Who is looking after your retirement savings?

We're not quite sure who's supposed to defend our right to a peaceful retirement. Picture: AFP

Twenty years after the introduction of compulsory superannuation, an alarmingly high proportion of Australians are unable to answer this seemingly simple question.

This week News Limited published rankings of the nations best and worst performing super funds over the past decade, based on their investment return after fees and taxes on their default product.

The results should be an almighty wake up call for all Australians about the benefits of shopping around when it comes to your super.

Looked at over the past five years, super returns are a bloodbath thanks to the global financial crisis. Indeed 6 million members saw negative returns on average over the five years meaning, with hindsight, they’d have been better off stuffing cash under a mattress - or having their super fund do it for them - to at least retain the face value of that money.

Over a longer time period the last decade - average annual returns are somewhat rosier. But they vary enormously between funds, from as low as 2.5 per cent - just barely keeping up with inflation - for the worst performing, up to 6.7 per cent for the best performing.

Some in the super industry are unsettled by this new focus on relative returns, arguing that past performance no guide to future performance. But that’s the ultimate get out of jail free card. Actually, ten years is a reasonable period in which to asses whether someone is relatively good at managing your money. If your mechanic kept failing to fix your car properly for ten years, would you keep going back?

Others in the super industry argue it is potentially dangerous to point out to people that they have lost money because they might pull out of shares just as a recovery is taking place.

But the discovery of losses might be just the shock we need to drive greater engagement with the way our super nest eggs are invested. About half of Australias retirement savings are invested in shares - one of the highest equity weightings in the world. Was that really such a good thing? With hindsight, it’s clear the 20 per cent plus yearly gains in share prices in the mid 2000s were unsustainable and the bubble burst in dramatic fashion. Looking forward, should more of our savings be invested in more conservative strategies like cash and fixed interested?

These are difficult questions. Ultimately, timing the market is not something most disinterested super savers are likely to succeed at it. But while you might not be an investing whizz, its worth making sure the people you pay fees to to manage your money are. It’s at least worth checking they’re not completely rubbish.

So consider again: who is managing your retirement savings?

First, congratulations if you can name your super fund. You know, those people who send you long and boring letters once a year that you immediate throw into a draw and never look at again.

But the buck doesn’t stop there.

The advent of compulsory super has spawned a huge and entirely government fed industry around managing Australias $1.4 trillion of retirement savings. Every day, of every week, 9 per cent of your salary gets pumped over to these guys to manage.

This has spawned a labyrinthine structure of people keen to manage your money and, of course, collect fees for their service.

Australians pay around $17 billion a year in fees to the approximately 350 super funds in Australia, including government funds, industry funds and retail funds.

For most workers, they are automatically signed up to the default super fund specified in their industrial award. For those not covered by award, it is up to the employer to choose a default fund. Which raises an important question: does your employer care as much as you do about earning the best return on your money? Your employer may pick a default fund based on other criteria, like how simple the fund is to deal with administratively, or, dare I say it, which offers the best freebie lunches or discounts on other financial products for the firm.

But that’s the end of it right? Your super fund manages your money? Wrong.

Most super funds do not actually invest your money directly, but outsource investment decisions to a panel of funds managers. These funds managers are big names like AMP, Colonial First State, State Street, Challenger and Perpetual. And they too, of course, expect a fee for their service.

How does your super fund decide which funds manager to go with? Again, by and large they outsource this decision too by employing asset consultants who make recommendations on which fund managers they should contract. Asset consultants are paid fees for this advice and youve probably never heard of them before. The biggest is a company called JANA (formerly John A Nolan and Associates) which since 2000 has been a fully owned subsidiary of NAB.

So for most people, your employer chooses a default super fund, which in turn chooses an asset consultant, which in turn chooses a fund manager to manage your money.

It’s a pretty long chain of command, along which fees are applied all the way, not to mention the potential conflicts of interest that arise because the big Australian banks own both the major super funds and the major funds managers.

No wonder many Australians are going it alone, establishing more than 470,000 self managed super funds in an attempt to minimise fees and get the best return for their money.

For the rest, it is important a default system is designed that protects the vast majority of savers who make no active choices about their super. Every step of this super chain needs more scrutiny and transparency applied. The Gillard Government is currently looking at ways to inject more transparency into the way that workplace default funds are selected.

It is also introducing a My Super low-fee, default product that will be offered by funds from next year. Hopefully, one day, a website could be designed - similar to the MySchool website - to allow savers to compare the long term returns on these products and vote with their feet.

Because as lazy as we may be about our super, Howard government reforms mean all Australians are free to choose their super fund.

At least part of the answer to the question of who is in charge of your retirement savings is: you are.

Twitter: @Jess_Irvine

Comments on this post close at 8pm AEST.

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    • acotrel says:

      05:23am | 10/10/12

      So we are supposed to spend our working life agonising over job security and mortgages , then our retirement agonising over superannuation ? There must be a better answer for those of us who accept working under the yoke, simply for professional interest and a salary.

    • Gregg says:

      01:51pm | 10/10/12

      There is likely a better approach too and it still may be unacceptable to many but I’d suggest it would still suit a majority of Australians, the focus of a better approach being moderation and as lazy as we may be, not being too greedy.

      With $17B/yearly going out in fees, it would seem there is a huge pie there that may be better distributed and despite all those fees and supposed skilled investing types, investing anytime has its dangers which even the best experts may not detect in advance nor have the ability to make changes for better results, the GFC, the failure of major companies being just two significant causes for loss of invested value.
      I just saw some stocks prices flashed on the noon news and Billabong was a standout at $0.99, it once being considered a growth darling of the stock market with a share value of more than $6, maybe even up around $8.
      Qantas, once around $4 is currently about $1.30.

      So be it investing in the stockmarket for the longer term or just getting fixed interest deposits, results can still be very changeable and people do get greedy, Storm Financial and its collapse highlighting what can happen with high interest returns on offer and it is not the sole example as far as managed investments go.

      So taking greed out of the equation and the vagaries of investment, perhaps it would be of value to ask what it is that we aspire to for a happy healthy retirement and the key ingredient is probably somewhere nice to be living, be a likeable location with a comfortable home or a retirement village and reasonable support services wherever one is and a reasonable income.

      For the many with insufficient wealth and means themselves why do we not get a government looking at how to finance housing/services into the future as the basics of superannuation, an enhanced pension scheme if you like and that $17B could go a long way towards looking at retirement villages and services etc., the provision of all that in turn helping to develop the economy.

      It should always be made very clear to investors that there is generally no such thing as a guarantee for investments and it should be mandatory for such a statement to be front and centre of any proposal.
      People who accept that and are prepared to go on chasing the bigger returns will only have themselves to blame.

