The HostPlus ‘Indexed Balanced’ member investment choice option, which costs just 0.036 per cent plus $1.50 a week administration fee, was well on its way to $1 million under management after its first month of availability, despite not yet receiving any promotion.
As at the end of December, 21 members had placed a total of $720,000 into the passive balanced fund, even though no communication has been made on its behalf, beyond a mention in HostPlus’ online member investment choice guide and some coverage in trade media.
The response was proof of the demand for low-cost indexed products, according to HostPlus chief executive David Elia. However, the mere fact the 21 members knew about the option indicated they were highly engaged, and were most likely using Indexed Balanced in concert with other strategies, Elia said.
The ultra cheap option – costing investors with a $50,000 balance just $96 per year, versus $403 for AMP’s entry into the bargain-basement indexing market, Flexible Super Core – would be promoted in future member mailings, but would not be emphasised more than any other option, Elia said.
The launch of the HostPlus option, as well as other all-passive super offerings like AMP’s ‘Flexible’ suite and BT’s Super For Life, have created anxiety among some funds managers. There is a concern that these vanilla products have been launched with MySuper legislation in mind, and will touch off a ‘race to the bottom’ that could eventually marginalise ‘expensive’ actively-managed products.
The MySuper regime is yet to be legislated, however Elia said any HostPlus MySuper product would probably look similar to the default balanced fund which currently housed 97 per cent of members. The best fit for the Indexed Balanced option would be within the ‘choice’ architecture operating separately to the MySuper world, he predicted.