Australians are disillusioned with superannuation and should not invest in hedge or buyout funds but rather choose simple investment products, says Jim Minto, managing director of TAL Ltd.

“The average Australian shouldn’t go within a bull’s roar of a hedge or buyout fund; they’re for reasonably sophisticated investors,” he says. TAL manages $3 billion in superannuation funds.

Minto says fund managers will move away from complex investment products, given pressure to reduce fees.

“The industry is facing up to the fact it must deliver very efficient, cost-effective product,” he says.

“If the goal is to create confidence in the industry we should have people in an appropriate product.”

The funds industry has a long way to go before it regains consumer confidence, says Minto.

“Consumers find the industry complicated and not too consumer friendly,” he says.

“People distrust superannuation, as evidenced by the fact they’re saving elsewhere.”


3 comments on “TAL’s Jim Minto says average Australian shouldn’t come within “a bull’s roar” of hedge funds”
  1. Is Mr Minto really advocating that average investors invest in low cost, badly performing long only equity funds which generally track the ASX200 plus or minus 1% or so?

    If that is the case he is advocating investing in an asset class which has fallen 1.5% over the past 12 months, and lost over 11% in the past 36 months!

    By comparison, the average Australian equity based hedge fund has returned +7.91% in the past 12 months and over 15% the past 36 months. The best of these funds have far exceeded the average with less risk (volatility) than the market.

    While it is difficult for the average investor to access many hedge funds, this is not the case for their Superannuation fund which has both the access, and should have the expertise to analyse, research and select a portfolio of the best of such funds on behalf of their members.

    Sadly many Superannuation funds have not done so on behalf of their members, which is maybe why the average Australian is so disillusioned with their superannuation returns.

  2. Mr. Liptak is correct. A low-cost, long only Australian equity fund (which might be what Mr. Minto is advocating, although it’s not clear) is a high-risk investment that is totally exposed to market fluctuations.

    Perhaps peoples’ mistrust of superannuation is due to them NOT having had the good fortune of their funds’ trustees making investments in the types of funds that Mr. Liptak highlights.

  3. Avatar Daniel Liptak

    While Jim is right in saying there is an increased complexity, we contend that the returns that can be achieved by removing some of the investment handcuffs do provide a better outcome for investors. Low cost solutions should be an objective, but it should not be at the expense of long term returns.
    Last year we reviewed Australian equity market neutral funds and compared them to the average Australian equity fund. The finding was fascinating, for every dollar spent on fees the Australian equity funds returned just $0.13, that is they cost investors 87 cents for the extra return. Meanwhile the market neutral funds returned $2.21 for every dollar in fees. In other words there is a meaningful return available from market neutral funds in Australia.
    Yesterday we released a sector report into Global equity long short funds. This time we looked at an index of Australian offered long short equity funds over the last ten years and compared that to the MSCI World Index ex-Australia in A$. The broad market index has provided a total return of 25.88% over ten years (at a rate of 1.86% per year). The higher cost global long short index, net of fees, returned 362.67% (at a rate of 13.04% per year).
    The returns are a dramatic indication that alternative investment strategies can be part of a well considered and educated portfolio. We contend that there needs to be education for investors to understand their superannuation investments. Further superannuates should be building portfolios with future liabilities in mind and not to be driven by short term distractions.

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