The APRA performance test has just claimed its first MySuper casualty for the first time in three years in BUSSQ’s default product.

The Your Future Your Super test, established by the Coalition government and began in 2021, was looking, at one stage, to be unfailable for MySuper products. But on Friday, APRA announced that BUSSQ failed the performance test – the first MySuper product to do so since 2023.

Notorious for encouraging benchmark-hugging behaviours, commentators have argued that the performance test in its current form has become gameable as long as funds take the meticulous steps of ensuring their portfolios stay close to relevant indices and manage strategic asset allocations carefully. Treasury is deep in the process of canvassing industry feedback on ways it can improve the test, including incorporating a CPI+X benchmark or a simple reference portfolio approach.

But BUSSQ’s failure shows the existing YFYS still has some bite to it. It was the only one out of 50 MySuper products to fail, while 11 out of 141 platform products failed the test.

A closer look at APRA’s comprehensive performance package reveals that the trouble lies in investment performance rather than fees. The 10-year net investment return per annum was 7.04 per cent, firmly in the lower quartile. The 10-year net investment return relative to SAA benchmark per annum – constructed based on BUSSQ’s own SAA – was negative 0.57 per cent.

It’s hard to say exactly what went wrong without more visibility on BUSSQ’s portfolio but the fund says it is now on top of addressing the underperformance. The largest asset class exposure in the investment option is international shares (29.5 per cent), followed by Australian shares (22 per cent), infrastructure (12.5 per cent) and fixed interest (9 per cent).

“We conducted a holistic review of our investment strategy last year and implemented material changes to our investment strategy and portfolio, removing underperforming investment managers and moving to more indexed equity mandates,” chief executive Damian Wills said in a media statement.

“Our priority is, and always has been, delivering strong retirement outcomes for our members.”

But still, if it hasn’t happened already, this performance test outcome should prompt some soul-searching at the $7.5 billion fund about its future. For one, it is among a diminishing number of small funds with assets under $10 billion that are constantly under merger pressure. The $8.2 billion Prime Super is the latest to throw in the towel, this month agreeing to explore a successor fund transfer with Aware Super.

It is also a fund with sub-system growth. According to the 2026 State of Super report from the Conexus Institute, the fund is in competitive outflow and only slightly positive overall asset inflow, expanding at a 0.8 per cent growth rate.  

BUSSQ needs to inform its MySuper members that the product has failed the performance test, but a second consecutive failure would mean it is prohibited from taking on new beneficiaries. And the stakes are high –  $6.4 billion, or 85 per cent of the BUSSQ assets, are in the default product, compared to around half of the assets in the default product on a system level.

While funds can retain members in a twice-failed product until it passes the performance test again – under which circumstance the member will receive a letter every year notifying them of the product’s failure until it meets the APRA requirements  – choosing to merge with another fund is a more common course of action.

BUSSQ still has a year to turn its performance around, but it shouldn’t wait for a second failed test to decide its future for it. Whether that means an urgent fix of its portfolio or a harder conversation about scale, the fund has more control over the outcome now than it will in twelve months’ time.