Industry super funds continue to beat retail super funds

Bank-owned retail funds underperform industry funds yet again

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published January 20, 2016 4:55 pm AEDT

Not-for-profit industry superannuation funds have thrashed retail super funds last year according to Chant West research.

Industry not-for-profit filled every single one of the top ten spots. The median return for industry funds was 6.7% to members, compared to 5.2% for retail funds. Since 2006, industry funds have outperformed their retail counterparts 7 times, with one tie and retail funds winning in just two years (2009 and 2012).

It's yet another reason for Australians to avoid the retail super fund industry, with the most likely reason for the outperformance the higher average fees retail funds charge. If you had invested $100,000 in an industry super fund back in 2006, you'd be close to $18,000 better off than if you had invested $100,000 in a retail super fund over the same period – as the chart below shows.

Source: Chant West (my calculations)

That's just for 10 years, but over a lifetime that saving could amount to hundreds of thousands of dollars missed out on.

Industry Super Australia chief executive David Whitely has told Fairfax media, "the data highlighted the ongoing underperformance of bank-owned super funds."

The big four Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC), and AMP Limited (ASX: AMP) dominate the retail managed and super fund industry. But their performance over many years has been proven to be below that of industry funds, and they often charge much higher fees.

Data released by SuperRatings confirms the relative outperformance of industry funds versus retail funds.

Foolish takeaway

We've said it many times before, and will likely say it many times again – Australians who want a better retirement are much better off investing in industry super funds than retail super funds.

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