      A program with much more modest aspirations and a far closer and diligent oversight by authorities would be good for the lucky ones prepared to partake and yet there are still many who have likely been left to their own means with self superannuation, many such as myself using that as an option when looking at a redundancy quite early in a lengthy career.
      I do save on fees, being a more DIY manager of my fund and investments than most may likely be but you can still not be lazy for there is quite some regular organisation of activities and administration involved.

    • Economist says:

      06:30am | 10/10/12

      Jessica a good timely article. While I can name my fund, I’m curious as to why you’re light on the detail from your investigation inthis article? Haven’t you got enough info to start a MySchools type website, isn’t this information available but you have to pay for it?

      Isn’t it broadly obvious that the best performing generally fall into the following category. government, followed by Industry, then retail, with a few exceptions? Isn’t retail effectively killed by fees, because they take advantage of the complacency of the consumer by not providing good information to improve choices In this case it isn’t efficient or effective, but rent seeking?

      That the Labor party want to reduce fees and make it more transparent, the Liberals alternative want the unions out of Industry funds, but can’t make any ground because they clearly outperform retail funds, despite the fact that they may pay union hacks very generous director management fees?

    • Gratuitous Adviser says:

      07:35am | 10/10/12

      The article is a bit light on because it is a complicated subject and the writer would have had to dumb down the information for us to comprehend. 

      I think the writer is using the term “Government” when she means “Company” funds.  To my understanding Government employee superannuation is funded out of consolidated revenue and does not have to conform to the prudential rules that the Company, Industry and Retail Funds do. 

      Retail funds are killed by fees because they are a profit making concern. 

      I was on two trustees.  One a company and one an industry (as company rep both times) and the union members on the board are very astute, honest and never received a fee.  I’d be more worried about the company superannuation Funds but there is not many of them left anyway.

      You are right, the conservatives would love Industry funds to shut down and give all that money to the retail fund sector for them to add their fees and fees and fees on fees.  Then we would be in trouble.

      I am amazed that people are so ambivalent with regard to their superannuation funds and yes, it’s true, the individual has to look after his own rice bowl.  They need to:
      -  Ask their employer how often the company deposit money into the scheme and check on them if you work for a small company and not in a union or have any concerns at all.
      -  Consolidate into one fund, and insist that any new employer contribute to your nominated fund, not theirs.
      -  Compare funds (bigger is better) and look carefully at retail funds management fees.  Remember, they are in it for a profit and industry funds are non-profit.
      -  Be careful with self managed schemes in that I think you are not insured against fraud and mismanagement like you are if you are in a company, industry and retail funds.
      -  If you are in an industry or company fund become interested in who the trustee members are and ensure that 50% of them are representing you.
      -  Understand that it is your money that is being held for you for your retirement and it is not a gift from your employer.  You worked for it.
      -  Read up on how the system works.  Some say it’s the best in the world.

    • Al says:

      07:49am | 10/10/12

      Gratuitous Adviser - there are actualy a number of government superannuation schemes in place now and not all are funded from consolidated revenue.
      Some are funded just like the other super funds, that is funded from members contributions and investment.
      There are some who are still on the defined benefit super scheme which is paid from consolidated revenue, but these numbers are decreasing and no new members can join.
      (By government I am refering to the Australian Public Service, not the ministers.)

    • KH says:

      09:06am | 10/10/12

      Instead of believing what Dr No and his numerous hacks are saying, go to your funds website - you can see who their board members are - and most industry funds aren’t just union nominated, but also employer nominated, and some have other business or community leaders as well, and representatives from the industry that most of the members come from.  As for director payments - ‘Compare the pair’ - the highest paid board member on one of the biggest industry funds got $50k in a year; the highest paid board member on one of the biggest retail funds got $1.8million in a year.  What was that you were saying about industry funds and ‘generous fees’ to directors?!!!!  Clearly the big money doesn’t make any difference, since the industry funds are outperforming the retail ones on the most part.

      This information is all freely available - just go to a funds website, have a look at their board, and the last annual report - they are required to disclose directors fees, and you can decide for yourself where you think your money should go.

    • GROBP says:

      06:55am | 10/10/12

      The reason 10 year returns are better is obviously bringing older numbers in. Numbers before the world worked out economists had wrecked the world.

      It’s laughable reading comments from people like Tubesteak, despite all the glaring evidence. The west is broke. We have transfered all our wealth to the toilers.

      You super is doomed if you stick to the ASX.. It’s very likely to halve from here. The whole thing, just like our entire economy is built on debt. If you haven’t worked that out, and continue to listen to people like Tubesteak, I can’t help you.

    • Tubesteak says:

      07:02am | 10/10/12

      If you’re not taking a keen interest in one of your most important investments then I have no sympathy for you.

      Firstly, if you don’t like one of the super funds you can set up a SMSF and do it all yourself.

      Secondly, you can always choose different options in most funds. I don’t think there is a fund out there that doesn’t allow this. You can always change funds if yours doesn’t allow it.

      You need to be considering your life stage and your risk profile based on this stage. Once you hit about 45-50 put it all in cash and remove your exposure to the sharemarket. We see downturns in the sharemarket about every 10 years and you don’t want to be retiring at the wrong point in that cycle.

      Most people aren’t going to have enough to retire on. This is partly because they don’t earn enough (mainly those earning less than $80k). It is also because they never thought about what they were investing in and took a more active approach to that investment. Time to wise up and take responsibility for your outcomes in life.

    • GROBP says:

      07:17am | 10/10/12


      This is the cycle where the west goes broke and other countries that we made rich take over.

      Cycle? Hilarious. What could possibly push the market up from here, other than the devaluation of our currency, which isn’t a good thing, nothing will, ever. It was all built on debt and that means we’ve consumed all the wealth of future generations in the past couple of generations.

      If you see it differently to this Tubesteak, the past has taught you nothing.

      Cash over 45? Ridiculous. 4% won’t even keep up with inflation

    • Tubesteak says:

      09:38am | 10/10/12

      Your entire assertion is comletely moronic and you have no idea of what you’re talking about.

      We haven’t gone broke. Many people still make money by selling goods and services to other people. This is how economies work. Some industries rise and some fall due to the nature of supply and demand and consumer preferences. Simple as that.

      Deposit rates in even online saver accounts are closer to 6%. Inflation is kept to within 2-3%. Again, you don’t know what you’re talking about.

    • GROBP says:

      10:05am | 10/10/12

      Tubesteak. Are you Julia Gillard?

      Inflation at 2to 3%. You’re dreaming.

      If this is how economies work, Ireland, Greece, The US, and the entire western world would not be broke. Your economic model broke Tubesteak when governments sold all the golden geese, borrowed money and encouraged households to borrow to fund consumption. How, given households can’t borrow any more, business can’t borrow any more, government can’t borrow any more, there’s nothing left to sell, how, do you see this as just a cycle? Being arrogant with “don’t know what you’re talking about” doesn’t convince me you’re right, nor does it, I hope convince any other thinking person.

