Does your super fund deserve to manage your money?

One honourable money manager is calling for lower fees.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Brett Himbury, the CEO of IFM Investors, a company that manages funds on behalf of superannuation funds has provided a refreshing blast of honesty at the Association of Superannuation Funds of Australia conference.

As quoted in the Australian Financial Review, Mr Himbury said that "total funds under management has risen and total investment expenses have hugged that trend. That's not good enough". His point is that management fees should be falling as larger fund size allows greater economies of scale.

As I wrote in this article, superannuation funds usually charge members a wide array of fees. The most important fee is the "management fee", which is a percentage of the funds under management. This fee does not depend on the performance of the fund. Members pay it whether the managers do a good job or not. However, the management fee should (arguably) fall as the size of the fund grows.

Himbury also implicitly acknowledged a fact that most large fund managers would prefer forget: small investors have a significant structural advantage when it comes to investing in publicly listed companies. Himbury argues that large superannuation funds should therefore invest more in unlisted infrastructure, because this is an area where they have "an advantage that cannot be questioned."

Aside from being sensible, this would also have the added benefit of funding new infrastructure from private capital rather than public debt. Better yet, many Australians would profit from the investment in the long term: superannuation funded infrastructure would be privately owned by many small investors.

Himbury isn't the only voice of reason coming from an industry that lacks transparency and accountability. Another fund that is doing its best to improve is behemoth AustralianSuper. Mr Ian Silk heads that fund and has long criticised fund managers for "extracting an egregious amount of money." Mr Silk has backed up his words with actions: AustralianSuper will manage a third of its assets in-house by 2018.

Enlightening comparisons may be made between the superannuation funds Commonwealth Bank (ASX: CBA) offers to its employees, and the funds the bank offers to the public. One such comparison is between the Commonwealth Group Super "Australian Shares" option, and the Commonwealth Australian Shares Fund. The former option is available to Commonwealth Bank employees (but not retail customers), and has achieved annual returns of 23.58% over one year, 9.56% over three years, and 11.53% over five years. The latter option, available to retail customers, has achieved returns of 22.2% over one year, 8.6% over three years, and 7.2% over five years.

Foolish takeaway

Every $10,000 invested in the fund for Commonwealth Bank Group employees would be worth over $17,200 after five years. In comparison, $10,000 invested in the fund that Commonwealth Bank offers retail customers would be worth less than $14,200 after five years.

Investors should consider prudently investing their superannuation in their own diverse stock portfolio, rather than investing it with a superannuation fund. For those who aren't ready to make that move, make sure you think carefully about the organisation managing your superannuation — you worked for that money.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »