A Liberal Party think tank has attacked spending by industry super funds at the same time the Government is trying to change the governance and disclosure rules for super funds.
“Industry super funds have spent millions on a lavish advertising campaign designed to portray privately operated funds as the fox in the hen house,” said Mr Nick Cater, Executive Director of the Menzies Research Centre, referring to a campaign by Industry Super Australia.
The Centre has released a report which recommends mandating at least one-third independent directors and an independent chair for large super funds – echoing Government policy.
The Menzies Research Centre describes itself as an independent think tank which is associated with the Liberal Party.
“This report makes clear that union dominance on boards poses the biggest threat to your nest egg,” said Mr Cater.
Minister for Revenue and Financial Services, Kelly O’Dwyer, has rejected that the Government is targeting industry funds with the changes.
“The changes that we are proposing are across the board changes that apply to corporate funds, to retail funds, and also to industry funds,” Minister O’Dwyer told ABC radio.
Industry Super Australia has argued that the outperformance of industry super funds compared to retail funds justify their trustee governance model.
However the Menzies Research Center report argues that the performance gap is a result of different member demographics and confidence in future contributions streams – allowing for longer-term, less liquid and better performing investments.
The report says that claims of outperformance by industry super funds is “misleading at best”, pointing to statements by APRA that “whole-of-fund performance claims misrepresent the underlying performance once differences in age cohorts and underlying investment objectives are considered”.
“The claimed differences in overall performance may merely reflect the difference in returns between the adoption of an aggressive growth strategy and a cautious capital preservation approach.”
“The inclusion of default funds in industrial relations awards and enterprise agreements has a coercive effect that gives industry funds a free kick. A consistent inflow allows them to invest in assets with longer investment horizons and to capture the liquidity premium.”
The report says the super system is “riddled with potentially conflicting parties each looking to benefit their own interests at the expense of members and their retirement savings”.
“They include asset consultants, investment managers hired by super funds, managers of superannuation funds, unions, employer groups, political parties and directors on superannuation fund boards.”
The Coalition initiated Financial System Inquiry (Murray Inquiry) had recommended a majority of independent directors. The Labor started Super System Review (Cooper Review) had recommended one-third independent directors.