      Time will tell who doesn’t know what they’re talking about. I’ll ask you for the tenth time Tubesteak. How does servicing each other provide wealth?

      Wealth is only created by producing and selling to other countries, we’ve done the opposite.

      As I’ve said before if just servicing each other worked, why aren’t countries that do nothing but service each other rich?

    • andrew says:

      10:08am | 10/10/12

      To me it seems counter-intuitive to put super into cash at age 45-50 (the age by which your super will have reached a substantial amount) - as a few good years of returns on $200K plus will really add up , I’m inclined to gradually move mine from aggressive to balanced as I age but will be unlikely to ever take a conservative option. As long as I retire with some other assets I know that if the super fund has recently taken a downturn I can always leave it in there and wait for it to bounce back.

    • GROBP says:

      10:51am | 10/10/12

      Aggressive’s good Andrew as long as you hover your finger over the sell button. Dont watch your money vapourise. Keep well away from banks and anything else that relies on housing going up. Resources are great if you get the timing right. Never listen to “time in the market” garbage. and there’s no point chasing dividends if your capital goes down more than the return. For me fixed interest is a great option for some of the money, while I trade the market with the rest. Best be informed, do your own research, use your own brain and don’t listen to anyone that thinks any of this is just a cycle. They’re wrong. Listen to smart people that predicted all this stuff, like Schiff,  Ruibini, Faber, they make sense as opposed to anyone else saying everything’s cool, because it ain’t. Common sense tells you everythings not okay, as opposed to some of the typical twisted logic, just a cycle, views on the Punch.

    • Yuri says:

      12:03pm | 10/10/12


      The mandate of Reserve Bank is to maintain inflation between 2-3%. If it goes too far above or below this then everything goes to crap, like Greece etc.

      Also, how does trading between countries create wealth, but trading within a country does not? The US has a very low percentage of their GDP as import/export, yet they are the wealthiest country in the world.

    • The Money Team says:

      12:28pm | 10/10/12


      You are on the damn money Sir. I’m tired of the “It’s all cool” Australian standard navel gazing.

      This country doesn’t make anything to sell.

      Growing and digging is idiot work that can be done much cheaper elsewhere. Only Australians would be dumb enough to pay a miner 120k a year.

      Sadly for us the mining companies aren’t that dumb anymore either.

      Innovation? Knowledge? Australia? *cracks up laughing*

    • GROBP says:

      12:51pm | 10/10/12


      You need to start at the beginning. The US is broke. They owe double what they did when they were already broke when Obama came in.

      It’s a transfer of wealth from one country to another. Can you explain or understand how trading from an iaustralian to another Australian makes us all richer. It doesn’t. Trade from a country to another will make one richer and the other poorer.

      We’re poorer, China, India, and any other emerging country that we’ve traded with are now richer, we’re poorer. Does it make sense we consume while they work and then at the end of the game we’re richer? Of course not. If we had an advantage like resources yes, but guess what, our idiot governments sold it all. We have no advantage any more and will now begin to pay an horrendous price.  Can we continue earning ten times the wages of those we compete with? Of course not.

    • Jay says:

      07:02am | 10/10/12

      Once upon a time Superannuation was considered a master stroke by many financial analysts. There were many countries that looked at our model with great envy. Alas our system is now used as a cash cow for financial institutions.
      No responsibility accpeted but happy to take their commission.Then we have the incomeptent Gillard Govt that continues to use Superannuation as a tax tool.
      These idiots do not understand that unlike politicians and public servants we actually can lose money whereas politicians and public servants go along merrily beacuase they know we will fund them. What people don’t realise is that in 25 years I guarantee you that before you can claim a pension you would have had to dispose of every asset you hold.This is going to be the biggest culture shock of all for Gen X. You can see how the Govt is manouvering to this. In the end we will cop it in the neck.

    • andrew says:

      08:41am | 10/10/12

      “What people don’t realise is that in 25 years I guarantee you that before you can claim a pension you would have had to dispose of every asset you hold”

      - and this is how it should be. We should be planning for our own future and not just expecting the government to do it for us. To go along with this should be the expectation that the aged pension will be insufficient to provide for anything more than survival. If pensioners want any luxuries in life they can either sell their homes or take out a reverse mortgage.

      You also forgot to mention: - preservation age will certainly increase well above the current 60, aged pension will be 70-75 years, so unless you want to work till around 70 you better accumulate enough funds to support you during your sixties too.

    • GROBP says:

      09:03am | 10/10/12


      I think you’re right, preservation age will increase. I think it’s wrong they make retrospective laws when the best we can do is make sensible decisions based on the present laws.

      I’ll go on the dole if they do that and suggest the other millions do too. I’ll have millions in super and be on the dole? I’ll structure my finances so I’ve got nothing but super just to spite them. Wink, wink, there’ll be plenty of cash. The law should let me access it if there’s enough to sustain longevity.. Im sick of medling government. Leave me alone.

      I’m not working past 60.

    • KH says:

      09:55am | 10/10/12

      Of course preservation age will increase - when pension and retirement ages were first introduced, the life expectancy of most people was much lower than it is today.  It was anticipated that most people would only be on a pension for a few years before they, well, died.  Thanks to medical and health advances, people now live much longer - so it stands to reason that retirement age should increase - you can’t realistically expect any government to pay a pension for anything up to 30+ years, when originally it was only envisaged it would be paid for around 10.  This will become more of a problem now that the boomer generation is hitting this age group - in 20 years or so we will have a huge number of elderly people - we simply can’t afford it.  Laws will change to force you to use your own funds first, and things like retirement age will increase.  They have to really - it sucks, but it has to be done.

    • Lucas says:

      02:01pm | 10/10/12

      Currently you can get around preservation age if you use a line of credit and your house is paid down. If you know you can’t touch your money til 60, but want to retire at 55 take out a line of credit for 5 years income and don’t tell the bank you are going to retire. Live on that for 5 years and then pay it off when your super unlocks. If the super returns around the same or better than the interest rate then it hasn’t cost you a thing. I just hope LOC’s still exist when I get close to my preservation age.

    • Tim the Toolman says:

      07:15am | 10/10/12

      Around about three different providers because of the ridiculous difficulty in getting anyone to obey the forms they’re supposed to.  Today will be another day of resubmitting, telling them that no, the information they need is all there, and to just do it.

    • Achmed says:

      07:28am | 10/10/12

      And because of Keating reforms you actually have a super fund.

    • GROBP says:

      07:46am | 10/10/12

      The sole useful thing Labor ever did. They’re now trying to mess it up.

      Labor spend money, other peoples’ money; not save it.

    • GROBP says:

      07:32am | 10/10/12

      1. Don’t listen to financial advisors. They are not on your side, they’re on their side. You make them rich; not you.

      Why do they tell you to consolidate super when fees are percentage based? Far more risk but easier for them. How disgraceful is that?

