AustralianSuper to Manage Equity In-house

The Australian has reported that AustralianSuper, Australia's largest industry superfund, is planning to manage some of its $15 billion of Australian equity investments, which are currently managed externally.

AustralianSuper head of equities, Innes McKeand told The Australian that the fund was 'in the process of putting a platform in place' to oversee some of its Australian equity investments.
The move would be a blow to the funds management industry which is already struggling with low volumes, soft equity markets and fund outflows.

The moves come as active equities managers face pressure to perform in the face of a shrinking number of investment mandates, driven by super fund mergers and a shift to other asset classes.
Mr McKeand told The Australian that while AustralianSuper would continue to award mandates to external managers, its internal platform was being built 'to cope with a significant amount of funds' to be run by fewer than 10 fund managers.

It is thought that other funds such as UniSuper and Telstra Super are considering a similar move due to their build-up of an in-house stock-picking team.

Transparency Needed on Fees - Members Charged Too Much By Managers (Superannuation Australia)

While the Australian super industry has grown in scale, this has not translated into lower fees for members.

Despite the amazing growth of scale in Australia's superannuation industry, fees have grown instead of dropping in recent years and members should demand transparency from funds, a financial adviser has said.

Custom Wealth Solutions chief analyst Chris Appleyard said "typically, when a company increases its production or its supply of services, it achieves an economy of scale and can reduce the costs of doing business".

"Superannuation funds do not seem to have passed on these savings to fund members," Appleyard said.

"Although nobody likes to pay superannuation management fees, one may think they are just the price of doing business; a necessary evil one cannot avoid. Many super managers count on that attitude and are overcharging super members."

The local superannuation market has the fastest-growing pension sector in the world, having grown 17 per cent in the past 10 years. The $1.3-trillion business was more than triple the United States retirement market.

"However, despite this amazing growth in productivity, members and assets invested, super fees have grown instead of dropped in recent years. Consumers may think that paying fees is unavoidable if they want the benefits of a managed superannuation fund. They may also conclude that 1 per cent here or there won't make much of a difference in the long run. Unfortunately, they would be completely wrong," Appleyard said.

Not all super funds charged the same management fees, with the average charge being 1.3 per cent, according to super industry researcher SuperRatings.

"However, some funds will charge up to 4 per cent of the fund's assets in fees," Appleyard said.
"That's a huge difference. When it comes to super funds, just half of a point difference can mean $50,000 less at retirement."

The Australian Taxation Office's self-managed superannuation fund (SMSF) overview for 2009/10 said the estimated average operating expense ratio of SMSFs fell from 0.69 per cent to 0.59 per cent and 0.54 per cent over the years ended 30 June 2008, 2009 and 2010 respectively.

Most SMSFs had an estimated operating expense ratio of less than 1 per cent (64.7 per cent of SMSFs in 2010). The highest proportion (almost 38 per cent in 2010) had an estimated operating expense ratio of 0.25 per cent or less.

"Nevertheless, self-managed super funds do require a substantial investment in time and resources that could make them prohibitively expensive for members with small super fund balances," Appleyard said.

Often managers would charge fees for services that clients either did not need or did not know about. "It is crucial that super investors understand what services they are receiving and what it costs them or else you can end up paying for services you are not aware of and don't use," Appleyard said.

People should consider the cost and availability of insurance, the fees super funds charged, and their expected retirement age before choosing a super fund. For some people, a competitive industry or government super fund was a good fit, while others benefited from more flexible instruments, such as master trusts and SMSFs.

Reviews of Hostplus by users - Superannuation Australia

Below are some user reviews and opinions of Hostplus offered by regular Australians who have had there money in Hostplus.

May 20th, 2010

Pros: Every hospitality company works with it, easy to compile different jobs' supers.

Cons: Watch out for the insurances, this guys are ripping you off! They put the insurance as default, and charge it to everyone, no form to cancel the insurance on their brochures; of course there's a form to increase your insurance. I've lost almost half of my money (I only work 15hrs per week) between insurance and fees! A lot of bureaucracy to get rid of the insurance!

Overall: They are ripping you off, read EVERYTHING, reject what you don't like and be carfeul with the fees they charge (they are high!)

1 out of 5

Reviewer: rodrigo
Member since: May 20, 2010

May 17th, 2009

Pros: A good fund if you were able to pick & choose your own portfolio.

Cons: They have a lot of fees that they try to cover.

Overall: Originally I thought this was a good fund when I entered when I was employed by the hospitality industry & I signed over my other super fund into Hostplus. But after a while I realised that I had made a mistake, yes it has come across as one of the best funds but it doesn't seem to be as good as it could have been by taking too many fees, some of these companies are getting very greedy.

2 out of 5

Reviewer: EileenGarraway
Member since: May 14, 2009

April 21st, 2009

Pros: average

Cons: some fees (that go to Hostplus) are taken out of investment returns, so its not as cheap as they make out

Overall: average fund, not all its cracked up so to be take a look at the fine print in the PDS

1 out of 5

Reviewer: Guest

Pros: As above, member fund, profits to members etc, great returns (except 08 of course, looking like an `8% loss)

Cons: BEWARE! The insurance situation is a minefield and very "cloak and dagger". My statements clearly advise no insurance cover and no deductions for insurance(I no longer work in hospitality), but when I call and ask they tell me I am paying insurance and dont like to go into detais, they send you the insurance booklet which you need a PhD to wade through, not nice.

Overall: On the balance, average. Great choices, very poor insurance situation that is possibly ripping off members without them knowing about it.

3 out of 5

Reviewer: scotty71
Member since: Aug 18, 2008

June 30th, 2008

Pros: This is an "Industry Super Fund" which means that it is non profit and they don't pay commissions to brokers. There is a lot of choice within the fund. I picked the fund that put all of my money into international shares. This is not for everyone but I really liked the fact that I had a choice of how my money is being invested.

Cons: They are slow to send out forms. The life insurance that is offered as part of the fund is impossible to understand. I wanted to get life insurance but it was far too complicated.

Overall: I have been happy with host especially given that all of the profit goes back to members. In particular, I chose them because of the options for how my super is invested. They could be better at sending out forms but I have only needed forms once so it was not too much of an issue.

4 out of 5

Reviewer: gmcopi
Member since: Jun 30, 2008

October 29th, 2007

Pros: great return (as at now Oct 07), low fees, easy admin

Cons: none so far

Overall: great fund with low fees easy to deal with admin and quick to get a job done. Has been in the top 5 performers for the last five years (as at Oct 07) averaging 15% return in the capital growth choice. Very happy to see my money grow. Hope it continues only time will tell. Also the capital stable account has been performing at over 10% for the last few years as well. So overall I highly recommend the fund for anyone who wants a simple superannaution fund to deal with and good performance.

4 out of 5

Reviewer: dijoca
Member since: Sep 17, 2007