Australian Superannuation Industry Wide Expenses

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asset_chaos
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Australian Superannuation Industry Wide Expenses

Post by asset_chaos » Wed Sep 12, 2018 6:13 pm

The Australian Prudential Regulation Authority (APRA https://www.apra.gov.au/) publishes spreadsheets with data on the largest 200 superannuation fund complexes here https://www.apra.gov.au/publications/an ... statistics.

Frankly the sheets are a bit daunting, but there are two columns G and H in table 2 that are respectively labeled "Investment expenses ratio" and "Operating expense ratio". From the details in table 3 the sum of these two columns seems like a good estimate of the total costs for each fund complex. Note that this cost estimate is averaged over all the specific funds in a complex: your specific fund choice(s) may have much larger or smaller costs than the average for the fund complex; although, if you are in the default or mysuper fund, then your funds expenses are likely pretty close to the fund complex's average. From the 28 March 2018 data I add the two columns to obtain a total cost ratio and plot it below as a histogram. Along the horizontal axis are total fund complex costs as a percentage of the complex's funds under management, and the vertical axis gives the number of complexes with that total expense ratio. There were 164 fund complexes with data (how 36 large fund companies managed to be allowed to not give data to APRA is a mystery). A small number of funds had extremely large cost ratios (up to 75%). I assume those are some kind of closed funds that are being run down, and they aren't plotted. The seven funds with 0% expense ratios seem to be government employee funds where the employer pays all superannuation management expenses as part of remuneration. The red line at 0.75% is the median of the distribution. While an average expense ratio weighted by assets under management could be calculated, I have not done so. How anyone expects to accumulate a sufficient retirement nest egg paying not just 1%, not just 2%, but even over 2% a year, I do not know. If your super fund has above median costs, there are many less costly choices to investigate. One place to start from an Australian Boglehead perspective is our wiki page on Australian Superannuation https://www.bogleheads.org/wiki/Investi ... rannuation.

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Regards, | | Guy

Beecee83
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Re: Australian Superannuation Industry Wide Expenses

Post by Beecee83 » Thu Sep 13, 2018 1:43 am

Interesting, I’m actually surprised it’s so low as even most of th the industry funds get close to that for their balanced funds.

I also noticed in the wiki that the Australian super index diversified fees are way off but the rest is really great.

asset_chaos
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Re: Australian Superannuation Industry Wide Expenses

Post by asset_chaos » Sun Sep 16, 2018 4:50 am

Beecee83 wrote:
Thu Sep 13, 2018 1:43 am
I also noticed in the wiki that the Australian super index diversified fees are way off but the rest is really great.
How so? I wrote that bit. I try to get things right, but always happy to have corrections. (And who knows, it may have just changed in the last couple of months.) If you can provide me the correct numbers or point me to exact links---the latter is probably preferable---I'm happy to make the edits.
Regards, | | Guy

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randomizer
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Re: Australian Superannuation Industry Wide Expenses

Post by randomizer » Sun Sep 16, 2018 5:24 am

Would be nice if there was a fiduciary concern here, but it looks more like vampires draining blood from their victims.
87.5:12.5, EM tilt — HODL the course!

Beecee83
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Re: Australian Superannuation Industry Wide Expenses

Post by Beecee83 » Sun Sep 16, 2018 5:49 am

https://www.australiansuper.com/-/media ... xedDiv.pdf

.16% fees per annum, not an issue just wanted to correct it. You have 1.05, not sure where this came from.

asset_chaos
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Re: Australian Superannuation Industry Wide Expenses

Post by asset_chaos » Sun Sep 16, 2018 2:32 pm

Beecee83 wrote:
Sun Sep 16, 2018 5:49 am
https://www.australiansuper.com/-/media ... xedDiv.pdf

.16% fees per annum, not an issue just wanted to correct it. You have 1.05, not sure where this came from.
Thank you. It is good to see the investment fee for Australian Super's Index Diversified fund fall to 0.16% from 0.22% between May and June. Moreover, I now believe I was mis-reading this document https://www.australiansuper.com/-/media ... .pdf?la=en and incorrectly adding a percentage administration fee. There is only a fixed dollar administrative charge. That brings the comparison cost of Australian Super's Diversified Index fund to a highly competitive 0.24% a year, with an extra 0.11% added to take a retirement income stream. I have corrected the spreadsheet and will correct and update the wikipage shortly.
Regards, | | Guy

Beecee83
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Re: Australian Superannuation Industry Wide Expenses

Post by Beecee83 » Sun Sep 16, 2018 4:57 pm

I think it’s positive that some super providers are gradually reducing fees and providing some index options. I am hoping they start adding more different index options allowing for riskier or more conservative allocations or giving the full scope of index options to mix yourself. I think sunsuper has done this and hostplus though there options don’t seem to be as transparent up front.

asset_chaos
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Re: Australian Superannuation Industry Wide Expenses

Post by asset_chaos » Sun Sep 16, 2018 8:28 pm

Beecee83 wrote:
Sun Sep 16, 2018 4:57 pm
I think it’s positive that some super providers are gradually reducing fees and providing some index options. I am hoping they start adding more different index options allowing for riskier or more conservative allocations or giving the full scope of index options to mix yourself. I think sunsuper has done this and hostplus though there options don’t seem to be as transparent up front.
Sunsuper and First State have this flexibility in that they have index funds that cover Global ex-Aus and Aus stocks and bonds, so that you can set your stock/bond allocation; however, Sunsuper has a single bond fund with fixed Aus/ex-Aus allocation, whereas First State has two separate bond funds. To my knowledge, no one else allows that indexing flexibility. HostPlus only has the single balanced index fund with a fixed policy allocation that they market time around and that at 0.14% is by far the cheapest super fund around.

In fact, I've only seen the flexibility of having balanced index funds with several policy allocations to chose from and to move to as one's stages of life change with BT Panorama from Westpac. They have balanced indexed funds with e.g. 70:30, 50:50, etc, policy allocations. BT could, if they chose to, have an excellent set of super indexed balanced fund offerings. Instead they charge too much and market time with the index funds.
Regards, | | Guy

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