Super funds struggle to beat the market

Athird of Australian super funds are tracking below their investment objectives as they struggle to match benchmark indices, according to Rainmaker Information, which publishes Money.

Rainmaker’s performance review compares funds’ average returns across more than 900 investment options, to the respective capital market indexes.

Property and domestic shares are the bread and butter of super. Allocations to Australian shares underperformed the S&P/ASX 200 by 0.3% over five years while property underperformed the Rainmaker Composite Property Index by 0.1% over five years.

However, it’s a different story when it comes to international shares. Super funds underperformed the MSCI World ex Australia Index by 3.2% over five years.

“The irony is that while international shares was the worst asset class for super funds, it was also the best because it achieved the highest index return,” says Alex Dunnin, executive director of research and compliance at Rainmaker Information.

“If super funds could be more efficient in managing this complex asset class, their overall returns could be much higher.”

Australian fixed income was also left wanting, with funds falling short of the Bloomberg Barclays Australia Breakeven Index by 2%.

But it’s not all bad news. “Despite the asset class underperformance, two-thirds of MySuper products are still tracking above their investment objectives over three years, notwithstanding that investment objectives are formally set over rolling 10-year periods,” says Dunnin.