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How did industry super fare in 2015?

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How did industry super fare in 2015?

Many keen tennis fans who watched the free-to-air coverage of the Australian Open this year would have undoubtedly seen the in-game advertising by Industry SuperFunds Australia. The advertising compared the two players on court performance at the completion of the set. It was usually accompanied by a commentator causally trying to work the phrase ‘compare the pair‘ into their analysis of the game, and an Industry SuperFunds Australia logo would also appear on screen (some may have found it to be the perfect time to take a bathroom break).

It was a clever promotion, and very well targeted given Roy Morgan reported 47 per cent of Australians aged over 65 say they watch the tennis at least occasionally, a prime demographic for a superannuation organisation.

The Industry SuperFunds ‘compare the pair‘ campaign has run for many years now, and has centred on highlighting the idea that Industry SuperFunds’ fees are cheaper than their retail counterparts, when considering the circumstances of an average person. The promotion assumes that the underlying investment quality and returns between super funds is the same, thereby implying that the only determining factor between providers is their cost, and that the person who chooses the cheapest option will win.

For people who have a ‘My Super’ option – the default option from large public-offer funds – this is largely true. Three year annualised investment returns to December 31 2015 for the top 10 ‘My Super’ providers as measured by SuperRatings are spread from 10.79 per cent – 11.70 per cent respectively – a very tight ‘match’ indeed.

Viewing returns through the ‘compare the pair‘ lens leads to the conclusion that investment management is basically a commodity, and that all investment managers will yield virtually the same return regardless of their strategy, style or story.

Spruikers of ETFs and index investing will also tell a similar tale – that active management cannot out perform a broader market and the only way to get ahead is to simply replicate the wider index as cheaply as possible and accept that you cannot beat the market. Given that big public-offer super funds have tens of billions of dollars to deploy into the stock market, they are often left with little choice but to effectively index invest their members’ money into the local and global markets. Consequently their ‘fees first’ promotion that they lead with suits their underlying operation.

Here at Montgomery, we have a different approach. We like to find companies with bright prospects at reasonable prices, that have a strong likelihood of increasing earnings in the future and that can retain and further compound those earnings for many years to come. We believe this will lead to an increase in the intrinsic value of the company and the share price will look after itself. And if we cannot find many companies that fit our requirements, or if the market is particularly volatile – we can use the safety of cash and await better opportunities. Our strategy has worked well so far since inception of The Montgomery Fund three years ago, the annual rate of return has been 18.91 per cent after fees to 31 December 2015.

There is no doubt that costs of investment and associated charges in your super fund are a significant consideration when deciding how you will manage your super, however it is very important to understand the underlying methodology of how your investments are managed as this will have a strong bearing on your long term investments performance.

If you are looking to invest your super in The Montgomery Fund, you can do so via personal super platforms such as the netwealth retail super platform or via a SMSF structure.

Just remember, superannuation and investment decisions can be complex. You should seek advice from a qualified investment professional before making any final decisions.

Scott Phillips is the Head of Distribution of Montgomery Investment Management. To invest with Montgomery domestically and globally, click here to find out more.

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Scott joined Montgomery Investment Management in 2013. Scott joined the firm from BlackRock Investment Management, where he was Managing Director, Head of Retail Australia for 12 years.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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4 Comments

  1. Hi Scott,

    Does the $50k minimum investment threshold for Montaka access apply to investors using the netwealth platform?

    • Hi Mark – no it does not apply. The minimum investment amount is dictated by the platform provider, which can often be as low as $1,000. This is because they are able to pool all their investor accounts and just hold one account with Montgomery for each Fund. The only issue at the moment is that netwealth do not have the Montaka Global Access Fund on their menu. We are hopeful that they will add it over the next six months though.

  2. Tristan Harrison
    :

    It really surprises me that with all of the well-paid analysts, bankers etc that the big banks / retail funds have, that they don’t try to achieve a better result than indexing, When they index and achieve the same result as a lower cost fund, there’s only one outcome as to who has the best return.

    Tristan

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