“As an industry we can, and should, be doing more to help investors navigate this climate of increased uncertainty,” Russell Investments’ Australian managing director Jodie Hampshire said.
Having the right asset allocation at the right time is critical.
— Jodie Hampshire, Russell Investments’ Australian managing director
Russell runs a prudentially regulated super fund under its own brand as well as managing money on behalf of third-party industry and retail superannuation providers.
Ms Hampshire said she was particularly “concerned” that just one in five survey respondents identified asset allocation as being an important factor in their ultimate retirement balance.
“For working Australians, asset allocation is one of the strongest factors driving retirement income adequacy,” she said. “Having the right asset allocation at the right time is critical.”
Literacy lacking
The findings come as reviews of the balanced funds of industry superannuation funds AustralianSuper and Hostplus, conducted by third-party researcher Lonsec and leaked to The Australian Financial Review, detected concerning investment management activity posing risks to members.
The Hostplus review found several “weaknesses” in the management and performance of its flagship balanced option, including “liquidity risks” posed by relatively high allocation to unlisted assets. It also said the $53 billion fund quietly changed its internal definition of “illiquid assets” in order to double down on the risky strategy after red flags were raised.
A review of AustralianSuper’s product, meanwhile, found “transparency regarding investment team member departures, performance and attribution outcomes of internal teams” to be well below peers’.
AustralianSuper responded that the Lonsec concerns were not reflective of its strong investment performance, while Hostplus declined to comment after initially agreeing to an interview.
Ms Hampshire would not comment directly about industry peers but said transparency was always valuable in shining a light on the way super investments are managed.
Not so helpful
However, she questioned whether broader access to fund research like Lonsec’s would be a solution to the worrying knowledge gap found by the Russell survey.
“It may be helpful for those really engaged and literate in finance, but for the average Australian not so much,” she said.
She speculated that the “one size fits all” approach in many balanced options and the “one size fits many” strategy in so-called life cycle funds were also contributing to widespread apathy and disengagement.
Instead, super funds need to increasingly adopt a more personalised and goals-based investing approach, where the specific retirement income needs and personal circumstances of the member are taken into account.
The survey found that more than one third of respondents (37 per cent) indicated they believed super funds were already managing investments in line with their personal needs and circumstances.