      2. Don’t listen to traditional economists. They’re the ones that got us in this mess, and they STILL think everything’s cool despite common sense telling us otherwise. They’re also most often compromised by who they work for.

      3. Salary sacrifice. It’s the only PAYE tax gift left.

      4. Get as far away from housing as you can. It will be less than half what it is now very soon.

      5. Above all, think for yourself. Does what’s going on make sense? Can more debt, more spending and more asset sales fix a problem created by debt, spending and asset sales. It sounds ridiculous because it is ridiculous.

    • andrew says:

      08:47am | 10/10/12

      It seems it’s not compulsory for employers to offer salary sacrificing?

    • GROBP says:

      09:07am | 10/10/12


      Do the work for them, just get them to sign the stuff.

      If not, I’d change employer. It’s ridiculous they wouldn’t accommodate you in wealth management.

    • Al says:

      09:08am | 10/10/12

      andrew - correct, however you can organise the proposal yourself and take it to the employer. As long as you are meeting any FBT obligations and additional costs incured the vast majority won’t say no.

    • andrew says:

      09:29am | 10/10/12

      Thanks for the advice. Currently there are other areas I would like to divert my funds to than my super fund - paying off what’s left of the mortgage ASAP for one. I also intend to make a $1000 contribution to my wife’s super fund each year to take advantage of the low income earner’s co-contribution scheme - 50% return per annum is not too bad at all ( even if it used to be 150% ) .

      Then there’s always the option of simply earning more so that the 9% employer contributions increase too…........

    • Ben C says:

      12:02pm | 10/10/12

      @ andrew

      The superannuation guarantee rate will go up to 12% by 2020. Your super will still increase even if your salary/wage doesn’t.

    • Diogenes says:

      07:37am | 10/10/12

      No I cannot choose my own super fund, because the fund has enough choice within it (a terrible loophole Howard left) , and the employer (NSW Govt) has decided that it (First State) is good enough. Strangely the union is not upset about this - oh wait our president is on the Board (either he or the union trouser the fees(not casting any aspersions)  - either way a conflict of interest).

      Switched to cash early this year - sooooo glad I did

    • Al says:

      08:00am | 10/10/12

      Its funny that the NSW stae government won’t allow this choice when Federal Government Departments do, even before Labour came in to power.
      I’m not saying your wrong, just wondering how you approached them and did they actualy get a ruling from a court to exempt them from allowing the employee to choose. As far as I was aware it only provided for employers to choose the fund when an employee has not made the election, and then only industry funds.

    • GROBP says:

      08:03am | 10/10/12

      There are other options. You’re not stuck.

    • Onlooker says:

      11:05am | 10/10/12

      Glad you switched to cash? Well, you just missed out on a share market rally of 8% since July. Diversification of risk is critical, don’t you think?

    • Toby says:

      12:49pm | 10/10/12

      i joined first state back in 2003, its been a dog of a fund since then. I totally pulled out a few months ago.


      Well it made losses pre GFC with the Cross city Debarcle, and post GFC the average return is either negative or 1-2%.

      Then To top it off was the lack of protection with its customers privacy and data when last year it was revealed that the online portal was open tothe world and anyone could access members profiles and sensitive data.

      I dont know why anyone with a choice bothers with them really, there are much better funds out there.

    • pete says:

      07:47am | 10/10/12

      People need to find somewhere they can access low cost index funds for the equity portion of the portfolio. AMP, Colonial First State, State Street, Challenger and Perpetual, all the names mentioned and more, can’t outperform the market and they charge a hefty premium for all their guesswork.

      Do you really need to be paying for fund managers’ meetings, conference calls, business lunches and company research visits?

      There’s a small army of managers and researchers at these funds and I’m sure it’s a very exciting life for them, but in reality they produce nothing of value because they need to outperform the market by their fees just to break even with market returns and they very rarely do that.

    • Peter says:

      07:52am | 10/10/12

      Not to worry, Shorten has decided that the best way to treat disengaged superannuation mambers is to make them even more disengaged. He has determined that to address the under insurance problem, he will ensure that there are even more members who are under insured.

      He has banned commissions but is quite happy for Industry funds to use members money to advertise and to sponsor football teams. The industry funds operate is a vail of secrecy, running a network of union supported organisations. Union officals who have no training and no experience are appointed board members paying themselves huge salaries for very little work.

      The manner in which Industry funds caclulate their returns is different to the rest of the industry and if you leave an industry fund at the wrong time you can be penalised up to 1% of your account balance. That 1% is then used to pay people who have stayed with the Fund.

      We dont know anything about industry fund infastructure investments, and it could be, like MTAA, that they will all fall into a screaming heap at some point in the future. The level of accountability and trasperency on their investments is negligable.

      Insurance is another issue where Industry funds are deficient. The standard levels of cover are inadequate and they drop off rapidly at a time when it is most important.

      MySuper is Bill answer. It will lower fees. It will provide less information, less service, less understanding. It will lower sums insured and it will make it difficult fo even make a claim on the small sums insured.

      Like everything else this dysfunctional and incompetent government has touched, it will result in poorer outcomes in years to come. It is more about spin than substance. The bottom line is that it is designed to push people into industry funds that are controlled by UNIONS. Given what we have seen at the AWU and the HSU, that has got to scare any fair minded person.

    • KH says:

      09:20am | 10/10/12

      I love it when people who haven’t got the faintest clue what they are talking about go on a rant.  Hilarious stuff.

      “under insurance” -  you obviously haven’t had a look at what is on offer.
      All funds charge admin fees and can do marketing, regardless of whether they are industry or retail.
      I haven’t seen any odd calculations in my funds.  And you don’t get charged ‘exit fees’.
      Read a PDS, or an annual report - all funds are required to disclose investments and remuneration.  Seriously, its on the internet - even you could find it.
      Many industry funds have great insurance offerings - default is often low, but you can increase it and its pretty good cost wise.  Again, you obviouly just haven’t bothered to look.
      MySuper will make it easier to compare funds, and make them more transparent - I assume you know nothing about this either.
      Board members are not all ‘unions’ - most also have employer nominated directors and other business and community leaders.  Again, this is on the internet - its not hard to find out the truth, rather than just relying on whatever gossip you heard.

    • GROBP says:

      09:23am | 10/10/12

      Already with the reforms made by these clowns my SMSF fees have almost doubled.

      We need political reform more than anything else in Australia. They are always scamming us out of money, freedom, options. Get rid of both parties (GROBP).

    • Peter says:

      09:44am | 10/10/12

      KH - yes your personal experience matches up to my 25 years in the industry. I have worked in Industry funds, institutions, consulting actuaries, and as an adviser. I have managed DB plans and accumulation products. I have built superannuation platforms. I know the market backwards and I know how people react.

