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News
www.fssuper.com.au Volume 13 Issue 04 | 2021
Merger legislation passes
APRA to weed out Choice underperformers Karren Vergara
A
Jamie Williamson
The legislation that will see the merger of Sunsuper and QSuper through was passed. The Superannuation (State Public Sector) (Scheme Amendment) Bill 2021 was passed by the Queensland Parliament on October 26, enabling the merger. The bill saw a relatively speedy turnaround, having only been introduced on September 1. "Subject to final regulatory and board approvals, this new fund will be a financial powerhouse for Queensland, supporting 2000 local jobs and reinforcing Queensland as a preferred investment destination," Queensland Treasurer Cameron Dick said. “New Queensland jobs are also expected to be created in the areas of investment, information technology and customer engagement as the fund grows in the future.” The passing of the legislation came just seven months after Sunsuper and QSuper announced their intentions. While the most complex super merger Australia has seen to date, the funds said the merger is on track to complete on 28 February 2022. “The merger of these funds will build on the successful legacy of both QSuper and Sunsuper and is a great result for their members and for Queensland,” Dick said. The passage of legislation comes as QSuper reinforces its commitment to climate change. Earlier this year QSuper, along with Sunsuper, was accused of lagging behind its peers when it comes to climate action. QSuper said a rebalancing of its global equities portfolio has seen a substantial reduction in carbon emissions financed by QSuper members. fs
The numbers
40%
How much more admin fees charged by Choice products are than MySuper products.
head of unveiling the inaugural Choice Product Heatmap, the prudential regulator released staggering statistics that will force superannuation trustees to lift their game and expose choice products that are failing members by charging high fees and delivering poor returns. APRA found that choice products charge 40% more in administration fees than MySuper products on a median basis using a member with a $50,000 balance. After examining 568 choice products with 43,000 investment options in total, choice products underperformed a risk-adjusted, peer-derived benchmark by more than 75 basis point compared to MySuper options. Further, performance of choice products with similar allocations to growth assets varied considerably. APRA highlights its findings in its
newly released Information paper: Choice sector performance: improving outcomes for superannuation members. Unlike MySuper products in which members defaulted into the product through employer arrangements, choice members typically either select other investment options available, join a new fund on their own accord or via an adviser. APRA executive board member Margaret Cole said historically, the choice sector’s complexity, variety and sheer volume of options have helped to shield poorer performers from scrutiny. “By shining a light on choice products that are failing to deliver quality, value-for-money outcomes, APRA expects to see the same types of improvements for the 34% of member accounts in the choice sector,” she said. fs
Colonial First State, BlackRock partner Annabelle Dickson
After failing to meet APRA’s inaugural performance test, Colonial First State (CFS) has appointed BlackRock to run strategies across its two MySuper funds. BlackRock won the mandate to provide investment services to CFS’ FirstChoice Employer Super (FCES) and Commonwealth Essential Super (CES) following a formal tender process. CFS will continue to set the investment strategy, oversee investment decisions and manage the implementation of those decisions in consultation with BlackRock. CFS will also retain its internal investment capabilities and both funds will continue as actively managed portfolios. The deal follows CFS’s failure of the Your Future, Your Super performance test in August alongside 12 other MySuper products. “It is important for our members that we act quickly to ensure that our MySuper products not only meet the benchmark test next year but outperform it in the long run,” CFS Superannuation chief executive Kelly Power said.
THE JOURNAL OF SUPERANNUATION MANAGEMENT•
“This is our top priority to make sure that both MySuper products feature in the top quartile of MySuper products available in market.” BlackRock’s head of Australasia Andrew Landman said the US$9.5 trillion asset manager is honoured to have been appointed by CFS. “Drawing on our experience in managing whole portfolios globally, BlackRock will offer the full breadth of its platform coupled with its in-depth investment expertise to support CFS’ efforts to deliver enhanced investment outcomes to its MySuper members,” Landman said. “We have a strong heritage in serving Australian superannuation entities and we recognise it is a great responsibility to help manage the retirement savings of many Australians. It speaks to our core purpose of helping more and more Australians experience financial wellbeing, and in the process, helping them retire with dignity and security.” Rainmaker Information executive director of research Alex Dunnin said the big driver for the partnership is efficiency and avoiding underperformance. fs
FS Super
