Only 15 out of 359 Australian funds outperformed the last 20 years of booms and crashes: the “Fierce Performers” This outperformance amounts to ~$411k more for the average Australian by their retirement The largest outperformance occurred in the ‘Sustainable’ investment category Index funds also outperformed active funds, and lower-fee funds outperformed overall
SYDNEY, July 13, 2022 /PRNewswire/ — Wealth advice platform and social enterprise Super Fierce has launched Australia’s first index to capture 99.8 percent of the entire market, based on 2,069 investment options across 359 superannuation funds.
The Super Fierce “Fierce Performance Index” (FPI) is also the only index to accurately measure not just performance, but also consistency of performance across multiple market cycles and across multiple investment options.
This is compared to other options which are often biased due to involving a “pay-to-play” component (the funds sponsor the research in some way), are not designed for Australian consumers, only cover one investment option in each fund, and suffer from recency bias due to a limited time period selection process.
As an example, ratings agency rankings suffer from recency bias and, worse still, are also often incomplete and biased due to funds having to pay to be included. The Your Future, Your Super (YFYS) comparison tool also has many current perceived weaknesses which are addressed by the FPI, which:
analyses performance of various time periods since 2003, not just YFYS’s single period of eight years ending at the most recent financial year end, which can skew results if markets have recently been particularly bullish or bearish; looks at consistency of performance across different risk options and for lifecycle and sustainable investing options; adjusts for the differences in strategic asset allocation (market risk) across funds, rather than relying upon the funds’ inconsistent self-classifications; adjusts for biases by measuring performance in good, average, and bad market conditions reduces the risk that “past performance is not indicative of future performance” by measuring consistency year after year and across all investment options; assesses resilience of relative performance by looking for funds that are persistently above 50th percentile year-by-year; and includes all fees on a consistent basis, addressing the criticisms about YFYS’s handling of administration fees.
This makes the FPI Australia’s first ever non-biased, comprehensive, and highly accurate mathematical analysis and reporting of super fund performance helping Australians maximise their retirement savings.
Trenna Probert, Super Fierce founder & CEO said: “Identifying the highest-performing superannuation fund through basic comparisons is a daunting and complicated task for the average Australian consumer.
“We created the Fierce Performance Index to provide all Australians with an affordable way to find and select a super fund that will suit their individual needs, leaving them substantially better off in retirement.
“Rankings, ratings, and the multitude of other sources of information are difficult to find and understand, and they are of course not tailored to an individual’s circumstances or preferences. With the current state of the financial advice industry further exacerbating this, we knew Australians needed a better way to select the right fund for them.”
Craig Swanger, Super Fierce Co-Founder and Head of Product and Investments said: “APRA’s Your Future, Your Super does what it is meant to do by highlighting the poorest performing super funds. But it was never designed for everyday Australians looking for guidance on choosing a fund that is likely to perform well in the future.
“This is because, to date, we haven’t had any proof that historical performance can reliably predict future performance. But our data has uncovered that past outperformance can be a predictor of future performance – so long as you analyse a fund’s performance across multiple market cycles and investment options.”
Customised FPI recommendations are included in the free Statement of Advice that any consumer can access on the Super Fierce website.
