Superannuation: Switch from retail funds not waning

Flows into AustralianSuper from people switching away from retail funds were 90 per cent higher than they were last year.

AustralianSuper CEO Ian Silk: ”We thought it was a short-term blip.” Picture: Britta Campion

AustralianSuper chief executive Ian Silk says he is “staggered” to see inflows from retail superannuation funds continuing at such a high rate as the country’s biggest fund closes in on $160 billion under management.

Mr Silk said flows into the fund from people switching into AustralianSuper were running 90 per cent higher than they were last year when the royal commission into financial sector misconduct was under way.

AustralianSuper has been a major beneficiary of a stampede out of funds managed by the big four banks and AMP and into the profit-for-members industry funds after the royal commission.

Figures from the prudential regulator released this week showed industry super funds grew by $80bn or 13 per cent to $677bn in the 12 months to the end of March, compared to just 3.4 per cent growth in the retail funds that were once the dominant players across the industry,

Mr Silk said AustralianSuper had $16bn of net inflows — new money coming into the fund, after payouts to members but excluding investment returns, with more than $5bn of that coming from people switching funds.

“It’s not waning,” Mr Silk said.

“Frankly we are staggered that it is continuing because we thought it was a short-term blip when the currency of the royal commission … was at its keenest.”

Mr Silk said the influx of money had not forced the fund to change investment strategy, nor hurt investment returns.

The fund’s overriding interest was member returns and “we should shut the door (to new funds) if it affects performance”.

AustralianSuper has also been forced to expand its financial advice offering because of the growth in member numbers. It employed 20 people directly but would “significantly” expand its existing network of 1200 external advisers.

Mr Silk said the advisers had to pass a vetting process before they could be endorsed by AustralianSuper and offered advice only on a “fee-for-service” basis, with no commissions and no access to fund money for advice that was not directly related to super.

Mr Silk said financial advice was one of the most pressing issues in the industry, with just 15,000 advisers in Australia.

Mr Silk told an Australian Israel Chamber of Commerce lunch in Sydney that the fund was on track for a return around 7 per cent this financial year.

Heather Ridout, the outgoing chair of AustralianSuper, told the audience that tailwinds for super were not as strong, with the local economy soft and US-China trade tensions clouding the outlook for investment.

“I worry that world politics is intruding into the investment world more than it ever has,” Ms Ridout said.

She also defended the governance of the industry funds against what appeared to be renewed attempts by the government to change from equal union and employer representation to a majority of independent directors.

She said the governance model had been a real strength because directors had “skin in the game” when making decisions.