(Pictured: Warren Chant)
by Greg Bright
The third annual Chant West Super Fund Awards, to be announced on May 6 at a black-tie event at the Ivy Ballroom in Sydney, follows three themes for the funds which have helped Warren Chant, the research firm’s enigmatic principal, to narrow down his short list. Fees and My Super is one of them.
Chant says that choosing the best funds is difficult. Choosing the very best of those, in any given category, is especially difficult. “What we try to do each year, therefore, is identify key themes that have shaped funds’ behaviour and then identify those that have responded best to those themes,” he says. “The themes we have identified this year are fees, retirement incomes and insurance.”
The insurance award has been reinstated this year. As has been well documented, insurance premiums have risen dramatically in the past year or so. Chant says that some funds have simply passed on hefty premium increases to their members but others have improved their insurance offering and Chant West wants to recognise them.
On the investment management fee issue, which is always the headline discussion at any industry event, Chant has been a champion for what many of us believe to be a sensible approach to investment strategies. That is, as John A. Nolan, the founder of JANA Investment Advisers, famously said in the 1990s: ‘all that matters is what the members eat’. After-fee and after-tax returns is what the members retire on.
Chant says: “On fees, we’ve seen a continuation of the commentary that started with the Cooper Review, leading to the introduction of My Super, and has been revisited by the Grattan Institute and most recently the Financial System (or Murray) Inquiry. In each case there has been a strong focus on reducing fees based on the perception that current fees are too high and that reducing them will improve returns. The Murray Inquiry has even gone so far as to say that if Stronger Super reforms don’t result in lower fees for My Super products, it wants a tender system introduced to allocate new workforce entrants into high performing funds.
“We disagree with the whole premise, and we are concerned that the perception that fees are too high will become accepted as reality. What we see, every day of our working lives, is intense competition between major funds and between high quality investment managers. Whether members are disengaged or not, they still benefit from price competition at the fund level and as a result the vast majority pay very reasonable wholesale fees to have their savings expertly managed.
“We question whether the current preoccupation with fees is really in members’ best interests, when surely what we should be focusing on is achieving the highest net returns. That is what the best funds do. So in this year’s awards we’re going to identify those funds that have resisted the call to ‘low cost’ and concentrated their efforts on spending what is necessary to get the best results for their members. They are the brave ones, and they deserve to be recognised.”
Chant West’s second theme, helping the firm in its super fund award selection, is to do with the vexed issue of retirement products. Chant says there’s a need t develop appropriate retirement income products, particularly those that address capital preservation and longevity issues which the current account-based pensions don’t.
“It is early days yet, but some funds have made a real effort to address these issues. We want to recognise them,” he says.
“Our final theme is insurance, and here we’re focusing on the need to provide insurance products that are sustainable in an insurance world that has changed markedly. While some funds have simply passed on hefty premium increases, others have vastly improved their insurance offers and we want to recognise them.”
As in previous years, the winner of the premier ‘Super Fund of the Year Award’, has to have demonstrated excellence across a range of attributes. The weightings assigned to each attribute are: investments 35 per cent; member services 25 per cent; fees 15 per cent; insurance 10 per cent; administration 10 per cent; and, organisation 5 per cent.
Further information about the awards and their presentation: click here