If ratings agencies can’t agree on comparable classifications for asset classes within industry superannuation funds, what hope do advisers have? This was the question posed by Andrew Fisher, Sunsuper’s head of asset allocation at Professional Planner’s recent Retirement Conference.
Fisher spoke on a panel discussion with Lonsec’s head of investment consulting, Veronica Klaus, Schroders’ director, Graeme Mather, and SMSF specialist adviser from Wealthspring Financial, Liz Hughes. He noted that Sunsuper’s balanced option was included a “balanced” survey by researcher, SuperRatings, and a in “growth” survey by rival researcher, Chant West.
“You know there’s something wrong when the ratings agencies can’t even decide,” he said.
Fisher used the forum to explain the way Sunsuper categorises asset classes according to their growth/defensive characteristics in light of the challenges the advice industry is having to compare industry fund allocations with alternate portfolio allocations for their clients.
“There are quite big differences from fund to fund [in superannuation] in terms of how they define different asset classes,” Lonsec’s Klaus noted.
The issue of comparability of funds inside and outside of the pooled superannuation system has become critical for the advice industry in light of the heightened focus on best interest duty following the Hayne royal commission’s final recommendations.
However, being able to compare funds to ensure an investment or a proposed alternative is in a client’s best interest is not as easy as it may seem, Klaus noted.
“You could look at the income volatility, amount of equity in an asset class or the growth of the capital income split of an asset class to determine where it comes from… these things might be easy within equities or fixed income, but it’s much more difficult when it comes to alternatives and direct property,” she said.
Indeed, classification of alternatives, property and infrastructure are where different funds think about things differently.
“Private Equity is a growth asset and we treat it as such. Property and infra we are targeting 50 per cent growth, 50 per cent defensive… Hedge funds we see as a defensive alternative. We can turn property into a growth asset using leverage but we don’t to that but we don’t do that,” Fisher explained.
Sunsuper and industry funds more broadly are increasingly looking to engage with financial advisers to offer their members advice to address their changing needs as they enter retirement.
Anne Fuchs, Sunsuper’s head of advice and retirement, recently told Professional Planner that funds actively working with advisers are getting much better outcomes than funds that don’t.
Sunsuper dismantled its employed adviser distribution channel three years ago and has a referral program with vetted advisers, Fisher noted.