We initially developed our tests of tomorrow following the Royal Commission to gain insight into the areas which may be focused on, should such an industry overhaul occur again, and we have continued to review and adjust these over time. Our suite of tests includes inactive account transfers, disclosure of fees, insurance and investment risk, legacy products, how well scale is being leveraged and retirement product development.

Kirby Rappell, Executive Director, SuperRatings 


With stapling reducing the flow of members defaulted into employer plans, funds need to focus on their acquisition strategies in this new environment and the channels through which to obtain members including corporates, direct acquisition and external advisers. 


Fees and investments continue to be key hygiene factors when selecting a default fund, we are seeing corporates adopt a more values-based overlay to their decision-making.


Camille Schmidt, Market Insights Manager, SuperRatings

With the stapling changes taking effect from November 1 this year, the complete picture will take some time to emerge. We believe it is well intended to stop the proliferation of accounts, though we will see changes in terms of the profile of member accounts among funds going forwards.

Funds should consider how to engage with employers in relation to the changes and will need to emphasise the value of superannuation as an employee benefit, with the future of tailored employment arrangements unclear. We also expect meaningful engagement with a disengaged member base to be challenging.

Camille Schmidt: Market Insights Manager, SuperRatings

Following a rigorous review of 530 major superannuation products SuperRatings 2022 ratings have been finalised. Some of the key themes we are interested in this year include how well funds are harnessing their scale and how are funds able to measure the benefits of member engagement.

Kirby Rappell, Executive Director, SuperRatings

Reflecting on the current environment, we are thinking of everyone who is currently in lockdown and hope everyone is staying safe and well.

With uncertainty an ongoing theme, we are turning our minds to market dynamics and the future outlook as we consider the introduction of the Your Future Your Super reforms, particularly the performance test and stapling, with DDO now also on the horizon.

Kirby Rappell: Executive Director, SuperRatings

Our new insurance survey has just been released. Drawing on a unique & broad dataset, this tool was created to meet demand from both Trustees and insurers for specialised benchmarking in this area. It enables us to provide key insights around claims and underwriting assessment and management, use of technology, staff resourcing and benefit design and pricing support.

  • Bill Buttler: Senior Manager, Consulting, SuperRatings
  • Luke Guns: Business Development Manager, SuperRatings

Following Lonsec’s Asset Allocation Investment Committee meeting in June, we asked Chief Investment Officer Lukasz de Pourbaix to give us an update on his views of the current market drivers and challenges, and how these impacted Lonsec’s latest dynamic asset allocation views.

The main topic of discussion at this meeting was inflation – is it transitory or are we seeing a structural shift up in inflation? Lonsec’s current view is that whilst inflation will continue to rise in the short-term, after that, it’s still questionable whether we will see a structural rise in inflation. One of the other matters we’re focused on is wage growth. We have not seen a material rise in wages, which is important in the context of looking at inflation.

As part of our dynamic asset allocation process, we also look at a number of key factors: valuation (are assets cheap or expensive), where we are in the business cycle, and policy (such as monetary policy) and liquidity. In this video, Lukasz looks into each of these factors and explains how these were considered to determine Lonsec’s current asset allocation


Inflation and its implication for asset allocation

Hello, my name is Lukasz de Pourbaix, I’m the CIO of Lonsec Investment Solutions. Today, I’ll be providing an update on our latest takeouts from our asset allocation Investment Committee, which is responsible for our dynamic asset allocation views. Now we hold that committee every quarter.

The main topic, really this investment committee was inflation, and whether inflation is transitory in nature, or whether we are seeing a structural shift up in inflation. And certainly, we’ve seen CPI numbers go up, most recently in the US announced the significant jump in CPI to levels we haven’t seen since 2008. And so, as part of that discussion, part of the narrative was, is this driven by supply/demand issues as a result of COVID? Or is there genuinely an inflation increase? And it’s fair to say that the market at the moment does believe that it’s transitory in nature, we are seeing significant disruptions to supply chains, which has impacted a range of assets. If you look at things like some of the commodities, Lumber (LBS), the one that suddenly is sort of focused on, through the microchips to make computers, mobile phones, etc. We’ve seen prices certainly spike up in a lot of these areas. And our view would be that once we get spending come back to pre-COVID levels, inflation will continue to rise in the short term, but after that, it’s still questionable whether we will see structural rise inflation.

Our base case at the moment is that it is likely to be transitory in nature, but that it will rise in the shorter term. One of the other aspects that we’re certainly focused on in that context is wage growth. Today, we haven’t seen a material rise in wage growth. It is a lagging indicator. However, it is important in the context of looking at inflation and while we have seen pockets of rises in wage growth, if anyone’s been out to try to hire staff in places like cafes, restaurants, fruit pickers, we all know that there’s shortages there, but across the board, we haven’t seen wage growth right rise and certainly that would be an area that we would be keen to focus on.

What changes were made in June to Lonsec’s Asset Allocation positions?