      Your membership of a union fund certainly puts me to shame. Ha. The reality is that MySuper will prove to be a disincentive to many people to trust in Super. All the gains and benefits in legislation have been smashed by Shorten and Swan in an attempt to put a few extra $ on their bottom line. Nothing they have done has assisted the middle class.

      In an attempt to punish the rich they have penalised everybody. Good work. But I am sure that you know all about the reduction in the contribution cap, the reduction in the co-contribution, the freesing of income funds making it harder for people to transition to retirement.

      I research funds everyday. I know what is on offer. I know exactly how industry funds operate. I know how retail funds operate. Admin is poor in both instances. The difference is that in a retail fund they will fix the problem and compensate. Industry funds operate like a union and will never admit a mistake.

    • KH says:

      11:20am | 10/10/12

      Actually, ‘Peter’, I call BS - I don’t think you work in this industry at all, judging from your comments.  I have worked in this industry for 15 years. I’m there right now.  And I am not a member of any union.

    • Peter says:

      02:44pm | 10/10/12

      KH - I’ve been in senior management for 15 years so I might speak to your manager from time to time but it is rare that I speak to an administrator. I’m at the pointy end where thing happen, not some back office processor who thinks they know it all.

      There is a reason why they pay me the big bucks and its not because of my dashing good looks.

    • Another industry stalwart says:

      03:32pm | 10/10/12

      My God KH if you work in the financial services industry, then I’m very concerned at your industry knowledge and experience.  Actually, it sounds like you work for an Industry Fund call centre judging by your comments - now it makes sense. 

      I have a question to ask you KH, given that in 2008 property funds were hit quite badly with market volatility, what are your thoughts on the practice of industry funds pricing their property assets less regularly (in some cases they were 6 months out of date) whereas retail/wholesale funds pricing their property assets on a daily basis. 

      The reason I ask this is that in times of market volatility unit prices would increase/decrease (well in the case of property decreased dramatically in some cases at 50%).  Do you think that this is an ethical practice, given that Industry Funds are effectively inflating unit prices to reflect a “better” return for their fund members?

      What effect do you think this would have if a very large number of fund members were to leave the fund? (I’ll give you a hint, KH, look at what happened to monthly income funds and mortgage backed funds when the govt. introduced the bank guarantee that resulted in investors moving their investments to banks and funds not being able to honour the withdrawal requests from illiquid assets.  Quite a few funds are still frozen and investors cannot access their funds)

    • TChong says:

      08:09am | 10/10/12

      Diogenes - you still in the PS, yes?
      So, what does “switched to cash” mean.?
      As a PS in NSW , you arent paid in cash, so ,what is the relavance to superannuation?

    • Al says:

      08:38am | 10/10/12

      TChong - sorry, please explain how Public Servants are not paid in cash (funny, I am sure I have seen them buying stuff with cash earned via their job)?
      Also, you may still be under the impression that Public Servants are all in their own special super scheme that is not the same as the others. You are wrong, the defined benefit public service super scheme stopped new members joining back in 2005. New public servants are subject to the same superannuation setup as everyone else (Industry or Private) based on their actual contributions and investment returns (and subject to the same risks, so moving the investment from shares or similar to cash is viable, most superfunds allow you to choose how to invest your contributoions).

    • Lou-Lou says:

      08:56am | 10/10/12

      He means that he changed his investment option to cash, rather than growth, bonds, etc,etc. Cash being the least risky option (I think).

    • Tell It Like It Is says:

      08:12am | 10/10/12

      For those who have self-managed superannuation funds and have to live off of them there has been no less joy the past several years.

      The most worrying thing is that this government, in typical ALP fashion, having misspent all the money in the kitty (i.e. OUR money) is now doing the inevitable and desperately seeking to find some. So they are threatening to pick on superannuation funds/superannuees in some way. Guess they won’t be happy until we’re all on welfare and beholdin’ to their paternalism.
      Must be better ways.

    • Tim says:

      08:46am | 10/10/12

      Ah no they’re not.
      They may be looking at lowering the tax breaks but that doesn’t equal taking your super.

    • Tell It Like It Is says:

      10:32am | 10/10/12

      But I did not write nor did I say anything about them “taking my super”. However, if you start eating into a portion of society which has responsibly saved and worked a lifetime in order to take care of yourselves….....Not a good place to go but then I expect no less from this government, not that anything they do will affect their own pensions!

    • Tim says:

      11:56am | 10/10/12

      No, you said:
      “is now doing the inevitable and desperately seeking to find some. So they are threatening to pick on superannuation funds/superannuees in some way”

      So they’re trying to find money by picking on Super? uh huh. How so?
      By possibly reducing the tax breaks gained which are mainly used by already well off people. I know I use them. I don’t see how this is being picked on.

      “However, if you start eating into a portion of society which has responsibly saved and worked a lifetime in order to take care of yourselves”

      How are they eating into a portion of society? Once again, reducing a tax break is not eating into anything. It’s reducing a subsidy you’re getting.
      Obviously encouraging people to save is a good thing, but when the vast majority of that benefit is going to people who are already saving anyway and are already well off, what is the benefit for the government in giving you a large tax break? A 15-20% tax break should be more than enough.

    • AdamC says:

      12:20pm | 10/10/12

      Tim, I am not sure what you are trying to say here.

      You are right that Labor are almost certain not to try to get their mits on the superannuation of current (or soon-to-be) retirees. That will not stop them possibly going after super in some other ways by snatching funds from those of us in the working, ‘accumulation’ phase. There are a two ways they could do that:

      1) tax contributions more heavily (especially the contributions of those nasty ‘rich’ people Labor are so fond of bashing); or

      2) tax super earnings more heavily than they are taxed now, perhaps by including a ‘progressive taxation’ system on super.

      I see an attack on super as one of the more likely ways the ALP will seek to plug its budget black hole. Looting the super balances of those of us for whom retirement is almost the perfect crime, politically-speaking.

    • Tim says:

      01:11pm | 10/10/12

      I"m responding to a theme of comments I’ve seen recently from certain people about the ALP “getting” or “looting” their super. It’s crap.

      Should their be a tax incentive for people putting their money in Super? Of course there should be and I’m using mine to the maximum amount possible.
      But there has to be a limit, and right now I think they’re pretty close to the mark. It was ridiculous in previous years when people nearing retirement could pump large amounts of cash into Super and thereby dodge their tax obligations.
      As I said a 15-20% tax break (ongoing) should be plenty of incentive to save for your future.

    • AdamC says:

      04:19pm | 10/10/12

      Tim, I guess my point was that you are taking people’s concerns about Labor ‘looting’ super a little too literally. You are right that those approaching retirement now are doing so at just the right time in terms of tax benefits (if not so much in terms of market returns). The transition to retirement largesse is unlikely to last, and it probably shouldn’t.

