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“If you had a retail fund PDS in front of you, what would it tell you about longterm performance objectives?” asks Warren Chant, principal at super fund ratings agency Chant West. “You’d get some waffly words, but no figures.” In their PDSs, industry super funds usually provide long-term investment objectives, for example consumer price inflation plus 3.5 per cent. But retail funds don’t. For example, according to the AXA Generations PDS, the manager’s Defensive multi-manager option targets “some growth in the short-to-medium term with smaller fluctuations in value” than the Moderately Defensive or Alternative Balanced options.

No specifics here. This is because retail funds, acting on advice from lawyers, fear legal action sparked by upset investors who interpret a return objective as a guarantee. “As soon as you start quantifying something and you don’t achieve it, you open yourself to being sued,” Chant says. Such a debate – over whether a stated investment return objective justifies an expectation – could provide investors wounded by big losses with a legal grey area to exploit in the courtroom.

This is primarily why longterm return targets, expressed against inflation, are not listed in the publicly released Chant West or SuperRatings fund rankings. “What would be a good idea to help people suddenly has a whole lot of disclaimers and assumptions with it”, Chant says. For example, “most people don’t know what standard deviation means”. For commissioned reports, Chant West compares investment returns against long-term return objectives – if they are available.

If these objectives were the norm across the super industry, the agency would list the median return for investment options against the average inflation-adjusted targets for each option, but not compare the specific returns and long-term targets of individual options. Chant believes that investors would be better-off knowing the long-term return targets of their fund – and to have it driven home that these are not guaranteed.

“Retail funds are very conservative about showing their expectations. We don’t agree with them. Industry funds set it out very well.” Meanwhile Chant slams the proposed SuperWatch league tables, in which the aggregate performance of super funds – not their investment options – will be ranked, as “nonsense and misleading”. Issuing performance figures to the public is a good thing, Chant says, but basing them on the performance of funds will be misleading because the vastly different asset mixes and membership demographics of industry fund default options and retail funds provide uneven grounds for comparison.

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