Fierce Performance Index: 2022 results
Performance data to 30 June 2022 demonstrated:
Australia’s top 15 super funds (the “Fierce Performers”) outperformed in all categories: High Growth, Growth, Balanced, Moderate, Conservative, Australian Shares, Global Shares, Ethical and Indexed The largest outperformance was in the Sustainable (1.70% p.a.), Indexed (1.31% p.a.), Balanced (0.92% p.a.), and Growth (1.03% p.a.) options, which are the four most popular options But the performance advantage of the Fierce Performers was so large that investors could drop a whole category of risk (e.g. from Growth to Balanced), and they would have still outperformed Fierce Performers had higher performance with lower fees, again across every category. The biggest difference in fees is in the Balanced (the most common) category Index outperformed active: Across 220 Balanced funds (60-75% in growth assets), indexed funds outperformed actively managed funds by 1.66% p.a. over the past ten years Sustainable investing outperformed normal funds over the past ten years Lifecycle funds underperform by around 0.65 per cent per annum. These funds are the option now used by more than 5 million Australians through employer selected defaults. The FPI “index score” runs from 0 (lowest possible) to 100 (highest possible), allowing for useful comparisons:
– the Fierce Performers (the 15 funds who passed every test) achieved an average index score of 86
– this is compared to the 13 funds that were named and shamed by APRA’s MySuper Product Performance Test last year, which achieved an average index score of just 31
– yet 39 other funds that were not named by APRA last year actually scored a lower average index score than this, foreshadowing that the Test will likely capture several more funds over the next few years
Fierce Performers 2022
The following 15 funds passed all of the tests of consistent outperformance. This is NOT a ranked list, but rather an alphabetical one:
Australian Retirement Trust AustralianSuper Australia Post Super (now merged into Australian Retirement Trust) Care Super CBUS Super Energy Super equipsuper HESTA HostPlus Vision (Local Authorities Super Fund) Mercy Super MyLifeMyMoney Super NGS Super Public Service Super* Qantas Super** Unisuper
*Public Service Super accumulation funds only. FPI does not include Defined Benefit funds.
**Qantas Super is yet to report June 2022 performance, but were strong enough by the end of May that failing the FPI tests after June 2022 performance would be statistically impossible.
Fierce Performance Index: Methodology
The 2,069 super fund investment options are grouped by investment strategy into the following categories:
Diversified:
All Growth (96%-100% in Growth Assets) High Growth (86-95%) Growth (76%-85%) Balanced (61%-75%) Moderate (41%-61%) Conservative (21%-40%) Capital Stable (0-20%)
Lifecycle:
All Growth (96%-100% in Growth Assets) High Growth (86-95%) Growth (76%-85%) Balanced (61%-75%) Moderate (41%-61%)
Specific Strategy:
Ethical Diversified:
– High Growth
– Growth
– Balanced
Equities:
– Global
– Australian
– Ethical
– Indexed
Real Assets:
– Property
– Infrastructure
The performance for each fund is then adjusted for fees where some fees had not been deducted from performance by the super fund, and compared over 5 year (2006-11, 2011-16, 2016-21), 7 year (2004-11, 2009-2016, 2014-21), 10 year (2004-14, 2011-21), and 15 year (2006-2021) periods to rank relative performance compared to like-for-like funds within the above categories.
Finally, where available, the year-to-year standard deviation of fund options’ performance was calculated, to indicate whether the fund typically had more or less consistency (or average consistency where annual fund data was not provided).
The process effectively eliminates funds in stages:
First, historically outperforming funds are selected (the top 33% of performers over past 15 years, or top 25% if a fund has less than 15 years’ track record), resulting in 97 of 359 funds in the database. Then funds that outperform only by taking more risk are removed, adjusting returns based on their strategic asset allocation. This reduced the list to 58 funds. Then funds that are not consistently above average in good markets and bad are removed, leaving just 20 funds. Finally, funds that were only strong in the MySuper category but not other investment options are removed. This leaves 15 funds with persistent performance. These 15 are the “Fierce Performers” used in our personal advice. All 359 funds are then indexed from 0 (poorest) to 100 (strongest) based on the z-score results from these tests.
Super Fierce (www.superfierce.com.au) is a wealth advice platform and social enterprise that helps women close the gender wealth and retirement gap. It provides a scalable advice platform that compares 500+ super funds and assists in switching to save fees and maximise returns.
This is critical as the average Aussie woman could save around $100k over their working life just by cutting pointless super fees.
Super Fierce also runs Fierce Impact, which aims to donate $100 million to Australian women living at the margins of society by helping 1 million women to save on super. For every person that uses Super Fierce to switch, $100 is donated to the foundation.
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