Paul Bouchey

Qantas Super and Parametric are celebrating the 10th anniversary of their partnership, which has produced enhanced benefits to members each year.

A decade of tax-efficient investment implementation at Qantas Super, working in partnership with global implementation manager Parametric, has delivered significant long-term benefits for Qantas Super members.

Parametric’s Centralised Portfolio Management (CPM) approach separates the idea generation function of portfolio management from the implementation. Centralising the implementation stops leakage from transaction costs, redundant trading and tax inefficiencies.

Parametric is part of Morgan Stanley Investment Management.

Parametric’s Global Head of Research Paul Bouchey said: “Qantas Super was a bold leader in being the first Australian superannuation fund to adopt tax-managed centralised portfolio management at a time when the industry was reluctant to embed tax considerations into investment thinking.

“For a long time, there has been a misalignment in the industry, where investment practices are based on pre-tax principles but retirement outcomes are built on after-tax dollars. The idea of after-tax investing is well accepted but minimally used in practice. There is a big opportunity still to be exploited by most funds.

“The CPM partnership has delivered an estimated saving of A$258 million for Qantas Super members in just under 10 years (till the end of June 2022) across Australian and Global equities portfolios,” added Bouchey.

In 2016, Qantas Super extended the relationship by appointing Parametric as its overlay manager.

The chief investment officer of Qantas Super, Andrew Spence, noted: “Our members have strongly benefited from being part of a CPM structure for listed equities. Implementation efficiency is one of our core investment beliefs and that focus on the effective management of investment expenses, such as fees, taxes and transaction costs, led us to Parametric.”

Daniel Vanden Boom, Managing Director at Morgan Stanley Investment Management Australia said: “We are very pleased to be able to celebrate this milestone and look forward to providing many more years of excellent service to Qantas Super and its members.”

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Leading research house SuperRatings has released the top performing funds within its SR50 Balanced Index which tracks performance of 50 options with exposure to growth assets of between 60 to 76%. Hostplus – Balanced was the top performing option for the 1-year period ending 30 June 2022, returning 1.6%.

David Elia Chief Executive Officer for Hostplus indicated the fund’s performance was “…a testament to Hostplus’s active investment approach, especially in navigating volatile markets.”

QANTAS Super’s balanced option came in second achieving a return of 0.6%, following its first-place result for the financial year to 30 June 2021.

QANTAS Super’s Chief Investment Officer Andrew Spence commented, “Our focus on diversification, risk management and investment governance help to deliver competitive returns despite the uncertainty in markets, as evidenced by our returns in FY 21/22 and FY 20/21.”

The table above also displays 10-year performance for these funds that have performed the best over the 1-year period, as super is ultimately a long-term investment and while it is interesting to compare performance over shorter-term periods, it is not the full story. This is particularly important to emphasise given the unprecedented levels of volatility we have seen since the beginning of the pandemic.

Hostplus was also the top performer over the long-term, with an average annual return of 9.7% over the last decade. Followed closely by AustralianSuper – Balanced with a return of 9.3% and Australian Retirement Trust – Super Savings with a return of 9.00%. Cbus – Growth (MySuper) delivered a close fourth ranking return of 8.96%.

AustralianSuper Chief Investment Officer Mark Delaney stated, “After more than 10 years of economic growth our outlook suggests a possible shift from economic expansion to slowdown in the coming years. In response, we have started to readjust to a more defensive strategy, as conditions become less supportive of growth asset classes such as shares.”

The Bumpiness Factor 

SuperRatings has for many years also looked at how bumpy or consistent a fund’s returns are over time. We have continued to focus on this amid the ongoing ups and downs we are seeing across Australian and global investment markets.

Kirby Rappell Executive Director of SuperRatings commented, “Since the bottom of the GFC we haven’t seen huge amounts of volatility coming through, there have been a few moments, but we have seen extreme levels of volatility since COVID-19 hit and in terms of the menu for the year ahead, we expect to see more volatility.”

The table below shows the top 10 funds ranked according to their volatility-adjusted return, which measures how much members are being rewarded for taking on the ups and downs.

Australian Retirement Trust – QSuper Accum. – Balanced sits at the top of the table below, which shows that the fund achieved a return of 6.1% p.a. over the past seven years. Catholic Super – Balanced Growth (MySuper) follows closely in terms of the ranking based on the ability to navigate the ups and downs of the market. While Mercy Super – MySuper Balanced a small-sized fund ranks third, punching above its weight and achieved a 7-year return of 6.8%.

Australian Retirement Trust’s Chief Investment Officer Ian Patrick commented, “Both Australian Retirement Trust portfolios incorporate dynamic asset allocation processes that see weights increased as expected forward returns increase. While the recent sell off in many markets clearly makes them cheaper, this is tempered by economic views, particularly given the uncertain outlook for inflation.”

Kirby Rappell commented, “While the 2022 financial year has seen super funds record a modest fall, the benefits of diversification have shone through. When we compare returns for equity, bond and listed property markets to balanced style portfolios among super funds, these results should be reassuring to members.”

Mr Rappell continued, “Superannuation is a long-term investment and patience remains key. For those Australians under 50, the recent market volatility is not expected to have any impact on their retirement. This year’s results are just one out of a 30 to 40 year investment for younger Australians.”

This result is more concerning for those nearing or in retirement, however, we often see these members sitting in investment options which are less exposed to these market movements which can lessen the impact. The sobering result for this year is likely to be those members invested in diversified fixed interest, with rising bond yields resulting in capital losses for members in an area often considered defensive.

As 30 June returns are now being finalised, funds will be focused on preparing member statements. Making sure you are putting aside some time to engage with your super statement will be time well spent. Checking the type of investment option you are in, and whether it suits the level of ups and downs you’re comfortable with, is worthwhile, with most funds offering a risk profiling tool on their websites to help members understand their own attitudes to risk. As well as seeing the calculators your fund offers, about 60% of super funds now offer an app, so if you have never checked your super before, now might be the time to get started.

Super has a lot to celebrate over the past 30 years. Since 1992, an estimated 7% per annum return means that $1 invested in 1992 is now estimated to be worth $7.67, depending on fees. While we will see ups and downs over time, super has performed strongly over the long term with 25 positive returns over the past 30 years.

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