Actively Managed Superannuation Funds Have Not Had a Stellar Few Years

Reddit

Here’s another knee slapper. John Brogden, the new director of Australia’s for-profit superannuation funds management association, wants mandatory super contributions increased from 9% to 12%. Brodgen heads the Investment and Financial Services Association (IFSA).

Talk about getting on the front foot. Actively managed funds have not exactly had a stellar few years. And as we reported last week, there’s some doubt as to whether the funds, on average, can ever actually beat the market. Increasing compulsory contributions might be a way to make up for revenue you’ll miss out on as those that can choose to move to self-managed funds.

Frankly, though, the whole idea of not having a choice about super reminds us of the ant colony in T.H. White’s “The Once and Future King.” In the ant colony, there is very little choice. Everyone has a role defined for him and even language itself is limited. The smaller the vocabulary you have, the more difficult it is for you to articulate your dissent.

The rule of the ant colony is that “everything not compulsory is forbidden.” How much does that sound like the Nanny state we are living in? The government is not only intent on telling you what you cannot do (smoke, drink, eat like a pig) but what you must do under penalty of law (surrender your income to be managed by someone whose financial interests are not aligned with yours.)

We’re not saying that laying up savings for a rainy day isn’t a good idea. It’s a great idea. In fact, it’s so important, we’d suggest it’s not the sort of decision you should surrender to anyone else. Preparing for your financial future is ultimately your responsibility because you’re the one that’s going to live that future, not your fund manager. If you don’t have your own wealth game plan, odds are you’re going to lose the game.

What that game plan includes depends on your appetite for your risk, and, of course, your view on the markets and your investment time frame. But these are not complex issues beyond the capability of ordinary people to discuss and plan for. They are the sort of things we should all specialise in if we want to make, grow, and keep our money-money that plays a part in whatever kind of life we choose to live.

If we’re a bit philosophical today it’s because we’re recovering from a weird ailment. Our colleagues call it the Darth Vader Diet. Last week we woke up to a constricted esophagus. It made it very hard to swallow. At first we thought it affected our breathing.

But once the panic subsided, we realised it was some sort of spasm in our esophagus, like a cramp making its way down our throat (it’s just above our stomach at the moment). It’s been dubbed “the Vader diet” because it’s like Darth Vader is squishing our throat because he finds our lack of confidence in the stock market disturbing.

In any event, we’ve been forced to a mostly liquid or mushy food diet so nothing gets lodged in our throat while it’s sill crook. It’s a good weight loss method, despite the discomfort. And it makes for a clear-if somewhat whimsical head. Hopefully the antibiotics and donuts will kick in and fix things up soon. Until then…

Dan Denning
for The Daily Reckoning Australia

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.
Reddit

Leave a Reply

12 Comments on "Actively Managed Superannuation Funds Have Not Had a Stellar Few Years"

Notify of
avatar
Sort by:   newest | oldest | most voted
Coffee Addict
Guest
Re Super: The ants will bail out the grasshoppers : – whether or not the ants can afford it; and – whether they like it or not. Pre crash, the average Aussie retires with about $90K in super. Many retirees are happy to spend any accumulated savings on travel and perhaps a new car THEN be supported by the old age pension and the public health system. I guess I’m an ant. I certainly feel that small (financially) in comparison to some of the posters around here and on the share blogs. Yet I still have about six times the… Read more »
Ross
Guest
CA, don’t let the industry funds off either. If you look at their collective performance on international shares in particular you might regard them as having run a casino and question the veracity of the claim that they don’t “pay commissions”. Watch that AUD go these past days! The EUR/YEN v USD hasn’t gone anywhere near matching it and the ZAR has only gone half way. I will be watchfull of any retreat and won’t miss it. I am now turning extremely bearish on resource commodities and am looking to take profits. I don’t include ag for the short medium… Read more »
Coffee Addict
Guest

Ross: I’m also very bearish at the moment. I’m only holding because most of my key picks are transitioning into production mode and are being (or will be) repriced on that basis. I’m also averse to realising tax profits at the moment.

I think we could have some fun managing an abolute return and protection (paraodox intended) fund if friends with a few hundred mil would give us the job!

Cheers

rag
Guest

where does inherited wealth come into this equation – what our parents or great aunts leave us = isnt there going to be a wealth distribution from parents to children and why wouldnt we consider this in our retirement equation

and of course each and every one of us has different opportunities givn parents wealth but there will be a distribution [less so now].

Ned S
Guest
One idea that I can see some sense in is that we’ll see a lot more wealth destruction rag – Over time – As the aging boombers all try to sell off their real assets like stocks and property to support themselves in retirement. But even if that is incorrect, I think we’ll see a huge amount of wealth dissipation. As opposed to direct wealth distribution from parents to children. Some examples: Old people are typically retired a long time. And they typically put their money in lower risk and return assets – So inflation eats it. Ken Henry specifically… Read more »
Ross
Guest
CA, one factor for me is that the market makers led by Goldman are now a smaller tighter group almost unopposed by contrary position holders with the wherewithal leverage in the index trades to challenge their control of asset prices …. and that the US govt know they have control. We know that US inflation is feeding in despite unemployment spiking severely. Goldman shorting commodities and helping to lower inflation might be a win-win too good for them to ignore. So I now see this as a rolling shakedown across all asset classes and am looking for it being brought… Read more »
Greg Atkinson
Guest

I wonder if the Ken Henry tax review will raise the issue of an inheritance tax? I would guess the government would love to get their hands on some of the money being handed down from one generation to another.

Ned S
Guest

Greg – I think they’ll find more subtle approaches? And it’s never a favourite of the truly wealthy – Which probably includes a lot of Oz politicians from both sides of the political fence these days. Never say never of course. But I must admit that it would surprise me?

Lachlan
Guest
Well it looks like inflation is an issue again but for how long I dont know. You get a Goldman bounce, probably a mile of short covering, a new and powerful spike on the market indexes, the USDX trying to break out on the downside (if that gets out of control we’re in trouble), commodities surging up (look at copper go). But where to from here. Well Ross if Goldman (and the rest of the deflationist crowd) get short as this move runs out of puff, commodities may be forced down again…along with the markets….maybe the dollar to keep grinding.… Read more »
rag
Guest
good reply on inherited wealth – so, after reading your response I have to rethink my retirement plan…damn although I hear that in Germany the children can sue their parents if the parents are not ‘looking’ after their assets properly – that is if the parents start to squander their hard earnt wealth the children can seek legal restraints to stop them – now that is real scarey oh well – I think I will buy a block of land, set up a huge solar panel and wind turbine – sell the stuff back to the grid and create retirement… Read more »
Annie
Guest

Yes it may well be that all those waiting for their oldies to croak may well be dissappointed and even end up on the floor in snot and tears.

Ross
Guest
Death duty is the least regressive tax and has the lowest GDP impact. If you look back to the Asprey Tax report in 1975 you can see we only applied it as a light touch and it formed a very small part of the tax base but of coarse it was deeply unpopular (or looking at it upside down an opportunity to gain popularity at a small expense to revenue) and politically the bottom of the harbour tax scheme crowd and the likes of Packer had relatively more clout back then. If you look at the Asprey committee’s views on… Read more »
wpDiscuz
Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@dailyreckoning.com.au