Passing super test seen as name of the game
Concerns have been raised that some superannuation funds may be able to ‘game’ the annual performance test through their asset allocation or by providing fee rebates. Morningstar said fear of failure and the growing capacity constraints of ‘mega-funds’ in Australian listed equities and some other asset classes had encouraged funds to “hug” the Your Future, Your Super performance benchmarks. The research house also said many major funds were performing so far above the test’s pass mark that they were less concerned about failure. “Its simplicity leaves it susceptible for ‘gaming’ by funds, who may allocate assets in a way that offers a high probability of passing the test,” Morningstar Senior Principal, Manager Research, Australasia Thomas Dutka wrote in a presentation. He said the limited menu of broad-based benchmarks could discourage other allocations, the test did not account for strategic asset allocation or the risks taken, and fee reductions may affect member experience and operational infrastructure. Of 556 products tested by APRA, just seven failed, and they were all platform trustee-directed products (TDPs). Dutka said a heavy concentration of platform TDPs had returns just above the -0.5% per year ‘pass