      However, the expected ALP assault on super contributions and earnings are pretty questionable, in my view. The best thing that politicans could do for the superannuation system would be to get together and make a bipartisan agreement that they will not change any super rules for at least the next ten years.

      Not that Swannie will do that. He needs revenue like a junkie, strung-out by withdrawal, needs a fix. To the Treasurer, super is like a discarded handbag full of cash is to the desperate drug addict.

    • Yak says:

      09:00am | 10/10/12

      Some advice would be most welcome.

      I want to look after my own Super but “they” tell me I have to have at least $250K to get started. Why? If I have a setup where every month my Super is divided up into, say, 4 Blue Chip stocks an Equity Fund and Gold Bullion, and I don’t mess with it, surely it wouldn’t be that hard. I think this set-up would cover all the basic economic bases? Wouldn’t it?

      Are “they” making it seem harder than it actually is?

    • lostinperth says:

      09:38am | 10/10/12

      Yes” they” are.

      The figure of $250K is a ball park figure where the fees for getting your own SMSF accounts prepared, audited and tax return lodged are less then the fees you would pay the professional funds to do it. But prices for getting a SMSF’s annual return done is dropping so a better figure will be approx $150 - $200K.

      On the basis of what you are proposing you could start on as little as $100 - $120K.  But be warned, running a SMSF means that you are responsible for the investments, you have to know what you are doing and you have to ensure that you don’t break the rules.  Using an industry or retail fund means you pay someone else to do all that for you.

      It’s not that hard, just takes a bit of work and a requirement that you do some reseach and take control.

    • Yak says:

      10:24am | 10/10/12

      Thanks lostinperth (been there, done that). I will look into it. I appreciate your input. Have a wonderful day.

    • Sammy G says:

      11:12am | 10/10/12

      Yak, working in the SMSF industry, you will be hard pressed to find someone to complete the annual accounting and audit of the fund for less than $1650 (GST inclusive). So about 1.5% of a $100k fund, which would be the same, or higher, than you would pay for an industry fund that bases fees on a percentage. Most accountants don’t charge on a percentage, so the more in the fund the better effective fee rate, if you have less in super it is much more likely to be eaten up in fees as there is a fair amount of work (thanks ATO!) even in very simple funds. There are accountants out there who will charge less for the work, I know if I went out on my own I could charge 1/2 that, but make sure they are reputable and it may pay to take out ATO audit insurance as the ATO is currently using fees as a basis for determining which funds get audited.

    • Yak says:

      02:11pm | 10/10/12

      @Sammy G, I will take all this info into consideration. Thank you.

      I wouldn’t have thought it was so difficult. Input = $?. Growth = $?. Total Fund balance = $?. If I just let it look after itself and don’t move monies around, it should take care of itself, tax wise. (?) But then I’m thinking logically which is not a common trait for Govt. Agencies.

    • Bob says:

      09:52am | 10/10/12

      You say “The Gillard Government is currently looking at ways to inject more transparency into the way that workplace default funds are selected.”
      This is FWA role.
      What you should say is that Bill Shorter is trying to bury the FWA report as it did not favour his favoured Industry Funds.

    • Lill says:

      09:55am | 10/10/12

      The reason people can’t be bothered with their super is because it’s a great big waste of time. I’ve been working full time for 9 years since I finished high school. I’ve earned super the whole time, now after all of that I have the grand total of $9900 in my super fund. That’s right people less than $1100 a year earnt (and I didn’t lose money during the GFC because I luckily had picked the right investments). How could I only collect this dismal amount of funds? Part 1. If you work for a small business you do NOT have the right to choose your own super fund, under a certain size they can designate who you use, cue crappy funds that eat up all your super in fees. Part 2, the joy of working for two companies that both went bankrupt during this time and did not pay any super to me at all. That was four years worth of work down the drain, the government made sure they got tax owed out of the assests sold, they couldn’t give a damn about the employees though. If I retire at 70, at the same rate I will have earnt another $40000 plus some interest. WooHoo! If I’m lucky I might almost make it to $100G. Yeah that’ll get me through retirement. Super is a waste of time. I’ll save my own cash in my own bank account thanks, a term deposit earns more return that a super fund.

    • Al says:

      10:18am | 10/10/12

      Lill - did you make a claim via GEERS for the outstanding payments when the buisnesses went bankrupt (including unpaid superannuation)? If not, why not?
      Your superannuation may be fairly dismal, but blaming it on the entire practice of Superannuation is simply wrong.
      There are many (myself included) who have quite a nest egg built up in superannuation (last check over $500,000 for just over 10 years work). Of course I make significant personal contributions as well.

    • andrew says:

      10:35am | 10/10/12

      Have you contacted the ATO or fair work ombudsman to attempt to recover the unpaid super?

      You’ve clearly been earning a low income for the last 9 years. If you don’t have a plan to move to a higher paying career (and soon) , then yes super is a waste of time for you in that it will not provide for your retirement.

    • Al says:

      11:27am | 10/10/12

      andrew - not sure about the ATO but suspect it is similar to FWO in that they are not able to chase up unpaid super regarding buisness that have gone into liquidation of bankruptcy. To do this a claim via GEERS needs to be lodged.

    • Simon says:

      10:37am | 10/10/12

      It should be quite clear to even the dumbest members of society by now that compulsory super is a conspiracy between government and the banks to keep the proletariat in financial servitude for the productive part of their lives…
      What surprises me is why the population still allows itself to be farmed like cattle with mortgage rates at 5-7% on the one hand and super earnings at 2 minus 2 to plus 1% on the other…

    • Gerard says:

      05:49pm | 10/10/12

      Why does that surprise you? Have you seen the ratings for Today Tonight recently? Australia is the world’s largest mushroom farm…

    • The Money Team says:

      10:53am | 10/10/12

      1. The Australian tax system is the six chamber of hell and needs a complete overhaul. A system that outright rewards financial irresponsibility. Like to save money? F**k you. Like to speculate on the property market with cash you don’t have? Go for your life, we’ll support your loss making ‘enterprise’.

      2. Super could only have been created in a country with the biggest gambling problem in the world. Only Australians would be happy for their government to take 9% of their money to hand to other elites to gamble on your behalf.

      3. Only Australians could get excited about the fact their banks in a middle to irrelevant power with a tiny population are the most profitable in the world without having anything in the way of reserves.

      4. Only Australians could accept paying 6-8% on a mortgage or 12-15% on a car loan.

      5. I’m out of here, this place is on the fast track to financial oblivion and the only people that can’t see it are…Australians.

      6. Worked in a bank for a year and what I saw on peoples accounts frankly scared me. Do you have any idea how many Australians on household incomes of 100k are paying 750k mortgages gained with a 5% deposit given to them by an idiotic family member driving a 80k SUV paid for from a redraw facility? It’s insane.