As part of our dynamic asset allocation process, we look at a couple of key factors that we think determine the direction of where different asset prices will go into the future. And those are valuation – so are assets cheap or expensive. Where are we in the business cycle, and then policy and liquidity.

If we take those three metrics in isolation, from a valuation perspective, it’s probably fair to say that most assets from an absolute perspective look pretty expensive. However, we are in the game of allocating capital. And so we have to look at things from a relative perspective. If we look at asset classes, from a relative perspective, we’ve continued to think that risk assets such as equities are favorable compared to things like bonds and cash, where know there’s you’re getting little reward for that risk. From an equity perspective, we probably have a bias towards emerging markets and Australian equities over some developed markets, particularly the US, from a pure valuation perspective. So overall picture is that from a relative perspective, risk assets are still looking attractive, you’re still being rewarded for risk from a valuation perspective. If you look at other indicators, and one of those is cyclical indicators – so where are we in the cycle? Cyclical indicators continue to look positive. A lot of economic data that’s been coming out, whether it’s looking at PMIs, whether it’s looking at job growth, all of them pointing in the right direction.

From our economic perspective, we’ve clearly seen a recovery and continue to see a recovery, those indicators are looking positive. Finally, from a policy perspective, if we think about monetary policy, and my earlier reference to inflation, the two are obviously related. Policy, however, does remain supportive of risk assets, interest rates remain low. Central Banks, in our view, aren’t going to pull the trigger anytime soon. They will want to see evidence of growth, and more evidence that if this inflationary environment is transitory, they’ll probably be a bit more standoffish in pulling the trigger on rates. But as it is at the moment, that environment in terms of policy does remain supportive of risk assets. We are also seeing material fiscal support. So net net if you think about those longer-term indicators, such as valuation, which is very much longer term indicator is supportive of risk assets. The policy settings continue to be supportive of risk assets. And then obviously, liquidity is there supporting markets as well, all things pointing to risk assets from an overall directional perspective, we do like risk assets over some of the more defensive assets. Having said that, we do think we’re in an environment where we are seeing a lot more dispersion between returns within asset classes. We do think that being selective within asset classes, be it equities or bonds, is becoming much more important. And we do think that dispersion between winners and losers will be wider going forward than it has been in the past.

Overall, the outcome of our dynamic asset allocation committee has been to make no change at this point. From our last quarter, we do remain positive on risk assets, underweight, Fixed Income, underweight Cash, we continue to have a neutral position to Alternatives. We are looking at if there are others? Potentially at some point, do we review that allocation to alternatives? Do we potentially increase that? From a portfolio perspective, we already have some exposure. Some of you will note will have we’ve had exposure to Gold, which has seen a significant increase in price over recent months. And if we do see that inflationary environment be more than just transitory those type of assets can contribute to helping protect the portfolio in that environment. So overall, there are some risks out there. Some inflation is probably the number one risk at the moment. But net net, we think that the environment is still conducive to risk assets.

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DISCLAIMER: No representation, warranty or undertaking is given or made in relation to the accuracy or completeness of the information presented in this document, which is drawn from public information not verified by LIS. The information contained in this document is current as at the date of publication. Financial conclusions, ratings and advice are reasonably held at the time of publication but subject to change without notice. LIS assumes no obligation to update this document following publication. Except for any liability which cannot be excluded, LIS and Lonsec Research, their directors, officers, employees and agents disclaim all liability for any error or inaccuracy in, misstatement or omission from, this document or any loss or damage suffered by the reader or any other person as a consequence of relying upon it.

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Hear from Scott Abercrombie, Executive Manager, Consulting at SuperRatings discuss the current key challenges facing the superannuation industry and what’s in-store for the future!

Watch the video below

There has been little evolution in this area over the last 5 years; however, with the greater focus on the retirement phase by the government we believe it is time providers turned their minds to optimising outcomes for retirees and tailoring investment objectives appropriately.

Camille Schmidt: Market Insights Manager – SuperRatings


SuperRatings Executive Director Kirby Rappell shares the latest performance results for superannuation funds and the future outlook for the industry.

Members should be prepared for more ups and downs. However, a patient approach has paid off for members over the long term with the median balanced style fund returning 7.0% per annum since the introduction of superannuation in 1992.




Any advice that SuperRatings provides is of a general nature and does not take into account an individual’s financial situation, objectives or needs. Because the information that SuperRatings receives about superannuation and pension financial products is from a number of sources, it is not guaranteed to be completely accurate. Because of this, individuals should, before acting on the information, consider its appropriateness having regard to their own financial objectives, situation and needs and if appropriate, obtain personal financial advice on the matter from a financial adviser. Before making a decision regarding any financial product, individuals should obtain and consider a copy of the relevant Product Disclosure Statement from the financial product issue.

Important information: Any express or implied rating or advice is limited to general advice, it doesn’t consider any personal needs, goals or objectives.  Before making any decision about financial products, consider whether it is personally appropriate for you in light of your personal circumstances. Obtain and consider the Product Disclosure Statement for each financial product and seek professional personal advice before making any decisions regarding a financial product.