AustralianSuper now provides members with investment services that are commonly available through self-managed superannuation funds (SMSFs). The $42 billion industry super fund allows members to invest directly in domestic stocks, exchange-traded funds (ETFs) and bank term deposits rather than existing investment strategies.

The Member Direct option, one of 17 ways the fund enables members to invest, became available on November 28, 2011. Andrew Baker, Sydney-based managing director of research company Tria Investment Partners, says it acts like a “wrap” run by bank-owned wealth management companies that charge people for investing in managed funds and stocks.

“It’s effectively a super wrap structured as an investment option within the existing fund, and although no managed funds are being offered, we understand the technology is capable of doing so,” Baker wrote on the Trialogue blog on December 16, 2011.

It’s one way for AustralianSuper to prevent members with large savings leaving the fund to establish SMSFs. In the year to September 30, 2011, SMSFs gained $13.2 billion in assets to manage $397.2 billion, according to the Australian Prudential Regulation Authority.

“This is not about $10,000 balance members,” Baker says. “Few people realise that the top 10 per cent of members often control 30 per cent or more of fund assets. They’re highly vulnerable to retail and SMSF competitors.”

By charging a minimum of $180 each year, plus brokerage costs, the service is cheaper than the average annual charge of 2.3 per cent levelled at SMSF trustees with more than $200,000, according to consumer advocacy group CHOICE.

That’s a cost of $4600 each year. AustralianSuper members use the UBS equity trading system to trade stocks in the ASX 300 index, while ETFs are provided by iShares, the $545.8 billion business owned by BlackRock Investment Management. The term deposits are provided by National Australian Bank and ME Bank, which is owned by 30 industry funds, including AustralianSuper, through parent company Industry Fund Holdings.

“Overnight, AustralianSuper has gone from a 100 per cent institutional buyer to also being a distributor of equities, ETFs, term deposits, research and more,” Baker says. The service can only be used by members with at least $10,000 in super savings. They must invest at least $5000 in another option. It is not currently available to pensioners or corporate fund members.


Seven-year low


Consumers lost more confidence in investment markets in late 2011 than during the global financial crisis, the latest CoreData Investor Sentiment Index shows. The index shows that confidence fell to minus 22.4 in the fourth quarter of 2011, more than the minus 22.3 recorded in the first quarter of 2009, when the ASX 300 Index reached its financial crisis nadir of 3124.3 points on March 9. The decline was driven by expectations that Europe’s sovereign debt crisis will weaken the global economy. The result marks the seventh consecutive financial-year quarter in which investor sentiment about the performance of the domestic economy and financial markets is negative.


Macro trends


Four macroeconomic trends should help the Australian economy grow for its 21st consecutive year in 2012, says Paul Bloxham, HSBC chief economist for Australia and New Zealand. They are: mining investment; businesses’ adaption to the high Australian dollar; strong household savings; and the Reserve Bank’s ability to cut interest rates from 4.25 per cent. But the economy will suffer if China experiences a worse-than-expected downturn.

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