    • GROBP says:

      11:47am | 10/10/12

      I’m with you, the problem is the whole west is in the same mess. There’s no where to hide. Best you can do is exactly what you are doing, think for yourself, most things are a scam. I don’t see super as an evil, use it to your advantage. The rules are flexible enough (for now) to invest in what ever you want. Gold, silver, fixed interest, trade shares. There’s plenty of money to be made. Sit and hold and you’ll pay an horrendous price, same as real estate.

      Like I keep saying the west is broke and governments of the day will do whatever they can to hide it, manipulate it, borrow from the future. What a mess.

    • The Money Team says:

      12:16pm | 10/10/12

      The entire west is a mess but Australia lives under this delusion that the financial structure of Australia is some sort of masterstroke. It’s not, it’s like most things in Australia, slow on the uptake.

      Take our property market. The established tragic narrative is this:

      One salary to buy a house, two salaries needed to buy a house boom time, “Hey, why don’t you do joint ownership with your mates kids?” No thanks, game over.

      We are playing our role to perfection.

    • GROBP says:

      12:41pm | 10/10/12

      @the money team

      What about this scam that affects us all and is an insidious advantage to high speed traders. The government and ASX say it’s benefiting us by maintaining liquidity.

      A share ETPGAS has a buy of 12 cents and sell of 13 cents. I put a bid in for 12.5 cents and they trade straight away. In other words a high speed computer somewhere sees my bid and then reacts to it. There was no one VISIBLY buying at 12.5 cents. today the bid were 13 and 14 centa and again a trade went through at 13.5 cents. Maybe they place the trade at 14 hoping someone will pay the inflated 14 cents. It’s a scam taking money away and giving it to institutions and the government sanction it. Why can’t You and i place bids no one else can see? That would be illegal.

      Ross Gittens wrote a rare good piece on it a while ago. I can’t find it at the moment.

    • Aussie Wazza says:

      11:18am | 10/10/12

      ‘We won’t be able to rely on the old age pension.’

      ‘We must ‘invest’ to secure our own retirement.’

      ‘Superannuation systems with compulsary deposits are the only answer.’

      So employers are obliged to give their staff a 9% (soon to be more) wage increase but instead of giving it into their hands, ‘invest’ it for their retirement.

      We are shown that, if now 30 y/o/a, by the time we reach retirement we will need one zillion dollars a year. Fortunately ‘OUR ’ fund, based on projected flim-flam will get close. (Subject to circumstances and fiscal roundabouts.) Hint, hint, wise recommendation, boost your investment by an extra X% to retire in luxury.

      ‘We can’t and must stop ‘bludging’ off the government.

      But wait a minute; Back in the old days when politicians had ethics and spent time working for Australia and our people, Ben Chifley placed a 1% levy on top of taxation. That 1% was solely to finance an old age pension.

      Maybe with inflation adjustments were needed but as a percentage it meant the dollars taken for this increased in line with wages.

      Superannuation is a lurk for shonks to bleed leaving the suckers only what’s left.

      At the end of the day, when you 30 y/o/a’s reach retirement I bet there will be a lot of disappointed people.

      It will be the ‘Sorry mate but unfortunately with the height of the tide in Tibet the la la la drivel drivel and due to—- performance at this point in time precluding the up/down turn in the market , decreasing export demand for custard and costs necessitated by post government policy has resulted in a negative result’.

      Your super would be as safe and reliable if put through the pokies.

    • Esteban says:

      11:40am | 10/10/12

      This is a good article and I hope it is the beginning of some overdue examination of these super managers.

      People love to focus on bank fees of a few dollars whilst being charged thousands for super fund managers to “manage”

      What is most frustrating is that a fairly conservative fellow like me can self manage a share portfoilio that easily out performs a super fund “managed” by experts. (my super fund has never outperformed my own shares even when netting out their fees)

      Perhaps the fee structure should be performance based. ie you can recover some but not all of your costs if the fund you are expertly managing under performs relative to the all ords.

      If your fund out performs the all ord then an increasing fee structure would be fair enough.

      Currently the only thing that hold these fund managers to account is competition.

      Given that most people don’t spend time looking at the performance and fee structure of their super fund those competitive pressures don’t really exist.

    • bananbender says:

      12:37pm | 10/10/12

      The only national superanuation systems that work are centrally administered sovereign funds in countries like Singapore and Norway.

    • Colin says:

      12:45pm | 10/10/12

      Jessica, you said, “This week News Limited published rankings of the nations best and worst performing super funds over the past decade ..”

      Where can we see this information?

    • The_Maestro says:

      01:05pm | 10/10/12

      I had a great laugh reading the comments posted here. The idiocy of the average Australian when it comes to superannuation knows no bounds. Hearing comments such as ‘It’s a great big conspiracy’, ‘You’re just giving away your money away to the government’, ‘Super is just a waste of time’, ‘It’s a lurk for shonks to bleed leaving the suckers only what’s left’ beggars belief.
      Here are a few facts for the less educated among us to read prior to making comments on a matter that they clearly know nothing about.

      1.  Super is nothing more than a tax structure. You can own almost anything within super (including Term deposits, cash and gold if that’s what tickles your fancy) as you can outside. The only differences are that you can’t access it immediately. To compensate for this the tax rate is generally lower than you would pay outside.
      2.  No matter which fund your super is with, you have control over the investments. There are in fact a number of fee free funds out there offering term deposits for people for whom any kind of negative return sends into cardiac arrest. Sitting there complaining about the managers of your super fund while being too lazy to consider any alternatives is just plain whingeing for the sake of it.
      3.  Portfolio construction is about much more than simply picking this years’ best performing asset. If it was as easy as seeing perfectly clearly into the future, we would all be multi-millionaires. A diversified portfolio is what the majority of people need to hedge against market outcomes. You won’t always get positive returns, but you also won’t be taking the enormous risk of having all your eggs in one basket.
      4.  If you are paying 1.5%pa or more in fees on your super, you’re being ripped off.
      5.  If you are bemoaning the fact that you have been advised not to start a SMSF based on the balances and only want to put your money in term deposits and/or shares, look around. Plenty of funds can do just that at minimal cost.
      6.  Super is not the government’s money. To quote the ATO, it’s your money, just not yet. If you think it’s a rort, or that it would be just as safe if you put it in the pokies, take your tin-foil hat off for a couple of minutes and educate yourself on exactly what superannuation is.

    • Simon says:

      02:09pm | 10/10/12

      I’m guessing you are employed in the superannuation or financial planning “industries” T_M ...

      1 It is not a tax structure it is 9/109=8.25% of your reward for personal exertion being withheld from you and being re-directed to (in the main) shysters to look after for on average 25 years . Talk about nanny state.
      2 you do not have control over any investments except direct investments. large fund superannuation by definition is an indirect investment.

