AustralianSuper has broken a long silence on the MySuper debate by defending itself from criticism that it has not innovated.
Alistair Barker, investment manager at AustralianSuper, speaking ahead of a presentation he is to make at the Fiduciary Investors Symposium on November 19, says the fund did its greatest thinking on its default fund just after the global financial crisis.
“We have been very silent on this issue, but we think that a lot that has been said is not right,” said Barker. “A lot of funds have been unfairly criticised for not innovating on MySuper, but we spent most of our time innovating from 2008 onwards, so the issues being raised are largely dead and buried from our perspective.”
The decision was made following the GFC to maintain members exposure to growth assets until after they retire.
This was driven by AustralianSuper members’ average balances at retirement representing only a small portion of their overall wealth. This was taken into consideration with the age pension representing an entitlement of over $500,000 in present value terms, home ownership against an average account balance at retirement of $150,000.
“Our biggest problem is adequacy, not the volatility of markets,” he said.
Barker added AustralianSuper had been vindicated in its decision not to de-risk after the GFC, by the strong rebound in growth assets. Its focus on investment since the GFC has been to add value by actively adjusting the asset allocation of the default strategy and to internalise funds managed to save on fees.
He said de-risking strategies (such as lifecycle or cohort-based approaches) were right for members whose savings going to deliver a large part their members’ retirement income, but questioned why it had taken until the advent of MySuper for these to be created.
He added that MySuper was an incomplete statement of policy as it did not deal with retirement. Further, he said it was ridiculous that the system currently does little to encourage members to convert their balances into retirement income.
The focus on cost in MySuper runs counter to AustralianSuper’s strategy of optimising net returns and was sparking some “unhealthy developments” that had focused on lowering costs at the expense of returns, he said.
Alistair Barker is to talk on MySuper product design at the Fiduciary Investors Symposium being held at Peppers Moonah Links, the Mornington Peninsula on November 17-19th. To find out more on the conference click here.