners comes out of the super funds' profits (generated by the fees charged to members).

Because retail funds are owned by large financial institutions that offer many different financial products and services, it's also common for a bank's financial adviser to cross-promote the super fund product to bank customers who have another product, like a mortgage. This isn't necessarily a bad thing; if you've got all your banking products with a particular bank then having your super with the same bank might be a convenient and appealing option for you.

Investments

Another interesting point of difference between these two types of funds is that industry super funds have significant investments in unlisted assets. This mainly includes Australian infrastructure like roads, bridges, airports and public transport.

Some analysts say these investments have helped industry super funds outperform retail super funds on average over the long term. However, others have raised concerns about the large amount of workers' super being invested in unlisted assets that are difficult to value and difficult to sell in comparison to listed assets like shares.

Industry super funds have, on average, performed better than retail super funds over the long term, according to research and advocacy group Industry Super Australia. One potential reason for this is that industry super funds tend to charge lower fees (although this isn't always the case). Because fees eat into your investment returns, the higher the fees, the less you'll earn in returns.Here are the best-performing industry super funds according to super research agency Chant West.

4 best-performing industry super funds

This list looks at the growth funds only (funds with 61-80% allocation to growth assets), which is where the majority of members have their super. Some industry funds have high growth and index investment options that may have performed even higher.