    • The_Maestro says:

      02:36pm | 10/10/12

      Simon, quite simply (and clearly) you are incorrect.

      1. Funding retirement benefits in this manner is clearly the most appropriate way to go about things. The alternative is to pursure a US style voluntary contribution system (people simply don’t safe enough for retirement and end up living in poverty) or a European style defined benefit system which has quite simply sent countries broke. It’s also quite obviously more of a ‘nanny state’ system than we have currently.

      2. This is simply false. If you can’t be bothered researching to find a super option to fit, that’s fine, but don’t go bemoaning the system incorrectly to others. With 2 minutes research, I found that Australian Super allows term deposits and direct shares (top 300 ASX) at the fraction of the cost of a SMSF. It’s not difficult for anyone with half a brain.

      Note: I do not work for Australian Super.

    • Simon says:

      03:48pm | 10/10/12

      It’s the most appropriate way? why? because you say so? I could put my money in several different Govt Bonds or several different Australian Bank TD’s with virtually no beta risk and get 4% yet i’m forced to let a fund manager spread it into their BS portfolios and pay them management fees for the privelege

      As I pointed out before with direct investments you get control, with large super funds you do not…
      With super funds You get to say x% of funds go into TD’s and X into shares. THAT IS NOT CONTROL You do not get to say put $35,000 into a Citibank TD expiring on x date and you do not get to buy shares in XYZ Ltd. ...unless you do it yourself (SMSF) My point stands.

    • Bert says:

      01:56pm | 10/10/12

      Every article I have read from informed sources say:

      1) Most comparisons are based on “Balanced” funds.

      2) Balanced funds are not always a like for like comparison - their mix of investments between cash Fixed Interest, Shares and Alternate Investments is part of the reason for the difference.

      3) Investment Markets make you money not investment managers. Here is a good guide - I invest in index funds for a true market return.


      4) Investment Managers can lose you money - refer MTAA Industry Fund. Also of particular note - the conflicts of numbers around Directors Fees.
      Why MTAA - as they were the Poster Child of Industry funds - Rooster one day feature duster the next.


      5) Balanced Funds are not the way we invest outside Super. Most people have a separate cash/term deposits and either a share portfolio or investment property.

      Maybe if we invested this way - we would understand Super more.

      I would encourage you to invest the same way in Super - Term Deposits and Index funds specific to the market you want to invest .

      Also look for a Super Fund that will separate - Investment fees and management fees.

      If your Super Funds does not offer this - change.

    • VJR says:

      03:43pm | 10/10/12

      Go back 20 years and it all looked very good we had the master of spin Paul Keating telling us that we would all be living like kings on our super of course he didn’t have to worry because his super was being paid for by the tax paper.  The amount of money I have paid in fees is a shocking waste of money. I get very little real advice except to be told to hang in there it will get better well it hasn’t and I will be long dead when it final does.

    • St. Michael says:

      05:08pm | 10/10/12

      Couple of random notes…

      (1) Fund managers of most stripes are bullshit artists.  Warren Buffet (not that I like the guy) has a standing bet that hedge funds can’t outperform the market (i.e. the S&P).  Note many US *pension*, i.e. superannuation funds invest in hedge funds over there.  Four years into the bet, he’s still ahead.  Read about his bet here: http://www.bloomberg.com/news/2012-03-21/buffett-seizes-lead-in-bet-on-stocks-beating-hedge-funds.html

      In short, even the “top flight” hedge fund managers in the US (who are either as good as or better than our covey of thieves) have insufficient skill to make investments that match the overall performance of the stock market at large.

      If you had money with one of these hedge funds, you quite literally would be better off instructing your stock broker “Put one dollar in each of the top 500 companies in the stock market and wait”.  (This being what we call an index fund).  The overall movement of the market would take care of the rest.  And, speaking only on history, would leave you both ahead of inflation and ahead of the whizz kids running those funds.

      (2) Stock markets always, always involve risk.  And they are not guaranteed ‘up and up’.  The archetypical argument on “buy low! Sell high!” is asking you to fantasise about how much money you’d have made if you bought in on, say, Ford on October 30, 1929.  They don’t tell you how many companies went bust well after that date.  Or how long it actually took for those shares to recover their pre-crash value - some literally took ten years.  Similar actually goes for property: property’s a long, long term hedge.  It took the better part of 20 years for property prices to recover from the Depression, too.  Like it or not, no matter how good your “system” or how good you think your stockpicker is, you are ultimately still gambling when you buy a stock, blue chip or penny dreadful alike.

      (3) Stock market crashes are not as cyclical as people think.  In that context, take particular care to avoid idiots and shysters who proclaim that a stock market crash is a “x number of standard deviations above the mean” event.  That thinking was the downfall of the quants, mainly because human activities, of which the stock market is one, do not follow a bell curve in their behaviour.  A crash can happen at any time, and you would be a fool to think you can pick precisely when and where.

    • Esteban says:

      06:29pm | 10/10/12

      I bet a super fund that spread money on a weighted basis with the companies that make up the all ords would be a great success.

      The fees would be low because there is no analysis of companies required.

      There would be the usual entry fee to cover brokerage but no significant ongoing fees because there are no decisions to be made about where the money needs to be shifted to.

      I would be delighted if my super performed as per the all ords index and had low fees.

      Now speaking of superannuation and market crashes within the one posts reminds me of a little worry that is at the back of my mind. all this money going into super has to go somewhere and most of it ends up in shares.

      Shares may end up being bought because the money has to be placed somewhere rather than bought because they represenyt a good investment.

      If shares prices are escalated up beyond what their fundamentals say are their value we usually fix that problem with a crash.

    • St. Michael says:

      05:12pm | 10/10/12

      Also, important P.S.: it is obscene that this article, the implications of which are highly likely to personally bite 95% of the Australian population in the ass, has received only 79-odd replies at the time of writing, and yet a series of articles on one Parliamentary discussion involving female genitalia, the dead, misandry and misogyny—which likely will be forgotten by the time of the next election—is at 500+.

      Our priorities in education in this country (and indeed across the West) are seriously out of whack.  Why the hell are we not educated economically? Why does it take the majority of people literally a lifetime to figure this shit out? This is a national disgrace.

    • Esteban says:

      06:15pm | 10/10/12

      The left side of politics lives in fear of the citizens being economically literate. Teachers are left leaning…...

      Seriously you might be on t osomething. A basic understanding of economics 101 should not be an elective at school.

      Perhaps the answer to superannuation is to deregulate it and return the onus of choice of fund manager to the customer. We would then be forced to become economically more literate in order to take ownership for the safety of our own superannuation.

      The problem is that deregulation opens up the door for the shysters and those who lose their money will have to be supportyed by the taxpayer with an age pension.

    • Bob says:

      06:17pm | 10/10/12

      @St.Michael the reason is simple the 500 + are mainly ALP Union or LNP funded.


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