‘Your Future, Your Super’ & alternative asset strategies

In October, the Federal Government unveiled their ‘Your Future, Your Super’ legislation, which is focused on introducing performance benchmarking to the superannuation industry.

According to the Treasury, there are six million superannuation accounts, and three million of these accounts are in underperforming superannuation products. The Government says that Australians are paying too much for their Super, and that super funds don’t have any incentive to compete on the amount of fees they offer. They also claim Funds lack accountability to their members and are failing to operate transparently.

To combat these issues, the ‘Your Future, Your Super’ legislation is introducing systems to monitor super fund performance using traditional asset class definitions.

Legislation to hold super funds accountable and ensure that members are receiving acceptable performance is hard to argue against. Naysayers are falling back on the usual arguments of regulation being unilaterally bad, but Super funds that offer competitive fees and reliable performance have nothing to fear from these changes.

However, the one downside of this legislation is that there are many ways to measure performance. This legislation is using a definition revolving around asset class definitions, but some funds are switching to alternative strategies, such as a ‘Total Portfolio Approach.’

Making sure that funds are performing is vital; but we don’t want to lock them into the same old strategies. Leaving room for innovation is important, too.

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