Size matters when it come to super fund performance _ afr. com what is msci world index

Size matters when it come to super fund performance _ afr. com what is msci world index For full functionality of this site it is necessary to enable JavaScript. In a tough 12 months, where the MSCI World Index ex-Australia edged up a mere 0.4 per cent and the S&P/ASX 300 benchmark added just 0.9 per cent, the top five performing superannuation funds for the year to June posted impressive gains of between 7.6 per cent and 5.5 per cent. The top performing funds were a motley bunch. Msci canada etf Although QSuper, which came in top of the pops for 2015-16, BUSSQ, UniSuper, Catholic Super and MTAA are notably all industry funds, they range in size from just $4 billion to $65 billion. Mostly the funds say they benefit from their size, whether big or small.

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David O’Sullivan, chief executive of Brisbane-based BUSSQ, which has $4 billion under management, argues that large schemes don’t have the choice of appointing high quality, niche managers, particularly small cap specialists, because it is not worth their while awarding mandates of, say, a couple of hundred million dollars. Msci world index historical data O’Sullivan points out that for an $80 billion or $90 billion fund, a $200 million mandate “wouldn’t move the dial”. BUSSQ says its strong tilt towards small cap companies last year helped the fund to a 5 per cent return on its equity portfolio despite the aforementioned flat market.

Leeanne Turner, whose MTAA is towards the middle of the bunch in size terms with $9.2 billion of assets, reckons that somewhere between $4 billion and $30 billion is the “sweet spot”. Meaning of msci If funds are too big, they come up against fund managers’ capacity constraints (many fund managers will only run a portfolio of a certain size). Msci world equity index On the other hand, funds of a decent size have the ability to invest in large infrastructure projects that generate long-term stable returns.

Msci data As Michael Pennisi, chief executive of QSuper said last week: “To be part of a small group of like-minded investors is a powerful position to be in.” So is there any data to show that large funds perform any better than small ones over the long term? There is. Analysis by research firm Chant West suggests that over the long term trends do emerge between the performances of small and large funds. Size does matter. Chant West found that over five, seven and 10 year periods, the median return for funds with more than $10 billion of assets was 0.6 percentage points higher than it was for their smaller competitors.

Msci world real estate index Over a 15 year period, the difference was slightly bigger. Msci world small cap Large funds outperformed schemes with less than $10 billion of assets by 0.7 percentage points.

Msci world ex u s index Furthermore, says Chant, large funds outperformed small funds over rolling 12-month periods for 15 years 80 per cent of the time. The study, it should be said, is based only on industry retirement funds because they tend to have similar investment strategies. “Over longer-term periods, larger funds are ahead by meaningful amounts. Msci world small cap etf Smaller super funds can invest in some very good fund managers but over the longer term larger funds do better,” Chant says.

He puts it down to the opportunity to own, or take stakes in large direct investments and the ability to take asset management in-house, lowering investment management costs. Msci database To this could be added the ability to hire more highly qualified investment professionals. Of course there will always be exceptions to the rule and it is notable that the top two performing funds over a decade, both posting an annual return of 6.6 per cent, were Catholic Super’s moderately aggressive option (Catholic Super has total assets of $7.4 billion) and REST Super, with $37 billion of assets.

Msci world local BUSSQ and QSuper also both appear at the top of the 10-year league table. But it is hard to argue with the data. Msci world quality index Performance, or lack thereof, is another reason why trustees of many small retirement schemes should be asking some hard questions of themselves, for the benefit of their members. Site: http://www.afr.com/business/banking-and-finance/financial-services/size-matters-when-it-come-to-super-fund-performance-20160729-gqh0dq