SuperRatings supports benchmarking of the industry, although understanding its nuances remains a significant exercise. We believe there are key areas of the Your Future, Your Super legislation which could be improved and are supportive of Treasury’s review and have made a submission reflecting this.
The performance test is increasing the awareness of tracking error relative to the test’s benchmark indices, and the need to track and minimise this. There is a reduction in the willingness and ability to engage in Tactical Asset Allocation and Dynamic Asset Allocation. Furthermore, the current set of indices has the potential to distort investment decisions as well as reduce choice for members. We have seen a material slimming of funds’ investment menus to date.
While the test could be expanded to a broader range of Trustee Directed Products (TDPs), we believe that there is not a clear and consistent definition of a TDP that is understood by, and applied across, the industry. If a common understanding doesn’t exist within the industry, it has the potential to amplify confusion amongst members.