(Pictured: Stephen Huppert)
Australia’s implemented consultants can add value in their manager selection, but, at the whole-fund level, this tends to be dissipated by poor asset allocation decisions, according to a new report from Deloitte Actuaries & Consultants.
The report published last week, entitled ‘Beating Those Super Fees: Is Active Management Delivering?’, was based on a performance survey for the five years to June, 2014. The researchers described the results as “surprising”.
Deloitte chose the Vanguard growth index fund as a benchmark to compare the consulting firms, which were not named in the report. Of the six firms studied, all added some value in manager selection but only three added value at the total fund level.
In terms of strategic asset allocation, which client super funds would be able to assess and approve prior to make their implemented consultant choice, only two of the six added value.
When the researchers estimated fees, the report also questioned what the net added value might me for the average offering on an after-fee basis.
The main implemented consulting providers are Mercer, JANA, Russell, Morningstar (the old InTech funds) and – perhaps, depending on Deloitte’s definitions – MLC and AMP. Deloitte did not name names in the publicly available summary.
Stephen Huppert, a Deloitte partner, said: “Trustees must be vigilant. Appointing a firm to look after assets does not abrogate the Trustee’s duty to monitor performance and to understand what is being done well, and what can be improved – and to act accordingly.
“We know that implemented consultants offer what amounts to an end-to-end solution and that this appeals to trustees. However, our analysis suggests that there is extra value that can be extracted by focusing each mandate on the specific area where a consultant had demonstrated its ability to deliver added value.”
A summary of the report is available here